By Michael O'Boyle and Stefanie Eschenbacher
MEXICO CITY (Reuters) - A Mexican court ruling allowing an ex-union boss to walk free of money laundering charges laid bare a serious flaw in a host of other high-profile corruption trials, officials and experts say, and underscored the challenge facing the incoming government.
Last week, former teachers union leader Elba Esther Gordillo walked when a judge dismissed charges that she laundered over $100 million (£78.6 million) in union funds to pay for luxury goods and plastic surgery.
Judge Miguel Angel Aguilar of Mexico City's first penal tribunal justified his decision, in part, using a November 2017 Supreme Court ruling that stated that prosecutors must first obtain court orders before requesting financial records, according to non-public court documents reviewed by Reuters.
The same argument could be brought to bear in other prominent investigations such as those into ex-state governors accused of embezzling public funds, a half-dozen government sources and legal experts consulted by Reuters said.
Mexico is awash with billions of dollars in illicit proceeds from drug trafficking, organised crime and theft of public money, but despite efforts to improve anti-money laundering laws, the country is failing to mount successful prosecutions.
Financial information has been obtained without court orders in thousands of cases under way or already resolved, said Jorge Lara, a former deputy attorney general.
Since Mexican law allows for jurisprudence that is favourable to defendants to be applied retroactively, many of those cases could be thrown out, he said.
"This is a really potent tool to topple cases," Lara said.
Public anger over corruption was a major factor in propelling leftist Andres Manuel Lopez Obrador to the presidency in the July 1 election. The Gordillo ruling shows that Lopez Obrador faces a tough task to fulfil his pledge to make corruption cases stick.
After a flurry of investigations toward the close of outgoing President Enrique Pena Nieto's six-year term, six former governors are in custody on pre-trial detention, according to watchdog group Mexicanos Contra la Corrupcion.
The case of Javier Duarte, a former Veracruz state governor accused of using fake companies to launder millions, has become a symbol of corruption under Pena Nieto.
Duarte, who denies wrongdoing, has been in prison since his arrest last year. His case is among those that could collapse due to the November Supreme Court ruling, according to two government sources with knowledge of the investigation.
A lawyer for Duarte declined to comment.
In Gordillo's case, Aguilar ruled that authorities did not have a court order before seeking private banking information in 2013 when she was arrested.
They therefore illegally obtained records on which to base their charges, court documents show.
That applied the November Supreme Court decision, which was meant to be a check against abuses by prosecutors, said Angelica Ortiz, a former top official at Mexico's financial intelligence unit, the Finance Ministry's anti-money laundering arm.
Gordillo's case also shows how prosecutors are struggling with a new U.S.-style system of oral trials that gives defence lawyers more leeway to dismiss charges for procedural errors, said Carlos Perez, a lawyer and expert on money laundering.
"We are still not 100 percent ready for trials," Perez said. "This is going to lead to not just letting the governors out, but also other types of criminals whose cases are under way."
The new model is replacing an opaque inquisitorial system, and has put prosecutors on the back foot in the courtroom, said Javier Lopez, who runs the anti-money laundering committee at the Mexican Institute for Public Accountants.
Speaking of the prosecutions of the ex-governors, he said, "The cases are not being put together properly."
(Reporting by Michael O'Boyle and Stefanie Eschenbacher; Editing by Dave Graham and Leslie Adler)