PDVSA takes no responsibility for mismanagement of pension fund

May 15, 2011

In another chapter of the characteristic “Yo no fui” (Who me?) attitude, PDVSA’s CFO has told the National Assembly in his report on the matter that”it is unfounded and irresponsible to link PDVSA’s Board of Director with the investments in the funds”.

Funny, Mr Carruyo, who is a member of the Board according to the PDVSA website (see above, it says Junta Directiva in the red square and then in the bigger red square is Mr. Carruyo himself) and according to this letter I published a while back, happens to be at the same time: “President of the Board of retired people of PDVSA and its affiliates”, he claims the Board (which apparently includes himself) has not made any decisions with respect to the investment decisions.

Say what? What is he President of?

Better yet, as President of the Board of the Pension Fund he had nothing to do with investment decisions, overseeing what was done and the like? Has he ever heard the words “administrative responsibility”?

But even worse, how could the same Board of PDVSA allow Mr. Carruyo to investigate himself and write the report?

And he says very funny things, such as “Mr. Illaramendi was never an employee of PDVSA, his professional link, was via outsourcing through a foreign company”

Which is true, Mr. Illaramendi made so much money at Credit Suisse, that he would have never taken a salaried job at PDVSA, he would have had to make more money than Carruyo and Ramirez together just to make the minimum salary of a Managing Director at CS. Thus, the magic “solution”: Hire him as a sweet deal consultant and to make it a little obscure, have him do it via a company owned by him.

But the most irresponsible and hilarious part is that Carruyo then blames what happen on “the capitalistic nature” of the fund, subject to the “ups and downs” of the markets.

Sorry Eudomauro, anyone that placed money with Madoff, Stanford and Illaramendi should not be allowed to get even close to one Bolivar or one dollar of money to be managed and should actually be punished for the loss. But this case is even more fishy, because Illaramendi was a Venezuelan friend of the “house”, hired as a high flying consultant, a job that he left precisely to start managing money, an area in which he had no experience. Stinks to high heaven.

In fact, the same report says how bad things are (or were), as the funds had a total of US$ 2.7 billion, of which only US$ 580 million was being managed abroad and of these US$ 453 million were with Illaramendi (The SEC says it is more)

So, 21.5% of the funds were managed abroad, but of this percentage, 78% was managed by an unknown Venezuelan investment manager, without a track record, unregistered to do the job in the US and who at some point had a sweet consulting deal with PDVSA?

Cuentame una de vaqueros Eudomaro. (Tell me a story about cowboys)

But as if this were not enough, the report says that of the total, 2% is in real state, 15% in local banks (pensioners get paid in local currency), 5% what is managed by others and 61% in PDVSA and Venezuela bonds.

Let’s see 61% of US$ 2.7 billion is 1.65 billion, but Minister Ramirez himself told us in January that PDVSA had sold US$ 1.2 billion of the PDVSA 2017 bond with an 8.5% coupon to the pension funds. So, a full 44.4% is in bonds of the company itself, which is not what portfolio management theory says you should do. (Remember Nortel? Employees not only lost their jobs, but also their pensions as most of the pension fund was invested in stock of the company)

But this is also not kosher, because there is no independent body making decisions. First, it is too large of a fraction in a single bond (The rest may be in others). Second, it makes no sense to invest it in a single bond, with a single maturity. Yes, the pension fund should invest in PDVSA bonds, they do yield 15-16% after all and the people running the company know it better than anyone. But it should be diversified in a basket of PDVSA bonds and they should be actively traded as prices vary. But it should never be such a large fraction and least of all in a single instrument.

Carruyo’s whole argument is that the Board of PDVSA never made any decisions on the matter. But he did. And as such, he should be forced to leave the position (i.e. fired and be made to pay for the mistake and be investigated), because either he knew or he did not know, in both cases, he is guilty of not administering the money correctly and someone else should be placed in charge.

