Derwick Associates paid bribes to get contracts in Venezuela

[UPDATED*] On Monday this week, one of Spain's newspapers of record (El Mundo), published the details of six Venezuelans being investigated, by Spain's Anti Money Laundering squad (SEPBLAC), for having taken part in money laundering. The news came after the U.S. Financial Crimes Enforcement Network (FINCEN) singled out a bank in Andorra (BPA), a tax haven tucked in the Pyrenees between France and Spain, for having laundered money for Russian, Chinese and Venezuelan criminals. FINCEN's announcement came in the back of an Executive Order from President Barack Obama, targeting seven high ranking chavistas, for being "involved in or responsible for the erosion of human rights guarantees, persecution of political opponents, curtailment of press freedoms, use of violence and human rights violations and abuses in response to antigovernment protests, and arbitrary arrest and detention of antigovernment protestors, as well as the significant public corruption by senior government officials in Venezuela."

*Fresh reports from another paper of record indicate that Spanish companies paid $148 million to obtain contracts in Venezuela (in English here).

Two of the six individuals identified, Nervis Villalobos and Javier Alvarado, have been named in a lawsuit brought against Derwick for having received millions of dollars worth of bribes. Furthermore, Villalobos is no stranger to corruption accusations in Venezuela. The man has got pedigree.

Villalobos was Venezuela's Viceminister of Energy and CEO of CADAFE, a power company fully owned by the Venezuelan State. In 2007, Chavez ordered all power companies, whether public or private, to merge into a nationwide conglomerate named CORPOELEC. Having being sacked from his CADAFE position by Hugo Chavez, Villalobos was brought back as an aide of sorts by Rafael Ramirez, longtime Energy Minister and CEO of PDVSA. Villalobos has been a regular passenger in flights aboard Derwick airlines.

Alvarado, on his part, was CEO of Electricidad de Caracas, and shared with Ramirez important board positions at newly formed CORPOELEC. Alvarado's son, also called Javier, is a school friend of Pedro Trebbau, one of Derwick's top executives. In fact, when Alvarado Jr was importing an old Porsche he bought from a convicted oil trader, he gave Derwick's office address in Caracas as contact.

FINCEN's report mentioned PDVSA as source of syphoned billions. Derwick Associates got all its 12 contracts either directly from CORPOELEC (through Alvarado and Villalobos), or from its partner PDVSA / Bariven (through Villalobos and Ramirez).

ProEnergy and Derwick have submitted procurement proposals to Venezuelan institutions. They started doing so long before Hugo Chavez declared the state of emergency that ended up awarding 12 no-bid contracts to Derwick, according to documents leaked by ProEnergy staff (see email below). Proposals submitted by ProEnergy and proposals submitted by Derwick were authored by the same individuals: John Stevens (ProEnergy's Vice President of Sales), Joaquin Mavares (ProEnergy's Vice President), and Omar Petit (ProEnergy's Director of Latin America Business Development). In fact, in more than one occasion, according to leaked documents, what Derwick did was simply replace ProEnergy's logo, bank accounts, but, more importantly, costs to include millions of dollars in overcharges: everything else in the proposals remained the same, including authors, according to documents' metadata.

How can this be? How could Derwick's proposals be prepared and authored by ProEnergy staff? Not only the ones for Venezuela, but also a bid in Suriname. Is it not evident that using proposals interchangeably does away with differentiation of bids / companies? ProEnergy paid bribes for the obtention of Termozulia contract, as revealed by Venezuelan journalists. Crucially, Termozulia contract and the bribes paid to obtain it, took place after Derwick and ProEnergy started working together. Given how ProEnergy and Derwick conducted its businesses with CORPOELEC and PDVSA / Bariven, does anyone buy Derwick's line that contracts obtained did not involve payment of bribes to Villalobos, Alvarado and others? 

As per El Mundo and local Venezuelan sources reports, the workflow in obtention of power contracts looks like this:
  • Duro Felguera >> $50 million bribe >> Nervis Villalobos / Javier Alvarado >> Termocentro contract.

  • ProEnergy >> $9.3 million bribe >> Majed Khalil / Omar Petit >> Termozulia contract.
However Derwick wants us to believe that no bribe made part of their workflow. Every single multinational and local company making business of moderate size in Venezuela pays bribes. To be fair, that's just the way it works. If no bribe is paid no contract is granted. But the peculiar thing about Derwick in particular, is their refusal to admit publicly that solely through corruption and nepotism can their success be explained.

