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Baja California governor accuses big US companies of water theft

Fidencio Carillo Gonzales
Fidencio Carillo Gonzales has been living next to a canal that flows through Tijuana for six years and complains about its horrible smell.
(Alejandro Tamayo / The San Diego Union-Tribune)

At least 80 employees of the state water agency have been suspended or fired.

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An independent audit of Baja California’s water agency alleges that former employees of the utility colluded with international corporations to defraud the state out of at least $49.4 million, according to an auditor and the governor of the state.

Local and international corporations — including such well-known U.S. names as Coca-Cola, FedEx and Walmart — for years took water for use in their Mexican factories, retail stores and distribution centers without fully paying for it, Baja California officials have alleged.

“These businesses have been systematically robbing the people,” said Baja California Governor Jaime Bonilla, who took office in November 2019.

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That corruption contributed to chronic under-funding of the state water agency, known as the Comisión Estatal de Servicios Públicos de Tijuana or CESPT, Bonilla said. To cover up the water theft, the auditor says, some companies also installed their own clandestine drainage systems to illegally discharge contaminated water into Tijuana’s already strained storm drains and canal.

That water feeds into the Tijuana River, which flows through that Mexican city toward the San Diego coast. There it crosses the border into the United States, polluting the southernmost communities in San Diego County.

More than 80 former employees of the water agency have been suspended or fired since the audit began, and nearly 450 companies are being investigated in the ongoing independent audit conducted by FisaMex, a Mexico-based accounting firm.

The Colonia Lomas Taurinas neighborhood is south of the Tijuana International Airport.
In Colonia Lomas Taurinas trash and standing water in a storm drain that runs through the middle of the valley. This neighborhood is south of the Tijuana International Airport. Residents complain about the fowl smells in the area on June 30th, 2020 in Tijuana. The state is investigating as many as 400 companies for water theft and illegal dumping of sewage. Coca-Cola, Samsung, Hyundai and Home Depot are among a growing list of international and American companies the state of Baja California is investigating for alleged water theft and the illegal discharge of water sewage into the city’s crumbling drainage systems.
(Alejandro Tamayo/The San Diego Union Tribune)

In a written statement, Coca-Cola said its Baja California bottling plant obtains the water it uses in compliance with Mexico’s federal general water law, and the factory makes “responsible use of the resource, improving our processes to be more efficient and reduce its consumption.”

Specifically, the Baja California plant said it processes 97 percent of its wastewater at its own wastewater treatment plant, and then returns it to the environment in compliance with federal law. The remaining 3 percent is discharged into the sewer system for which the company says it has discharge rights.

None of the other companies responded to questions from the San Diego Union-Tribune.

Some companies have responded to state investigators, saying they did not pay for water because they were not charged under the prior state administration. Bonilla doesn’t accept that explanation, pointing to measures he says some companies have taken to avoid being billed for their true water consumption, which were uncovered during the months-long audit.

Bonilla has vowed to make the companies pay what they owe, so he can “clean-up the canal and stop spreading contaminated water to the beaches of Imperial Beach.”

“That has to stop,” he said.

According to Bonilla, the uncollected state funds could have been used to invest in maintenance and infrastructure to prevent at least some of the Tijuana sewage spills that have fouled San Diego shorelines and strained international relations.

The Tijuana River runs through the city of Tijuana heading towards San Diego coast on June 30th, 2020 in Tijuana.
The Tijuana River runs through the city of Tijuana heading towards San Diego coast on June 30th, 2020 in Tijuana. The state is investigating as many as 400 companies for water theft and illegal dumping of sewage. Coca-Cola, Samsung, Hyundai and Home Depot are among a growing list of international and American companies the state of Baja California is investigating for alleged water theft and the illegal discharge of water sewage into the city’s crumbling drainage systems.
(Alejandro Tamayo/The San Diego Union Tribune)

Tens of millions of gallons of raw sewage and toxic sludge spill every year into the Tijuana River on the Baja California side, and then drain into Southern California’s lower ground, eventually emptying into the Pacific Ocean.

In 2019, more than 2.3 billion gallons of wastewater and polluted runoff crossed the line, contaminating U.S. properties, beaches and wildlife habitats. The sewage has most impacted Imperial Beach, a small coastal city within the County of San Diego.

In Colonia Chula Vista sewage water and trash flow in the storm drain on June 30th, 2020 in Tijuana.
In Colonia Chula Vista sewage water and trash flow in the storm drain on June 30th, 2020 in Tijuana. The state is investigating as many as 400 companies for water theft and illegal dumping of sewage. Coca-Cola, Samsung, Hyundai and Home Depot are among a growing list of international and American companies the state of Baja California is investigating for alleged water theft and the illegal discharge of water sewage into the city’s crumbling drainage systems.
(Alejandro Tamayo/The San Diego Union Tribune)

It’s a decades-old problem, recently featured on “60 Minutes.” The United States plans to invest $300 million in infrastructure to stop the sewage from flowing across the border, according to the legislative act governing the United States-Mexico-Canada Agreement.

Imperial Beach Mayor Serge Dedina, a vocal critic of the cross-border sewage, said he was “shocked but not surprised” about the results of the Baja California audit.

“We expected something like this was going on — but nothing at that scale,” said Dedina.

“It all makes sense now — why the situation deteriorated so quickly and why they never seemed to be able to fix anything. Some of the most powerful, wealthy corporations in the world we now know contributed to our sewage crisis,” he added.

Bonilla said he plans to do his part by ensuring companies operating in Baja California pay for the water they use, so the utility can start investing in maintenance to replace aging city pipes and upgrade Tijuana’s largest sewage treatment plant. Companies will be fined for illegal sewage discharges, he said.

