Archive for February 16th, 2006

Electoral Board “only” six weeks late with audits (out of five)

February 16, 2006

Remember how the fascist Head of the Electoral Board gloated saying that 47% of the ballot boxes would be audited but not live, but in five weeks we would know the comparison? With a sraight and cynical face he said this was good, this was perfect, how could people not like it? How could they compalin? So transparent! This guaranteed the integrity of the ballot box or some BS like that.

Well, today, that subversive group called Sumate went to the Venezuelan Supreme Court asking that Court to force the Electoral Board to reveal what the hell happened to those virginal audits, because it has now been eleven weeks and the Electoral Board has yet to release the results.

I guess the Sumate people are just impatient, 11 weeks is only off so far by a little bit over 100%, what else did they expect from an incompetent revolution? But hey! If Jorgito were running the Haitian elections Aristide would have won that country’s elections runnning away, even if he was not a candidate. In fact, by law, all election material could have been destroyed by now, according to Venezuelan regulations. That must be why the Chavistas want him back.

What is wrong with this picture?

February 16, 2006

What is wrong with this picture:

Funding for the Maiquetia Airport: Bs. 60.2 billion or US$ 28 million

Highway Plan financed by PDVSA for all of Venezuela: Bs. 120 billion or US$ 59 million

Four possibilities:

-a) They want the airport efficient so that their enemies can leave the country without problem
-b) They ride airplanes and helicopters and could care less about the people and the highway infrastructure.
-c) Small minds, small budgets.
-d) They have no clue

All four?

Another cynical and unethical attempt by Chavez’ Government to take credit for somone else’s success

February 16, 2006

In the latest cynical and
dishonest move by the Chavez Government, the country awoke this morning to
dozens of billboards like the one above (This one from Carabobo state, sent by
a reader) in which President Chavez attempts to steal (rob might be a better word) the credit for the country’s
victory in the Caribbean Baseball Series a week and a half ago.

This is really stooping
quite low, because the Venezuelan representative to the Caribbean Series was a
team, the Leones del Caracas or Caracas Lions, which is part of a private professional
baseball league. What makes the whole thing more irksome is that Chavez has
actually ignored the victory for a variety of reasons, refusing so far to even
do the customary invitation of the team to go to the Presidential palace.


The reasons for this are
many. First of all, Chavez is a baseball fan who used to go to games during the
first two years in office. But as people turned against him, he began to be
booed (and worse!) which forced him to stop going to games. Second, Chavez is a
fan of Magallanes, the baseball team from Valencia which was eliminated in the
playoffs by the Leones and which has performed very poorly ever since Chavez
became President, leading some to blame it on the President.


Third, the Government
actually tried to create a parallel baseball league to compete with the private
one, robbing players from the team and spending at the time some Bs. 4 billion
to set it up. The league lasted all of three games. In the first one, the game
began something like two hours late, because they were waiting for Chavez to
arrive. There was a second one that was played and in the third game the
uniforms did not arrive on time and that was the end of that league (and the
money). The Government also hurt the professional league by prohibiting that
beer companies sponsorship be shown on the player’s uniforms, which eliminated
a very important source of funding for the league, in which the weaker teams
barely make money.

Finally, the Caracas Lions
is owned by Venezuelan billionaire Gustavo Cisneros who is supposed to be
Chavez’ arch-enemy, even if sometimes rumors float around that they have some
sort of silent pact on something or other.

Thus, if anything Chavez
and his Government have been working against the success of Venezuela’s
professional baseball teams, which make it absolutely. In fact, it is not only
absurd for Chavez to attempt to take credit any part of this victory, but it is
cynical, unethical and despicable.


It also makes you wonder,
if the man is so popular, why does he need to try to steal what is clearly
somebody else’s victory?

A remarkable description of the Government’s involvement in agribusiness as well as funny bussiness PART II.

February 16, 2006


PEPwatch Venezuela: Beware of
government-controlled private corporations PART II


By Ken Rijock
 We continue our
series on how compliance officers can ascertain whether a private company
seeking to become a bank client is indeed a government-controlled corporation
that is a politically-exposed organisation requiring enhanced due diligence and
heightened Source of Funds analysis. Our previous article detailed how a
government-controlled company may have special access to financing, or even
grants, how its officers and directors may be fronting for its real ownership ,
and how its ability to obtain public funds without accountability may make it a
high-risk, or even unacceptable, client. Today we examine a more dangerous variety
of government-controlled company: where its ownership is but a portion of the
total shares of stock. While identifying nominee owners of 100% of a company as
fronts for government beneficial owners, record holders of minority interests
are often overlooked, or disregarded entirely in due diligence investigations.


Recognise that the laundrymen know your policies.


As a compliance officer, I
was instructed by bank counsel to ignore owners of less than 20% of a company.
I later ascertained that potential clients were routinely advised to set
company ownership at exactly 19%. Their agents obviously knew where our enquiry
threshold was , so we quickly abolished the arbitrary benchmark , and checked
out anyone whose holdings were just under the formerly used figure. Why is it
difficult to recognise companies where government ownership is less than a
controlling interest ? Let’s examine the general corporate landscape where a
quiet transfer of partial ownership has occurred:


- Officers and directors
generally are unchanged; however, there may be direction from behind the
scenes, reducing the officers to figurehead status.