Without a track record to speak of, Derwick insists that their company has been victimized by a conspiracy, led by me, to “tarnish its reputation”, while swearing that all their work has been above board. Moreover, Derwick employs Adam Kaufmann, a former Manhattan's DA's Prosecutor, a man that spent over decade working with Robert Morgenthau (left in pic., Kaufmann on the right), who has had the gall -I am more inclined to think the stupidity- of daring to go on record in the Wall Street Journal to claim that Derwick is a “transparent company with nothing to hide.” Contrast, however, what Kaufmann says to the WSJ, to what Derwick's lawyers do in a lawsuit filed against it in New York:

Truly transparent, eh?

Derwick's time's up. Its execs are currently being probed by Manhattan DA's Office, several U.S. Federal Agencies and now the corrupt thugs that contracted them are also investigated by FINCEN and Spain's Anti Money Laundering authorities. This will, almost certainly, lead to further investigations by other Spanish and / or European law enforcement agencies. For instance, El Mundo reports that Villalobos wired money to bank accounts in Miami. Is RBC, as quoted in SEPBLAC's report, the Royal Bank of Canada? Also consider that Villalobos is an intermediary, a bagman for a big chavista beast, otherwise known as Rafael Ramirez. Villalobos didn't just pocket the $50 million, simply because having no official job at the time he couldn't possibly have awarded a contract. That's the remit of someone with true discretionary power, someone high enough in the chavista food chain, a Ramirez, a Cabello...

Derwick also stands accused of paying, at least, $50 million to Diosdado Cabello to obtain contracts (see Cabello mention in another email below). Its partner / alter ego already paid millions to get Termozulia contract. Seeing what Villalobos got from Duro Felguera for same purpose, and Derwick's repeated refusal to open up to scrutiny in lawsuits, its credibility is simply non existent. Francisco D'Agostino, one of Derwick Associates heads, admitted that in Venezuela "you always have to pay" Villalobos-type of "consulting fees" to get contracts.

Notice mention of Majzoub brothers and Ricardo Fernandez, all three proxies of Diosdado Cabello.

Derwick execs favourite argument is that I have been paid to write about them, that my work to expose chavista corruption, which started when some of them were teenagers, is some sort of vendetta, and that silencing me -through break in, theft, stalking, online defamation, spurious legal accusations and threats against my children- will bring to an end their problems with the justice. I guess in their soireés in newly acquired, multimillion dollar houses overlooking the greens of Caracas Country Club, among all those idiotic yesmen, chavistas and pneumatic women, they must think that I have enlisted Barack Obama, Manhattan DA's Office, FINCEN, SEC, FBI, Treasury, IRS, DEA, Homeland Security, the WSJ, El Mundo, and SEPBLAC for my "campaign". Like their chavista patrons like to say: “It's all an Imperial Conspiracy!

It is not a conspiracy to quote them admitting to payment of "consulting fees", or to link to American and Spanish newspapers and investigations; it is not a conspiracy to say that Derwick pays Wikipedia editors to scrub their non existent "reputation"; it is not a conspiracy to mock their advocates idiotic arguments; and to ridicule their lawyer's untenable positions.

As I said a while back, Derwick brought all of this to themselves, and they have only themselves to blame for what's coming their way. I have been told that sancochos in El Furrial are hopelessly boring... 


The world is shrinking for Derwick Associates

One of Spain's newspapers of record, El Mundo, published in its front page today about corrupt officials from Venezuela using the subsidiary of a little bank in Andorra to launder billions of dollars. The news may come as a surprise to some. Readers of this and other blogs of mine will, I hope, share a feeling of vindication with me today, for as extraordinary as El Mundo's decision to name names is, we have known this for a while. In fact, I alerted Spain's money laundering authorities (SEPBLAC) about it in April 2012.

Six names have been mentioned in relation to this money laundering scandal: Alcides Rondon, Carlos Aguilera, Omar Farias, Rafael Jimenez, Javier Alvarado and Nervis Villalobos. Some background is provided, though much information still needs to make it to print.

Derwick Associates has been described by El Mundo as an American company that has benefited from public contracts given by Alvarado and Villalobos, now under investigation. Derwick is not an American co, we know that, but Alvarado and Villalobos are key to this multibillion dollar swindle.