Preferably somebody that knows and I am not offering myself for the job. I would never work for the current PDVSA. I would advise a new PDVSA for free, but that I dont think will never happen.

And someone else should investigate Carruyo. It is called conflict of interest and in this case there is a HUGE one, to say the least.

Note Added: Today the SEC added Highview Owners to the accusation. More here and here.

18 Responses to “PDVSA takes no responsibility for mismanagement of pension fund”

  1. Gringo Says:

    And someone else should investigate Carruyo. It is called conflict of interest and in this case there is a HUGE one, to say the least.

    As Miguel knows all too well, this will be yet another Chavista snafu swept under the rug. What a shame.

  2. Roy Says:

    The buck stops… nowhere.

    What an incredible act of moral cowardice.

  3. Alek Boyd Says:

    …he would have had to make more money than Carruyo and Ramirez together just to make the minimum salary of a Managing Director at CS.

    Miguel, are you really implying that a manager at CS makes more money than Carruyo and Ramirez? Do we know how much Carruyo and Ramirez are making?

  4. Kepler Says:

    Obviously, Miguel, the “director de finanzas” has to do with research and development, the “director de investigación y desarrollo” has to do with logistics, the “director de logística” has to do with human resources and the HR director has to do with production.

    And as Gringo said: this will go…Pedro Pérez in Venezuela knows about Miss Venezuela and baseball and he reads about Chávez’s promises on housing and believes them or does not believe in them, he may be oppo now or just nini, but this news just won’t get to him.

  5. moctavio Says:

    Last time I checked, Ramirez’ salary was maybe US$ 400,000 a year, I would bet a MD at CS makes a million minimum. I know at Goldman Sachs it is a million, but Illaramendi was bringing in lots of deal with the Venezuelan Government, so I am sure he was making more than a million.

  6. A_Antonio Says:

    Amazing!. Your punch is harder when you are abroad. Keep in good shape. :-)

  7. Kepler Says:

    Lo traduje a las carreras. Quizás puedes revisarlo y corregir.
    ————————————————————
    En un nuevo episodio de la Telenovela “Yo no fui”, el Jefe de Finanzas de PDVSA le comunicó a la Asamblea Nacional en su informe que no había razones pruebas y era irresponsable vincular al Consejo de Administración de PDVSA con las inversiones de los fondos.

    Es curioso: el Sr Carruyo, que según el sitio de PDVSA es miembro de dicho Consejo de Administración (ver el cuadro ojo, dice Junta Directiva) y, según esta carta que publiqué hace un tiempo, es igualmente Presidente del Consejo de los Jubilados de PDVSA y sus afiliados afirma que el consejo en el que está no toma decisiones con respecto a las inversiones.

    Y ¿de qué es entonces presidente?

    Aun más escandaloso: como presidente del fondo de Pensiones dice que no tuvo nada que ver con las decisiones de inversión del mismo, aunque tenía que controlar lo que se hacía con el mismo. ¿Es que esa persona no ha oído jamás lo que es el concepto jurídico de responsabilidad administrativa?

    Lo peor es cómo el mismo Consejo de PDVSA pudo permitir que el Sr Carruyo fuese el encargado en investigarse a sí mismo y escribir ese informe.

    El Sr. Carruyo dice cosas muy curiosas como: “El Sr Illaramendi jamás fue empleado de PDVSA, su enlace profesional se realizó a través de una subcontratación con una empresa extranjera”

    Eso sí que es verdad: el Sr Illaramendi ganó tanto dinero con la multinacional Credit Suisse que jamás se habría rebajado a tomar un empleo simple en PDVSA, hubiese tenido que ganar más que Carruyo y Ramirez juntos para obtener el salario mínimi de un Director General en Credit Suisse. Es así como los de la PDVSA roja-rojita produjeron una revolucionaria solución mágica: contratarlo como consultor y hacer las cosas un tanto enrevesadas a través de una compañía de su propiedad.

