The Mexican government's damage control effort over a conflict of interest scandal involving properties linked to President Enrique Peña Nieto has itself created allegations of a conflict of interest.

Peña Nieto on February 3 appointed a career bureaucrat to head a previously dormant ministry meant to act as an anti-corruption watchdog over public officials.

But a day later, the new comptroller Virgilio Andrade admitted that he was long-time college buds with Peña Nieto's finance secretary, Luis Videgaray.

Both Peña Nieto and Videgaray, as well as Mexican First Lady Angelica Rivera, have had to answer allegations of impropriety linked to properties they've bought or financed under favorable terms from companies that have earned government contracts during Peña Nieto's terms as a governor and now as president.

"We are friends," Andrade said Wednesday afternoon of his relationship with Videgaray, who purchased a country club property from a government contractor with credit provided by the same company.

Mexico ranks 103 of 175 countries in Transparency International's most recent Corruption Perceptions Index.

"I repeat, one thing is this area," Andrade said of the friendship, and "another is the fact that the actions of government officials have to be subordinate to laws and accountable."

Analysts in Mexico quickly dismissed the prospects of Andrade effectively carrying out his post. As one headline put it, Andrade was tasked with investigating "his friend, his boss, and his boss's wife."

By Thursday, the new comptroller clarified that he will not be investigating the deal that led to Peña Nieto's purchase of a house from a government contractor, as first revealed by The Wall Street Journal, because Andrade's office can only investigate federal officials.

At the time of the sale, the president was governor of the state of Mexico.

Videgaray and Andrade were classmates at the Autonomous Technical Institute of Mexico, or ITAM as it's known in Spanish, in the late 1980s, media reports noted.

Videgaray, who last week announced significant national budget cuts to stem the effects of the drop in global oil prices, recommended Andrade for a previous post as a commissioner on Mexico's elections council, a law professor at Mexico's autonomous university UNAM told Sin Embargo.

"In political terms, Videgaray is Andrade's godfather," professor Ernesto Villanueva said.

Turns out the new comptroller will not actually investigate President Enrique Peña Nieto's dubiously purchased home in Ixtapan de la Sal. (Photo via Presidencia de Mexico)

Andrade is also apparently friendly with Peña Nieto, who he said he first met in 2006.

"President Peña Nieto was very clear in saying that there are no friendships in the government," Andrade assured in a Wednesday briefing with reporters, which VICE News attended.

President Denies Wrongdoing

In a political system plagued by cronyism and patronage, the issue of conflicts of interest has captured attention since the first lady's so-called "White House" entered the headlines for its exorbitant price and the cozy chain of events that led to its purchase. Experts say the concept is poorly defined in the country, while transgressions are seldom scrutinized.

The president, Rivera and Videgaray deny any wrongdoing.

Still, the president announced actions to combat what his government has dubbed perceptions of corruption. He said he would establish a Specialized Unit on Ethics and Prevention of Conflicts of Interest within the revived comptroller agency. However, the appointment was further ridiculed when the daily La Jornada pointed out that, technically, the reestablished agency simply does not exist within currently established law.

The conflict of interest allegations, along with what critics have called the president's aloof handling of the case of 43 missing students, has severely damaged his approval rating and for some Mexicans served as a reminder of the worst excesses from the era of one-party rule — provided for decades prior to 2000 by Peña Nieto's Institutional Revolutionary Party, PRI.

"I am aware that the indications have generated the appearance of something improper, something that in reality did not occur," Peña Nieto said last Tuesday. "In the exercise of my duties I have always acted with impartiality and in accordance with the law."

Andrade arrived to a ministry created in the 1980s by former President Miguel de la Madrid, who came to office promising "moral renewal." Three decades later, Mexico ranks 103 of 175 countries in Transparency International's most recent Corruption Perceptions Index.

The comptroller's office was left leaderless for two years as Peña Nieto had proposed creating an anti-corruption commission, an initiative stalled in Mexico's PRI-controlled Congress and previously put on the back burner as legislative leaders pursued the president's agenda of structural reforms in areas such as energy and education.

Analysts say Andrade's ability to operate will be limited, mainly because he is a presidential appointee and part of the cabinet.

"The comptroller doesn't have any teeth," said Aldo Muñoz Armenta, political science professor at the Autonomous University of Mexico State. "The comptroller depends on the presidency and even has to name his undersecretaries in agreement with the president."

In his meeting with foreign correspondents, Andrade insisted he was independent and clean of any conflicts of interest. He outlined his net worth: a bank account worth $275,000, a $600,000 home, a 2011 Volkswagen Jetta, and a 2011 Toyota Sienna van.

First lady Angelica Rivera's mansion sits in a luxury neighborhood of Mexico City. (Photo by Dario Lopez-Mills/AP)

Peña Nieto purchased his criticized home in late 2005 from a government contractor, Roberto San Roman, in the weekend retreat of Ixtapan de la Sal, Mexico state. It was just weeks after Peña Nieto assumed office as governor of the state.

San Roman subsequently received more than $100 million in government contracts, the Wall Street Journal reported.

"The relationship with Mr. Peña Nieto and some members of the San Roman family is several decades long," government spokesman Eduardo Sanchez admitted, adding that "the president bought the $372 thousand house at market value, and the transaction does not represent a conflict of interest."

The website for the Gran Reserva Golf Resort & Country Club, where the home is located, opens to a disclaimer in response to the controversy.

"The WSJ article indicates that during this federal administration, CUISA has won 11 contracts, but fails to mention that the company has lost 48 public-works bids that it has participated in," the statement said. "This is evidence that we compete under the same terms as anyone."

Videgaray bought a home from a different contractor, Grupo Higa. He later said the contractor gave him a loan with an interest rate of 5.31 percent — less than what was offered by commercial banks.

While Videgaray has acknowledged that he bought the half-a-million-dollar home from the builder, he claims that there was no wrong-doing, since he acquired the home in the state of Mexico prior to assuming his post as finance minister.

"There was no conflict of interest. I did the deal when I was not holding public office, and the deal was within market parameters," Videgaray told the Wall Street Journal in December.

A former soap opera star, first lady Angelica Rivera purchased a $6.3 million mansion in 2011 built by Grupo Higa, which also provided her with the credit to buy it.

A multi-billion dollar contract to build a high-speed rail line between Mexico City and Querétaro was awarded to a Chinese company and its Mexican partners, including Grupo Higa, but the contract was cancelled shortly after the potential conflict of interest was exposed by Aristegui Noticias.

Rivera said that she had paid for the home with wages earned as an actress, but her name reportedly does not appear on the homeowners' contract. The home is instead registered to a subsidiary of Grupo Higa.

_Follow David Agren on Twitter @el_reportero. _