In Colonia Chula Vista sewage water and trash flow in the storm drain on June 30th, 2020 in Tijuana.
In Colonia Chula Vista sewage water and trash flow in the storm drain on June 30th, 2020 in Tijuana. The state is investigating as many as 400 companies for water theft and illegal dumping of sewage. Coca-Cola, Samsung, Hyundai and Home Depot are among a growing list of international and American companies the state of Baja California is investigating for alleged water theft and the illegal discharge of water sewage into the city’s crumbling drainage systems.
(Alejandro Tamayo/The San Diego Union Tribune)

“These are multi-million dollar, transnational corporations that are listed on the stock exchange,” said Bonilla. “And, in Tijuana, they steal water?”

Coca-Cola, FedEx, Walmart, Samsung and Hyundai are among the more than 400 companies whose water and sewage use has been audited.

Coca-Cola is accused of contracting with CESPT in 1992 to connect water to a parking lot located 150 meters from its bottling factory in Tijuana.

Manuel Garcia, the Fisamex auditor, said the company then illegally connected the water services from the parking lot to its property across the street, where he says it employees hundreds of people.

Since 1992, Coca-Cola has only been paying the same minimum monthly bill of five units of water for its entire factory, Garcia said, about the same amount of water used by one person living conservatively in a small home.

Garcia said the company owes the CESPT about $1.1 million in unpaid water fees for the past five years, the maximum time frame the agency is allowed to collect.

When he visited Coca-Cola’s property, Garcia said he discovered three hidden drainage pipes — two that were eight inches in diameter and one that was 12 inches. The professionally installed drainage pipes were never authorized by CESPT, he said, but they eventually connect to the Tijuana canal, which funnels sewage water toward the U.S. border.

Coca-Cola released a statement in response to the allegations at Corporacion del Fuerte, the system’s bottler in Tijuana:

“For more than 30 years operating in Baja California, hand in hand with Corporacion del Fuerte, we have been characterized by complying with the laws and obligations applicable to our processes, the satisfaction of our customers and consumers, and by supporting the community,” the statement read in part. “We reiterate our commitment and willingness to continue collaborating with the authorities in favor of the development of the area.”

For one of Hyundai’s large auto-assembly factories along the border, auditors could not locate any water or sewer account on file with the Baja California water agency. Since 2012, the company has not paid the state for a single drop of water, state investigators said.

“How is it a company like Hyundai, a transnational company, listed on the stock exchange, its profits being reviewed by its shareholders … How is it they come settle in Mexico without ever paying a water bill?” asked Bonilla.

“Nothing is installed. There’s no meter, so they have volumes of water coming in, enjoying the free drainage and there’s absolutely no record of them at all at the water agency. Let’s see. It means, to do all that, they had to have been cooperating with the CESPT,” he said. Garcia said Hyundai owed $489,104 in unpaid water fees to the CESPT for the past five years.

Bonilla said the director of a well-known hotel in Tijuana recently asked to meet with the governor to complain about the “injustice of the CESPT.” The hotelier explained he had already paid CESPT employees directly in April about a quarter of his bill to make his entire outstanding balance disappear, Bonilla said.

A forensic analysis of the account showed the hotel’s approximately $178,000 debt had been deleted from the agency computers without any record of the payment to the CESPT employees, according to Bonilla and the auditor.

The secretary of Baja California’s public integrity unit, Vicenta Espinoza Martínez, agreed it would have been difficult for no one at the CESPT to notice the discrepancies.

“It caught our attention when reviewing the budgets,” said Espinoza Martínez. “When reviewing the accounts of large water consumers we saw we were actually spending more than we were bringing in — more than our income was ... and some accounts were being charged for very minimum consumption despite being very large companies ... to the point where it was illogical.”

The new governor has vowed to collect what is owed or to cut off water to big companies, including Grupo Aeroportuario del Pacífico, the Mexican company that runs the Tijuana International Airport.

Some workers say they knew there was a high risk of coronavirus inside the Mexican factories, but they needed the jobs.

June 5, 2020

In June, state officials cut off water at the airport, causing employees and passengers to complain about the smell of urine and concerns over the spread of coronavirus. Last Monday, CESTP officials turned the water back on after the company paid $1.5 million in back payments for water. Baja California state law says the company can only be charged for five years worth of discrepancies in unpaid water bills.

Grupo Aeroportuario del Pacífico’s CEO Raúl Revuelta Musalem said in a statement on June 29 the company is “committed to the economic and social development of Mexico” and working with Baja California officials to building a “spirit of conciliation to jointly face adverse circumstances facing the country.”

Bonilla, a former Otay Water District director, is a member of the ruling MORENA political party, a new leftist party founded by Mexico’s current president. In 2019, MORENA defeated the National Action Party or PAN, the political party that had nearly exclusively governed Baja California for 30 years between 1989 and 2019.

“I’m from Tijuana. I’m from Baja California, and it hurts me a lot that these businesses come here and make a lot of money off the sweat of Baja Californians, but they don’t comply — at a minimum — with their basic obligations,” Bonilla said.

He said he was equally upset with the water agency.

“They cut off the water very rapidly for the woman who lives on the corner who owes 1,800 pesos ($79.37), but not for the giant corporation that hasn’t paid for water for 7 years ... “ said Bonilla.

Victor Manuel Vegas, 45, lives on the property adjacent to the illegal drainage ditch used by the airport in the Lomas Taurinas neighborhood. He’s been complaining about the smell since 1993.

“When it is hot, it smells so bad; it’s unbearable. My kids can’t even live here with me because we’re worried about the contamination,” Vegas said. He’s seen chemicals, gasoline, oil and other hazardous material flowing through the creek.

“My family is afraid to live here with me because of their illegal actions,” he said.

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