Nervis Villalobos was Viceminister of Energy and CEO of CADAFE just prior to Hugo Chavez decision to merge all power companies in Venezuela in 2007, while Alvarado and PDVSA's CEO Rafael Ramirez shared important board positions at the newly created CORPOELEC. More relevant still, all 12 contracts awarded to Derwick Associates were given by CORPOELEC and / or its subsidiaries / partners (CVG and PDVSA / BARIVEN). Missouri-based ProEnergy Services -under investigation by U.S. Federal Agencies- was then subcontracted to carry out all the work.

Luis Jose Diaz Zuloaga, stepfather of one of Derwick's principals (Francisco Convit), was CEO of Electricidad de Valencia (one of the private cos forcefully absorbed by CORPOELEC). Javier Alvarado, in turn, is the father of a close school chum of Pedro Trebbau (Alvarado Jr on the left, with light blue, Trebbau in the center, dark blue and glasses).

Through Diaz Zuloaga, Villalobos, Alvarado and Ramirez, the Derwick bolichicos managed to get over 1.3 billion USD worth of contracts, according to ProEnergy Services sources familiar with the deals. In addition, Derwick overcharged the Venezuelan State 35%, on average, on each contract, according to leaked documents and ProEnergy Services sources familiar with the contracts.

Spain has been one of Derwick's favourite destinations. Millions of Euros have been spent in lavish weddings, and real estate acquisitions. The Bank of Spain, now at the centre of Andorra's money laundering scandal, ignored AML regulations in purchases involving Derwick. This may be due to the fact that the CEO of the subsidiary of Banca Privada D'Andorra (BPA) operating in Madrid (Banco de Madrid), Mr Jose Perez Fernandez, is a former Director of Compliance of Bank of Spain. The Derwick thugs have become so emboldened that relatives have threatened Spanish journalists,  forcing them to sign gag orders prohibiting any disclosure about their "businesses". Some of the money that Derwick used for property purchases didn't come from BPA / Banco Madrid though, but from Portugal's BANIF, yet another provider of money laundering services for PDVSA's middlemen such as Villalobos.

Spanish authorities have been caught napping at the wheel with regards to arrival of Venezuelan "entrepreneurs" and their "wealth". The case of Juan Carlos Escotet provides the perfect case study. But others come to mind: Miguel Angel Capriles Lopez, or Victor Vargas's acquisition through proxies of Banco Europeo de Finanzas. The reality is that none of these fortunes are legitimate. Cursory checks on origin would, almost certainly, reveal BPA kind of illegal deals.

While this happens in Spain, the Obama administration keeps increasing the pressure on chavistas and their assets in the U.S. Recent sanctions targeting human rights violators are but the tip of the iceberg. Federal Agencies' sources claim that much activity is undergoing behind the scenes, in an attempt to get financial operators and chavista bankers with a great deal of exposure in the U.S. to rat out high officials of Nicolas Maduro's regime.

Derwick Associates, whose execs are under investigation by Manhattan's DA's Office and other Federal Agencies, refused to turn up for depositions in U.S. soil. They are so afraid of being arrested that they were deposed in Aruba, according to sources. They are fighting to keep discovery information secret, despite preposterous claims about being a "transparent company" having "nothing to hide" made by their legal counsel, Adam Kaufmann, to the Wall Street Journal. Others claim that their multimillion dollar properties in New York and Miami are quietly being disposed of, and they are no longer using their N-plate jet to avoid revealing their travels through FOIA request to FAA. If Spanish authorities get serious about preventing money laundering, it is doubtful that they will continue hosting hunting dos in Toledo with Spain's impoverished jet set. That may be the reason why both Trebbau and Betancourt have recently purchased multimillion dollar properties in Caracas Country Club, one of which, allegedly, from Tomas Niembro, Victor Vargas's proxy in Banco Europeo de Finanzas acquisition.


On U.S. sanctions to chavistas: A note of gratitude to Obama, and a tip

Dear President Obama,

Thank you.

Thank you for having the courage to sanction a bunch of thugs, when all other democratic nations turn their backs on us.

Thank you for showing that Liberals do not tolerate human rights violators, regardless of where they stand in the political spectrum.

Thank you for shining a light of hope upon our battered nation.

Not long ago, I was in a conference about the offshore financial services industry. I remember, in particular, a conversation with the organizer, who claimed that the only country in the world that does something with regards to money launderers is the U.S.

We have seen how U.S. authorities have slapped big banks with hefty fines, due to their involvement in financing terrorism, large scale money laundering and other similar actions.

