30 November 2011

Corruption & Hugo Chavez: the cancer of Venezuela

*UPDATE at bottom. Lately, information coming out of Venezuela confirms that officials from the Hugo Chavez regime are totally unaccountable, above the law for all practical purposes. It sort of started when Congressman Carlos Ramos revealed there was a $29 billion fiscal hole in FONDEN, which is basically an out-of-budget fund that Hugo Chavez uses with absolute discretion to fund his pet projects and global revolution. In what has become known as the FONDEN papers, fellow blogger Miguel Octavio has delved more and more into the details of the dodgy fund.

In the meantime we have been treated to information about much smaller, but equally scandalous, expenditure. For example, a contract to provide to the Chavez regime electronic IDs, worth some $40 million, between Gemalto, a French public company with ADRs traded over in the USA, and a totally unknown Cuban briefcase-company called ALBET, which is meant to be some sort of subsidiary of Cuba's "university of technology" UCI. In this respect, Congressman Ramos also picked up the story, and decided to investigate a little.

Then, there's the sponsorship contract between PDVSA and Williams F1 team. In this instance, the amounts are believed to be between £110.5 million and £154.7 million (over 5 years). Again we find Congressman Ramos -it seems he is about the only elected official in Venezuela concerned about corruption- questioning the legality of this contract.

More recently though, copy of contract between China and Venezuela -to increase amount of a fund aptly called Chinese fund- has also been leaked. As Miguel reports, if what's stated in the documents is to be taken at face value, Venezuela, or rather Hugo Chavez acting unilaterally and without Congress' approval, wants to borrow $116 billion from China. In Miguel's own words:
The Republic borrows US$ 20.8 billion from the Chinese. PDVSA “pays” for this loan to the tune of US$ 15.7 billion per year, clearly an inordinate amount of money for the loan received. The Chinese collect interest and capital and any “excess”, of which there is a lot, returns to the Government, not to PDVSA, via parallel funds, which bypass the controls and approvals of Venezuelan Laws.
It's hundreds of millions here, thousands of billions there, maddening figures. Had these amounts of public money been put to legally intended use, Venezuelans, all 26 million of them, would most definitely be laughing any mention of crisis or capitalism failure. For it must be borne in mind: all these borrowing and spending without oversight, circumventing laws and Congress through dodgy funds and paying mechanisms, comes on the back of the highest ever windfall of oil income in the history of Venezuela.

Since Hugo Chavez took power in 1999, Venezuela's debt has mushroomed:

  • Internal debt has gone from 3.8 billion Bs to 83 billion Bs ($31.9 billion, 2010 figures).
  • External debt has gone from $37.7 billion to $54.5 billion (2009 figures).
The above excluding commitments entered into with the Chinese fund as referred above, and in addition to the nearly $2,000 billion estimated GDP since 1999. Some estimates put the combined budget of the Chavez period at about $1,000 billion.

Venezuela has become so corrupted, since Hugo Chavez's ascent to power, that it seems normal now that Nigerian-style scams, whereby officials documents and signatures are forged, are popping in the most unexpected places.

The worrying thing though, is that corruption does not end in Venezuela. Chinese, Russian, Belorussian, Iranian, Cuban, Nicaraguan, Bolivian, Ecuadorian, Colombian, Brazilian, Argentinean, and American authorities are happy to look the over way, so long as deals with the Venezuelan caudillo worths millions or billions can be had. But European countries, such as Spain, Italy, France, Germany and the UK are just as keen, perhaps even keener considering Europe's pathetic economic outlook, to look the other way, violate own anti corruption legislation, and enter into contracts that can't stand a minimum of scrutiny. This behaviour is generalised and widespread in both public and private sectors.

Venezuela is seen, as Libya used to be seen. Chavez is perceived, as Gadaffi used to be. Mad dog and all, there's tremendous potential to make a few billions quickly. And Chavez, in his diminishing existence, is eager to mortgage the future of Venezuela. The sad thing for us is that those who are meant to have higher moral principles, are just as corrupt and corruptible as chavistas.

*UPDATE: Miguel writes in with new debt figures: Venezuela's total debt has gone from $39.5 billion in 2000, to $104.5 billion in 2011.

24 November 2011

Update on BCV - Kellmar Ltd / Tony Caplin

The state of play in the alleged transfer, by Venezuela's Central Bank (BCV) of a sovereign bond, worth $2 billion, to Kellmar Ltd and Tony Caplin, is the following.

The president of the BCV, Nelson Merentes, has denied having signed any document to that effect [link]. If Merentes' denial is to be taken at face value, it remains to be seen what legal actions will he, the BCV, and the government of Venezuela undertake, to prosecute Kellmar Ltd and Tony Caplin, for forgery of documents and signatures of Venezuelan government officials, in what could be a rather elaborate scam.