    Aquí no termina todo. Lo más irresponsable es que el Sr Carruyo le echa la culpa de lo que pasa con el fondo a la “naturaleza capitalista” del mismo, que lo hace sujeto a los vaivenes de los mercados.

    Discula, camarada Eudomaur: nadie que haya invertido el dinero con Madoff, Stanford y Illaramendi debería tener permiso a acercarse a un centavo para administrarlo y debería, si lo hace, ser castigado por cualquier pérdida. Este caso es aun peor porque Illaramendi era un amigo venezolano “de la casa”, pagado como consultor de lujo, un trabajo que dejó precisamente para gerenciar dinero, un área en el que no tenía ninguna experiencia. Esto clama al cielo.

    El mismo informe fantástico nos dice cuán mal están las cosas: los fondos tenían un total de US$ 2 mil 7 millones, de los que solo US$ 580 millones se manejaron en el extranjero y de estos US$ 453 millones con Illaramendi (el SEC dice que era más).

    Así que 21,5% de los fondos se manejaban en el extranjero, pero de este percentaje un 78% fue administrado por un gerente de inversiones venezolano desconocido, sin historial de trabajo, sin permiso para hacer el trabajo en los Estados Unidos y quien tuvo durante un tiempo un contrato de consultoría muy jugoso con PDVSA.

    Cuéntame una de vaqueros, Eudomaro.

    Pero esto no es todo. El informe también dice que del total un 2% estaba en bienes raíces, un 15% en bancos locales (los jubilados reciben su dinero en moneda local), un 5% fue administrado por otros y un 61% estaban en fondos de PDVSA y Venezuela.

    Veamos: 61% de US$ 2 mil 700 millones son mil 650 millones, pero el ministro Ramírez nos dijo en enero que PDVSA había vendido US$ 1 mil 200 millones del bono PDVSA 2017 con un cupón de 8,5% en fondos de pensiones. Así que 44,4% fueron a bonos de la propia empresa, que no es precisamente lo que la teoría básica de gerencia de carteras de inversiones nos enseña (¿Recuerdqn q Nortel? Los empleados no solo perdieron sus empleos, sino también sus jubilaciones porque el fondo de pensiones se invirtió en acciones de la propia empresa)

    Pero esto tampoco es un negocio limpio pues no hubo un comité independiente que tomara las decisiones. Primero: es una fracción demasiado ggrande en un solo bono (el resto puede estar en otros). Segundo: no tiene sentido invertirlo en un solo bono, cun una sola madurez.

    Sí: el fondo de pensiones debería invertir en bonos de PDVSA, estos producen un 15-16% de ganancias y la gente que maneja la empresa los conocen mejor que nadie. Pero debería ser diversificado en una cesta de bonos de PDVSA y deberían ser negociados de manera activa según varíen los precios. Pero jamás debería ser una fracción demasiado grande y en un solo instrumento financiero.

    Todo el argumento de Carruyo se basa en que el Consejo de PDVSA jamás tomó decisiones al respecto. Pero sí lo hizo. Y fue por esto que tiene que ser despedido y tiene que ser investigado y pagar por sus errores porque o sabía o no sabía y en ambos casos es culpable de no haber administrado el dinero de manera correcta y no puede estar en ese puesto.

    Su puesto tiene que ser ocupado por alguien que sepa y no es que yo me ofrezca para este trabajo, jamás trabajaría para la PDVSA actual. Le daría consejos gratis a una nueva PDVSA, pero no creo que eso pase nunca.

    Y alguien debería investigar a Carruyo. Se trata de un caso increíblemente grave de conflicto de intereses.

  8. Buster Hymen Says:

    off subject but……please tell me…is Hugo really really really this stupid? does he had a secret desire to be anal probed with a cruise missile or a drone? if this is really true and not some made up BS, it shows that he is oblivious to the reality of modern weapondry and targeting……and that he is again pissing YOUR money away. Id be curious on your take

    http://www.jpost.com/International/Article.aspx?id=220879

  9. moctavio Says:

    He has always believed nobody is watching, so, the ansewr is YES he can be that stupid.