Your Executive Order imposing sanctions on seven chavistas suggests that those who associate and partake in the "illicit financial flows from public corruption in Venezuela" will also be targeted. As one of Venezuela's foremost researchers on corruption, let me stress upon the importance of targeting such people.

What keeps Nicolas Maduro's regime in power is not the might of its armed forces; is not the brutality meted out on innocents, or torture and assassination of students; is not its political cunning, nor its association with the communist Cuban handlers. But rather corruption. The freedom to use Venezuela's cash with absolute discretion, and without any form of accountability, that's what keeps chavismo in power.

If you were to disrupt that, by sanctioning the enablers, the facilitators of corruption, chavismo would tremble. For the U.S. financial system, which your EO aims to protect, continues to act as a gigantic laundromat, for nearly all involved in corruption in Venezuela. U.S. based banks, lawyers, lobbyists and businesses are employed as a matter of standard practice by the Boliburgeoisie.

It'll be difficult, even for you, to be able to impose meaningful sanctions on somebody like Diosdado Cabello. But you can very well hit his proxies, the financial operators that use the U.S. financial system to launder the proceeds of corruption. You could start with Roberto Rincón, based in Texas. He knows a thing or two about other OFAC-designated thugs, like Hugo Carvajal, a distinguished member of Diosdado's "Cartel de los Soles."

You could summon Luis Alfonso Oberto Anselmi. Now that one is a double -perhaps a triple, quadruple...?- whammy:
  1. he is married to Victor Gill's daughter; 
  2. used to be partner of Raul Gorrín;
  3. does deals with Francisco D'Agostino (also New York-based and currently under investigation by Manhattan's DA Office and other Federal Agencies), who's in turn married to Victor Vargas' daughter;
  4. is partner in some other deals with Coco Capriles (one of Nelson Merentes' favourite proxies / operators);
  5. is associated with Derwick Associates folks, reportedly as Venezuela's largest black market forex operators;
  6. has a direct line to the very top of PDVSA (Rafael Ramirez, Baldo Sanso, and Asdrubal Chavez), reportedly allocator of hundreds of millions of dollars to be used in arbitrage;
  7. did, together with his father, some deals with Wilmer Ruperti;
  8. is into banking, insurance, food processing, and services in Venezuela;
  9. reportedly does business with Danilo Diaz Granados and Leonardo Gonzalez Dellán.
The above, there are many more living in the U.S.A., are the kind of informants that can help you sanction with surgical precision Venezuela's top human rights violators.


How to get a bank for free, Juan Carlos Escotet style

While investors and businesses were running for cover, multinationals were unable to repatriate profits, inflation and devaluation killed the Bolivar "Fuerte" (BsF) value, and the Venezuelan economy went to the dogs chavistas, a Boliburgeois banker, Juan Carlos Escotet, managed quite an extraordinary deal. No point denying it, so kudos are in order.

Say you have a bank (BANESCO) in a country with three different foreign exchange rates (Venezuela):
  • the first ($1 = 6.3 BsF) available only to businesses dealing with "critical" imports (i.e. food, medicine, etc.); 
  • the second ($1 = 12 BsF) available to businesses in not so "critical" sectors; 
  • and the third fluctuating, the highest one, at $1 = 177 BsF, for everyone else.
Regardless of which one you are willing to get your USD from, you still need a chavista if you want to exchange, say the entire asset portfolio of a bank.

Clever operator Mr Escotet
If you happen to be Mr Escotet (pictured), you are not going to print in press releases your bank's book value at the highest rate of exchange, but at the lowest, as impossible as it may be to actually justify said value, according to Escotet's own words  (see point 4). So in Mr Escotet's world, and that of the media which reprints without question his every utterance, BANESCO portfolio of assets -whatever the amount in BsF- gets magically converted into USD at the preferential -essential sector only- rate of $1 = 6.3 BsF, thus falsifying true net worth.

European bureaucrats and media outlets aren't concerned by such details of course, so Mr Escotet found out about a distressed bank for sale (Abanca) that had gotten more than €16 billion worth of aid from European and Spanish funds, and decided to put a €1 billion bid for it. Placing a bid is not the same as having to fork out the full amount, right? Having won the bid to acquire 88.33% of Abanca, Mr Escotet negotiated payment with Spanish authorites: 40% upfront and five years to clear remaining balance. With that in his pocket, Mr Escotet set out to raise the required €400 million to close the deal, which he did, eventually.

