Bribes in Ferrominera Orinoco's iron ore sales

From: Patrick Hodgins

To: CAÑAS L. JORGE L. / FMO 3142: canas.jorge@gmail.com

Sent: Wednesday, July 11, 2007, 6:11 AM

Subject: RE: Iron request for China

George,

First let me thank you for your patients in this matter , the chinese have been very hard in their negotiations, however we can revert with the following counter for your perusal.

We accept as per your Offer below and i thank you for your efforts in getting this far, we there for counter with the following:

1) Quantity:

a) 2007 Contractual Year: Nine (9) shipments of 70,000 MT +/- 10% MOLOO each (“Panamax” size vessels).

b) 2008 Contractual Year: Seven (7) shipments of 130,000 MT +/- 10% MOLOO each (“Cape” size vessels) or in Buyers options capes to be split into panamax (14) 70,000MT +/- 10%moloo.

2) Quality:

a) Ferrominera Sinter Feed (FSF2007), as per the specifications previously provided to you.

b) San Isidro Calibrated Lump Ore (SICLO-1), as per the specifications previously provided to you.

3) Delivery Period:

a) 2007 Contractual Year: Nine (9) shipments, as per point 1a above, from August 1^st, 2007 until April 30^th, 2008.

The above was replied by the following email:

Panamax Bulk AS

Fra: Freddy A Castellanos [fcsenior57@hotmail.com]

Sendt: 11. juli 2007 16:43

Til: Patrick Hodgins

Kopi: Panamax Bulk

Emne: Re: Iron request for China

Patrick,

Thank you for the blind copy. Now, Jorge will reply to you as per the terms we have agreed but with the prices that will appear in the contract between FMO and you (either Crown Venture of Juhua Group). As per the discussions I have maintained with Jorge, FMO will have following FOB prices in the contract:

FSF2007: US Cents 69.54/DMTU

SICLO-1: US Cents 86.55/DMTU

As also agreed, the difference between above prices and those agreed between us (FSF2007: US Cents 75.00/DMTU and SICLO-1: US Cents 92.00/DMTU) together with the 1.5% (of the FOB value of shipments) commission for buyer, which will be included in the sales contract to be signed, will be for FMO's people who got the material and will approve the deal. I am sending on a separate message a draft of contract to be signed between Crown Venture and me concerning this issue.

Finally, I thank you for your efforts on successfully concluding this negotiations.

Kind regards,

Freddy Castellanos

The above is quite self explanatory, but to put it in context, actors must be identified.

As per his LinkedIn page, Patrick Hodgins is meant to be an Australian shipping executive that has worked in the past for Rio Tinto, Freight Investors Services, Fortescue Metals Group, and Nidera. At time of emails, Hodgins was with Australia's Fortescue Metals Group.

Jorge Cañas (Vzla ID no. 8.540.342) is quoted as being Sales Manager (Gerente de Comercializacion) of Venezuela's iron producer Ferrominera del Orinoco (FMO).

Freddy Castellanos (Vzla ID no. 4.883.936) is a metallurgic engineer, who worked for FMO until August of 2003 [see here].

Crown Venture claims to be a “global trading company being registered and having offices in Hong Kong, Singapore, Oslo and Caracas.” There's a Crown Venture Limited registered in Hong Kong (company number 1128011). It is a HKD 10,000 capital company (wholly owned by Singapore’s Amoy Trading PTE. Limited), whose director is Cook Island's based CV Services Limited [see here]. Crown Venture also has a record in Oslo (no. 995 957 086), where it appears as one of a number of subsidiaries of Hjalmar Røed & Co AS, owned / operated by Morten Frode Riis, whose other subsidiary Panamax Bulk AS was declared bankrupt. Unsurprisingly, Panamax Bulk AS and Crown Venture are registered at the same address in Oslo. There is no record of Crown Venture in Venezuela's registers.

Juhua Group, is China's Zhejiang province largest chemical industry.

In another communication, Fernando Campbell, Astrup Fearnley of Norway's representative in Caracas is copied. Given that both Panamax Bulk AS and Crown Venture are mere fronts of intermediators, perhaps Astrup Fearnley's Fernando Campbell was drawn in to arrange the maritime side of things. Or perhaps that was Morten Frode Riis's part of the deal.

In any case, just by observing the murky structure leading to Singapore, Hong Kong, Miami, Panama, Australia, Cook Islands, Venezuela and Oslo, one can infer where this is going. In subsequent communications [see here and here], Castellanos instructs Hodgins on what needs to be done for the deal to be completed, as well as requests of Hodgins payment of $2,309,978.92 worth of commissions to be divided among FMO staff and himself.

Payment was to be made to BAC Florida Bank, Account Number: 937-959-820, ABA: 067009044, SWIFT: BFLBUS3M, To the name of: "Societe Partry, S.A." [see here].

Castellanos sent Hodgins, as representative of Crown Venture Ltd, an invoice from Societe Partry SA with a bogus address in Caracas [see here]. Partry is a company registered in Panama, whose proxies Ana Luisa Amengual, Mercedes McCarthy and Francisco Ramirez are directors of hundreds of companies, and all share the same address in Miami, according to records [see here].

A couple of bank transfers (payment of commissions) are evidenced in the leaked documents: one from HSBC Hong Kong, acc. no. 168-313013-838, dated 01/07/2008, to Societe Partry's account in BAC Florida Bank for $426,939; another one dated 24 July 2009, from Crown Venture Limited's account in Singapore's DBS Bank Limited, for $381,571.58.

Castellano's leverage over FMO's commercial decisions is apparent when he writes to Hodgins:

As you see in FMO's message, they are also including the Letter of Authorization for your company to promote and sell FMO's iron ore in the Chinese market this year as well as next year. This will support you in your discussions with Beitai Group and other Chinese mills.

But Hodgins own position is also interesting, considering that at the time he was meant to be working for Fortescue. Was he dealing on the side, or was Fortescue involved in the paying of bribes to Venezuelans in iron ore purchases?

As per Junhua's, well Chinese companies' corruption is rampant and very well known across the world. There is hardly a market corrupt Chinese haven't been able to crack by hook or crook.

And what to make of HSBC's Hong Kong failure to notice Hodgins own dodgy set up, and that of beneficiary of transfers, Societe Partry? In one of the emails, it would appear that at least four transfers in 2008 (dated 01/07, 01/08, 27/08 and 09/10) were made to Castellanos through HSBC (as seen in case of Mexican narcos and many other scandals, HSBC's forte is not precisely strict observance to anti money laundering regulations). In the same email, Metalloyd of London (Reuben bros) is identified as having purchased around 447 metric tonnes of FMO's iron ore between January and July 2008.

I sent emails requesting comment to some of parties involved in this corruption racket. No one has replied. Another case of rampant corruption involving high chavista authorities and foreign companies and individuals only too happy to engage in criminal activities to make a quick buck in Venezuela.