20 November 2011

Venezuela: Central Bank transfers $2 billion sovereign bond to Tony Caplin / Kellmar Limited

Daniel writes in to say that I should provide a bit of an explanation for why this should be a scandal. I guess that the reason would be that it is simply not normal for a Central Bank, to transfer free and clear, ownership of a sovereign bond, worth $2 billion, to a recently formed limited company with a share capital of £2,000, managed by an individual (Tony Caplin) who appears as inactive in the Financial Services Authority register.

[Read UPDATE] Some context of actors provided to facilitate further investigations in respective jurisdictions.

Banco Central de Venezuela (BCV): Venezuela's Central Bank [link].

Nelson Merentes: Current President of BCV [link].

Eudomar Tovar: First Vice President of BCV [link].

Kellmar Limited: Isle of Man registered, £2,000 limited company [link].

James Ellwood: Director of Kellmar Ltd [link]. Board member of Momentum Pensions Ltd [link].

Anthony Lindsay Caplin: a.k.a. Tony Caplin [link]. Former Chief Operating Officer of the Conservative Party [link]. Formerly with Panmure Gordon [link]. Director of Kellmar Ltd since 29 March 2011 [link]. Current Chairman of North West London Hospitals NHS Trust [link]. Current member of the Medical Research Council [link]. Current Commissioner of the Public Works Loan Board [link]. Currently inactive -as individual AXC01538 - Anthony Lindsay Caplin- according to the Financial Services Authority register [link].

Ramon Carpio Carvajal: Vice President of International Operations of BCV [link].

Ira D. Pruitt Jr: Attorney for Kellmar Ltd and Tony Caplin [link].

Rosallyn Hazelle: St. Kitts & Nevis Ambassador and Permanent Secretary Industry, Commerce, and Consumer Affairs [link].

Credit Suisse [link].

Sovereign Bond: Bolivarian Republic of Venezuela, 9.250, 07/05/28, ISIN USP17625AB33, common code 036133678 [link].

16 November 2011

Venezuela: Congressman Carlos Ramos questions Williams F1

Congressman Carlos Ramos is now turning his attention to Frank Williams' F1 team. PDVSA, the Venezuelan oil State conglomerate, is sponsoring the Williams F1 team. No one in Venezuela -apart from a handful of chavistas- knows how many millions have PDVSA promised and disbursed to Williams F1 team. In any case, according to Venezuelan legislation, no public monies can be committed to any such projects without the approval of the Venezuelan Congress. Neither Hugo Chavez, nor PDVSA, can unilaterally spend public monies without oversight or approval. Therefore the contract between PDVSA and Frank Williams F1 team may well be illegal, as there's no record of the contract ever having been discussed, or approved, by people's representatives in Venezuela's Congress. We shall see whether Williams F1 team replies now, to an official request for a copy of the contract for an ongoing investigation in Venezuela's Congress.

According to previous local reports in Venezuela, starting in 2010, Frank Williams F1 team could have gotten either £110.5 millions, £138.14 millions, or £154.7 millions from PDVSA depending on exposure of PDVSA / Venezuela logos in Williams F1 car and drivers' livery.

Tomorrow, I shall be sending via recorded delivery a copy of this letter to Claire Williams.

UPDATE: copy of Congressman Carlos Ramos letter was received in Williams F1 office in Grove on 18 November, at 08:47, according to Royal Mail.

UPDATE II: Claire Williams has replied to Congressman Ramos' communication, 18 November 2011 16:15:24 GMT. We are preparing a reply, to be posted here soon.

Venezuela: Congressman Carlos Ramos questions Williams F1 - PDVSA contract

14 November 2011

Gemalto notified of Venezuelan Congress investigation

The letter from Congressman Carlos Ramos to Isabelle Marand, VP Corporate Coomunications at Gemalto, was delivered to her office in 6 Rue de la Verreine, Meudon, in France, on 7 November 2011, according to La Poste:

Congressman Carlos Ramos is now to seek collaboration from Dutch and French congressmen/women to force an answer from Gemalto, which to this day, has refused to even acknowledge communications sent by Congressman Ramos or myself.

It is evident that this failure / refusal to answer a set of simple questions by whoever is in charge of PR and communications for Gemalto, it would appear to be Ms Marand, is indicative that Gemalto could have something to hide. Given that the company is registered in France and Holland, and the fact that it is a public company, it will be interesting to see whether their alleged operations and earnings in Venezuela, through a fully owned subsidiary in Mexico, are legitimate and have been properly declared.