Donald Trump has a Mexico problem.
No, not that one -- a $12 million one involving the 2007 Miss Universe pageant.
Behind the headlines over Trump’s Mexico-bashing remarks is a legal dispute between the billionaire presidential candidate and two Mexican businessmen. Trump says they owe him millions from the beauty contest eight years ago.
The dispute has been lost amid the uproar on both sides of the border after Trump -- property-mogul-turned-reality-TV-star- turned-presidential-candidate -- accused Mexicans of bringing drugs and crime to the U.S. during his campaign kickoff speech June 16. No one has suggested that his money problems in Mexico prompted the remarks. But the legal flap has led Trump to swear off doing business with the entire country, slam its court system as corrupt and suggest building an impenetrable wall to keep Mexicans from ripping off the U.S.
“The defendants have been successful in using a corrupt legal and governmental system to delay and stall the fulfillment of their obligation to the Miss Universe organization,” Michael Cohen, special counsel to Trump, said in an e-mail. “It is a shame that these few individuals can have such a negative effect on a country and a country’s reputation.”
Trump’s reputation south of the border has also taken a hit. Interior Minister Miguel Angel Osorio Chong condemned his comments on Mexican immigrants as “prejudiced and absurd.” Last week, photos circulated on the Web of a shop in northern Mexico that fashioned a pinata after Trump.
Pageant Boycott
On Thursday, Univision Communications Inc., the largest U.S. Spanish-language broadcaster, which is partly owned by Mexico City-based Grupo Televisa SAB, canceled its telecast of the Miss USA pageant, also a Trump property.
Trump has since issued a statement saying he is “close friends with many Mexican people.” As far as Univision is concerned, he told CNN he’d sue over any contract breach for “tremendous amounts of money.”
It shouldn’t come as a surprise that doing business in Mexico has some hazards. The Latin American country ranks fourth-to-last among Group of 20 nations on Transparency International’s corruption index.
Trump experienced the brunt of it, according to his lawyers. They say that businessman Pedro Rodriguez, owner of Grupo Promotor MU Mexico SA, signed a $6.5 million agreement to host the Miss Universe pageant in 2006. Trump owns Miss Universe jointly with Comcast Corp.’s NBCUniversal, which disavowed his remarks about immigration.
Bogus Collateral
Rodriguez paid $1 million upfront. As collateral for the remainder, he agreed to set up a trust containing 26 properties belonging to a second businessman, Rodolfo Rosas, according to Omar Guerrero, a Mexico-City-based partner with Hogan Lovells who’s representing Trump. Once the show was over, they refused to pay the balance, and it was impossible to claim the collateral.
It turns out that the assets were never actually contributed to the trust, according to Trump’s lawyers.
Calls and e-mails to Rodriguez, Rosas and their attorneys went unanswered. In a blog post with no date, a writer identifying himself as Rosas said he never signed the agreement with Trump and offered up the collateral only as a favor to Rodriguez.
“Donald Trump lies, and with his lies he creates a farce akin to his reality show,” Rosas wrote on rodolforosasmoya.mx.
Arbitration Ruling
Eventually the Miss Universe organization took the case to an arbitration tribunal in Mexico and won. But attempts to enforce the decision stalled in the Mexican court system after multiple appeals by the defendants, according to the lawyers.
Including interest and legal fees, the amount owed has swelled to $12 million, the Trump team says.
With that as the backdrop, Trump sounded off to his 3 million Twitter followers on Feb. 24: “I have a lawsuit in Mexico’s corrupt court system that I won but so far can’t collect. Don’t do business with Mexico!”
A week later, he vowed that Mexico will never again host the Miss Universe pageant.