Abanca, formerly know as NCG Banco, had assets worth €71 billion in 2011 according to the European Commission. BANESCO, the Venezuelan bank of which Mr Escotet controls an estimated 58%, is worth less than $2 billion, but that was never going to stop Mr Escotet, was it?

So the deal, quite brilliant I must admit, went thus:
  1. put a bid on a distressed bank from a country whose authorities / media don't get the half of it;
  2. inflate true net worth by capitalising on ignorance of three-tier exchange rate;
  3. promise that no jobs will be lost should the deal be approved;
  4. upon deal approval, negotiate favourable payment terms and raise first installment;
  5. upon gaining control of distressed bank, set up a fire sale to recoup initial payment and then some.
It must be said, Mr Escotet managed quite the deal. Without putting a coin, he bought on some else's dime a bank several times larger than his BANESCO. He got a foothold in Europe, increased his net worth many times over, in real terms, and managed to dupe Spanish, European authorities, stakeholders and media long enough to get what he wanted.

Mr Escotet, whose net worth was recently put in some obscure Chinese report at $2.3 billion, has definitely entered the big leagues. His 58% of BANESCO doesn't quite get to $1 billion, but BANESCO's 88.33% share of Abanca's €71 billion does. Chapeau Mr Escotet.


On Malcolm Rifkind & Jack Straw

In the maelstrom of bad news from around the world, it would have been easy to have missed the latest UK political scandal, involving two senior and accomplished politicians: Tory Malcolm Rifkind and Labour's Jack Straw. The two share a number of feats, like having held the office of UK Foreign Secretary in the past. These are two grandees. Two fellas that have made it big in UK politics, and have held very important positions. In fact, Rifkind was, until a few hours ago, Chair of the UK Parliament's Intelligence and Security Committee. Read. That. Again. Please.

Screenshot from Channel 4 Dispatches
A team of Channel 4 journalists set up a website (now defunct) about a PR company, called PMR Communications (see image). The site was registered in September 2013, and it referred to a fake, as in non existent, Hong Kong company.

Channel 4 journalists sent emails to 12 Members of the UK Parliament, claiming PMR Communications was interested in hiring for its advisory board. Malcolm Rifkind and Jack Straw, among email recipients, took PMR's bait and replied. Both met with staff of the said fake company, and both were filmed admitting that they were up for it: Rifkind stating that he would require between £5,000 and £8,000 for a day's work, while Straw (Labour) said he would charge £5,000.

To be clear, neither actually took the money. But, both boasted about networks of contacts around the world that they could tap into at a moment's notice, and provided specific examples of the sort of access and results they could get (policy changes at national or international level). Said for-sale network is based on past or present jobs (let us not forget that both are current Members of Parliament), and both said that, for a fee, they could be hired by PMR Communications.

It took me about two minutes to WHOIS PMR's website, and find out that there is no record of PMR Communications in Hong Kong's register of companies. Rifkind was, at the time, Chair of Parliament's Intelligence and Security Committee, and Straw does not lack contacts, at the highest levels, to have checked the bogus firm. And yet both fell for it. The promise of £5,000 led them to abandon common sense. Straw even admitted, after the fact, that he had "checked" the company with some people in Hong Kong. No wonder the UK keeps dropping the ball in so many issues, when the most prepared and cunning civil servants can't conduct the simplest due diligence checks.

Corruption in the UK, as demonstrated by Rifkind and Straw, is as rampant as anywhere else. UK politicos, and bankers, may come from Eton, speak the King's English and keep a facade of intellectual superiority. At the end of the day though, a quick buck, regardless of provenance, is as appealing to them as it is to thuggish chavistas. It is a disgraceful state of affairs, but one that proves that money talks and bullshit -whether dressed in fine tailoring from Saville Row- walks, regardless of ideology, status, education and background. While Rifkind and Straw claim that nothing improper took place, the fact that both readily admitted to be willing to capitalise on their extensive network of contacts, acquired over many years of public service funded by taxpayers, leaves little doubt as to their moral stance towards corruption. Furthermore, Rifkind, a current MP for Kensington & Chelsea, even claimed that he was "self employed", and that "no one pays" him a salary (he must have forgotten the £67,000 he gets as an MP). That utter disregard and contempt for the people that elected him should be used as campaign motto by the next Kensington & Chelsea MP.