- The company, previously
known as private and closely-held, has no legal obligation to disclose its new
situation. Indeed, corporate records are usually only available to
shareholders.


- Certain benefits may
inure to the company by virtue of the new owner that it does not want the
commercial world to know about. ( e.g. contracts, new business, new raw
materials and/or facilities made available.)


Why be concerned ?


Over and above the
obvious, there are clear and important potential dangers when a financial
institution handles a government-controlled company where the private and
public sector share ownership. Some important things to be aware of:


- Covert governmental aims
and goals, whether diplomatic or economic, may cause serious reputational
damage to your bank when publicly disclosed in the media.


- The company may be
immune from civil, or even criminal action, by virtue of its hidden
governmental control. Can you be the banker for organised misconduct, or
criminal elements ? Obviously, no.


- Intelligence or
espionage activities may be conducted, either domestically or abroad, by agents
using the company for these operations. The linkage of such ‘dirty tricks’ as
the Watergate break-in, or the Nugan Hand scandal, can be fatal to the
existence of a financial institution.


- Goverment-sponsored
money laundering may be part of the company’s operations.


A frightening case study.


An illustrative company
should help explain the nature of the beast, and why it could be compliance
suicide to knowingly allow a government-controlled corporation to bank with
you. Last week the world’s largest corn flour and tortilla manufacturer,
Mexican agrarian giant, Grupo Maseca, also called GRUMA, announced that it was
selling a 40% share of one of its Venezuelan subsidiaries, known as Molinos Nacionales, CA,
to Ricardo Fernandez Barrueco, for $65.6m. But do the Mexicans really know who
they are doing business with ? Readers who absorbed the first installment of
this series will recall that Sr. Fernandez Barrueco emerged from penury and
obscurity to become a major owner of Venezuelan companies closely aligned with
the immediate family of Venezuelan President Hugo Chavez Frias. Fernandez has
such power that his “friends” in government and the military succeeded in
quashing a major law enforcement investigation into his suspected smuggling
operations.


More suspect comrades.


We have already covered
Fernandez’ “colourful” background, and his shady associates, but perhaps it is
best to mention two additional individuals who are his frequent traveling
partners on his Bell 206 Ranger helicopters. They are the radical Lebanese
brothers Khaled Khalil Majzoub, born 26 August 1965, Cedula 6290182, and Majed
Khalil Majzoub, born 23 April, 1970, Cedula 13526338.


Believed to have
improperly transferred prohibited advanced technology from the US to Venezuelan government agencies using a Miami company called Hardwell Computer, Inc., their US visas were
revoked in 2004. The Khalils appear to be the preferred contractors of the
Venezuelan armed forces, and are allegedly linked to Venezuelans involved in
laundering money siphoned off from public contracts and from other illicit activities.
Like Fernandez, their companies appear to be involved in tax evasion and
customs schemes. Fernandez and the Khalils are linked to the same customs
agency, TMB Aduanas.


Financial pirates looting funds at public expense.


Fernandez is also considered
to be a member of the New Bolivarian Elite, the Venezuelan inner circle, all of
whom, by the way, clearly rate PEP status due to their ready access to billions
of dollars of Venezuelan oil revenues diverted by Chavez from the public
treasury, and used to promote his radical political agenda in Latin
America. Rotch Energy Holdings, the Fernandez company that
controls the other half of DAMASECA, GRUMA’s other subsidiary, is a registered
PDVSA broker. Energy brokers purchasing petroleum products from Venezuela are
regularly forced by PDVSA to send a large portion of their commissions to
powerful Venezuelan PEPs, often in tax haven countries. Would you like to see a
client of your bank named as a funding source of criminal organisations ? The
bank would surely run afoul of US anti-terrorism financing laws, or worse, in
today’s strict regulatory enforcement climate.


Is Fernandez the worldwide laundryman for Chavez?


The is an additional, more
dangerous, red flag: Fernandez’ businesses, which are strictly agrarian, and
are domestic in focus, cannot be reconciled with his dozens of personal
overseas bank accounts, many of which are in the unreformed active tax havens
of the Caribbean and Europe. A partial list impresses even this old veteran of
the “ banking republics. “


Compliance officers
note well how he has accounts at both the London
offices as well as the tax haven branches of some of the world’s largest
international banks, including Barclay’s . Such inter-branch transfers rarely
incur enhanced due diligence, as the receiving compliance staff assume the
client’s transaction has already been vetted. Such multiple accounts at many
branches of the same bank allows virtually foolproof layering enroute to a
final destination, as investigators rarely would be allowed access to internal
transfer information between branches that have bank secrecy laws in effect.


Do you really want to be
moving suspect funds for a company with a hidden, governmental agenda, run by
the right-hand man of the family of the president of Venezuela , and whom may be a
master laundryman ? That’s just one risk one takes when banking
government-controlled companies. As the foregoing aptly demonstrates. Getting
involved with clients who may be a government-controlled company is not just a
PEP problem, it may indeed result in a financial infection from which your bank
may not recover, They should only be allowed under strictly controlled and
monitored circumstances, and if a link to hidden government ownership is shown
regarding a present client, steps should be taken to terminate the relationship.

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