  10. Kepler Says:

    Hugo can do a lot of foolish things. Still, I find it strange how this story pops up. I read it in Die Zeit, I looked for some information about this Clemens Wergin and his positions in the Middle East and I re-read where he got his “sources”. Then I see the article is referred to time after time in Jewish newspapers.
    The Russian weapons mentioned in one of Wergin’s article are no secret, they are even listed in normal Russian newspapers in full detail.
    I would still like to see more concrete stuff about the Iranian weapons.

    Then read this (previous article about the same issue, my translation)

    “Just one month ago Chávez forced the state oil company PDVSA to sell its 50% share in German Ruhr Oel to the Russian oil company Rosneft, supposedly very much under its price. With the earnings of 1,6 billion dollars Chávez wants presumably to buy new weapons. APart from that he signed a treaty with Moscow to build a Venezuelan nuclear power station ”

    Well, let’s keep an eye on this.


  11. [...] Excrement has a take-down of Eudomario Carruyo, the CFO of Venezuelan state oil company PDVSA. He is looking slimier and slimier, and is epically [...]

  12. tleon Says:

    Another week in Venezuela and the people of Venezuela are screwed again by Hugo and his thugs.

    Perhaps one day the people will tire of bending over and taking it in the ass, but I think not as it is to easy to sit around and cry in their Polar.

    Have a great week in what was once wonderful country.

  13. loroferoz Says:

    Interesting…

    The conflict of interest is built-in.

    Since WHEN??? May I ask?

    One of the directors of the company presides the pension fund which is supposed to be the safety net of employees and retirees, as well as their property. This director (or should I say the board of PDVSA?) steers the pension fund to invest mainly in debt issued by the company and the government which owns the company. They hire a consultant for the pension fund who has no experience, are initiates a Ponzi Scheme and loses a significant fraction of the pension fund.

    What else, The pension fund is managed like their own petty cash account? But don’t push them, they might manage it like their own PERSONAL account.

    This does not smell funny, this is not rotten. This is a carcass, bursting open.

    I sympathize with PDVSA retirees from before 2002. And with the employees who lost their pension (and job, and all) at the end of 2002 to prevent PRECISELY this from happening.

    On the other hand, I cannot feel that much sympathy for those who went along with the Roja Rojita PDVSA. Hope they will accept some “carajazos”, when they too retire because that’s the currency for them. IF they get to retire from PDVSA, if PDVSA even exists then. They should make plans to work with foreign oil companies either way, because those will INEVITABLY end up owning PDVSA’s bones after it dies. Which will not be such a tragedy, except for the Petrostate.

  14. moctavio Says:

    Another reason to investigate: The Pension fund sold some bonds to Illaramendi for US$ 149 million and he turned around and sold them for US$ 149 million. That just does not happen in the bond market, ever.


  15. [...] been negative for the last ten quartersElectrical crisis continues in Venezuela despite ample rainsPDVSA takes no responsibility for mismanagement of pension fundMedia Blitz is on: Chavez forever!Even CANTV is slowly being destroyed by Chavez’ revolutionHugo [...]


  16. [...] my memory serves me right, in the process, but somehow nobody in Venezuela was responsible, as both The Board of PDVSA and the Venezuelan National Assembly found that there was no responsibility for the loss within the [...]


  17. [...] it wasn’t all that surprising that PDVSA, Venezuela’s state oil company, wanted to wash its hands of the affair after hundreds of millions of dollars went “missing” from one of its pension funds because of [...]


  18. [...] financials are so simplistic that our good friend Setty has told us that the half a billion dollars lost to the Illaramendi funds,. does not even deserve a mention in the financials, by PDVSA or by the auditors. Go Figure, half a [...]


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