Did Venezuela Really Give US$ 2 billion in Bonds For Humanitarian Projects?

November 22, 2011

Today Alek Boyd presented some documents showing that the Venezuelan Central Bank transferred US$ 2 billion in bonds for humanitarian projects to be executed by a company Kellmar Limited run by Anthony Caplin, a former Chief Operating Officer of the UK’s Conservative Party.

I believe these documents are fake due to a number of inconsistencies. Among them:

- The bond supposedly transferred was a Global 2028 and in the nominal amount of US$ 2 billion. The Global 2028 bond was issued in May 2008 and sold to local investors in Venezuela in the amount of US$ 2 billion paired up with a Global 2023 bond in the same amount. There is no record of additional issuance of a Global 2028 and the numbers that identify the bond shown are identical to the ones issued in May 2008 and no bond could be transferred electronically, like these papers claim, if there was no registration of the issuance. As shown below, owners of this bond are multiple, topped by Fidelity Investments which holds 3.46% of the issue, thus the Venezuelan Central Bank could not have transferred the amount claimed.

-The documents contain a series of inconsistencies as to Venezuelan laws and institutions. For example, it says the bonds are registered with the Comision Nacional de Valores (page 3 in Alek’s document, shown below). Venezuelan Sovereign bonds are not subject to the regulation of the Securities regulator, as per Art. 1 of the old and the new law, nor do they trade in the Caracas Stock Exchange as it says in the document purportedly written by the Venezuelan Central Bank. Moreover, the Comision Nacional de Valores no longer existed in May 2011 when this letter was written, it’s name was changed to Superintendence of Securities in September 2010.

-The documents always refer to the Ministry of Finance, which in May 2011 was actually called Ministry of Finance and Planning.

-The suggestion by the BCV that the good relations of Kellmar Inc with the Vatican and the Sisters of Charity does not sound at all as something coming from the Chavista Government.

-There is a letter of compliance by the BCV. Why would this be needed at all? If the bonds were coming from the BCV, that alone certifies the origin of funds and adequate provenance.

-Page 5 of the document is supposed to be a SWIFT transfer of the bonds. As far as I know and have been able to determine today, SWIFT is a system for the transfer of money, not securities. Securities are transferred either via Euroclear or via Clearstream. The SWIFT document also contains unnecessary explanations of why the bonds are being transferred.

So, I am of the opinion that these documents are fake, that the Venezuelan Central Bank has never made such a transfer, nor the Venezuelan Government wants to support projects by Kellmar and Mr. Caplin like those described.

Then, what is going on here?

My suspicion is that this is either an elaborate scheme to scam other philanthropic organizations to contribute to these projects by suggesting they already have a good “seed” funding provided by the Government of Venezuela or an attempt to create a cloud around Mr. Caplin or damage him politically. I would lean towards the first, but have no idea of how such an elaborate scheme would or could possibly work.

45 Responses to “Did Venezuela Really Give US$ 2 billion in Bonds For Humanitarian Projects?”

  1. Alek Boyd Says:

    Hola Miguel, according to my source two emissions of Global 2028 were made. One was sold, as you argue, and the other was not (a “shelf issue”?)

    In any case, I was told that Merentes was sitting on this, and decided to transfer to Kellmar / Caplin.

    It may well be, as you say, that the documents are not legit. But then, who could possibly benefit of faking these documents, and signatures of BCV officials, if not Kellmar / Caplin directly? Mind you, if anyone is trying to set Caplin up, as you argue, what benefit could be derived, other than that, from concocting this elaborated scam?

    We know the company Kellmar exists. We know Caplin exists. We know the bond, at least one version of it exists. The way of solving this riddle is to simply call Credit Suisse, BCV and Caplin and ask.

    In the next few days that’s going to happen, and then we will see…

    • moctavio Says:

      As of today, only US$ 2 billion of that bond exists. Electronic bond transfers system need bonds to be registered in order to move them. If they had created US$ 4 billion it would be registered, otherwise you can transfer or sell the bonds. The whole thing is fishy, but I really dont buy the story of another US$2 billion in existance.

    • moctavio Says:

      Both bonds have the same number, it would be registered. A second issuance would have required different numbers, but only one is registered. And I agree, by tomorrow we should hear some explanations or denials.

      • Alek Boyd Says:

        In that you are absolutely right Miguel. Two different emissions, surely can not have the same numbers, as shown in Euroclear Bank, Bloomberg screen, etc.

        We will see what happens, one way or another.

  2. CharlesC Says:

    Wow! Big Daddy’s back home!! And, walking tall!
    I thought this was the strangest, fishy story that
    broke today. It’s even stranger now.
    You certainly have the vision of an eagle.


  3. Miguel

    So you are forcing us to write erratas. Not fair, I have no access to the stock screen you posted….

    Still, as Charles says, it is fishy to say the least. Maybe some kind of intra chavista fighting to succeed Chavez?

  4. carne tremula Says:

    It sound to me like a nigerian scam.

  5. Javier Says:

    Alek, Miguel and Daniel. You know, notiven is 10 years old just about the same time you’ve been writing – I’ve done some research too and from the start I’ve had links to you guys for the kind of things you bring up and analyze.

    I am sure that Alek obtained the documents in good faith to the point that Nelson Bocaranda posted it in RunRunes with a title that leaves open further investigations and not compromises him ” Suspicacias en transferencia de bono soberano BCV de $ 2Mil Millones a empresa de sólo £2 Mil de capital” – Fishy things surround the transfer of a BCV Sovereign boond of $ 2 Billion to firm with a £ 2,000 capital

    Notwithstanding the BCV should either deny or confirm but there needs to be an official answer

    If it’s denied, even happening, this reminds me a situation like a month or so ago when El NUevo Herald’s reporter, Antonio Delgado, wrote that Chávez was taken to a private hospital etc etc, and what happened ? The El Nuevo Herald lost credibility. Maybe Chavez’s people are putting “conchas de mango” ( mango skin ) to see who slips and falls in order to create a sensation that people can’t trust the media

    If it’s true then we are in presence of one of the biggest robbery in history; maybe it’s because it’s their last days they need to clean the pan ” raspar la olla”

    Tomorrow should be a nice day to find out, either way

    • J.E. Says:

      Javier

      I buy your theory. By tricking Alek they may be able to deflect his previous leads by claiming he is untrustworthy.

      The whole scheme just sounded way too sloppy to be true

    • HalfEmpty Says:

      “conchas de mango”

      I learn a new phrase, thanks for that.

      Amateur effort on someones part, perhaps something better is in the offing? Smoke screen? Were there any other big moves along side this?

  6. island canuck Says:

    If this is a scam it’s sure an elaborate one.
    If it’s a scam it most likely originated outside of Venezuela – the completion of the documents, the use of English correctly & the details would seem to indicate that.

    If this bond is real it has a cash value of around 60 to 70% or US$1.2 to 1.4 billion. It’s annual interest is US$180 million.

    As has been asked – what is the purpose of the scam? The first thing our Emperor is going to say that it is an Imperialistic trick to embarrass him by the CIA or … (fill in whoever you want). If this is the case would they make the obvious errors the Miguel points out? – not likely.

    Then who? It looks more & more to me that this is a UK originated scam to get more money from other governments or companies.

    The news today will be interesting.

  7. John Barnard Says:

    False flag operation perhaps…

    • island canuck Says:

      Very interesting and believable until proven otherwise.
      Now we wait for the comments from the UK side.

      It’s a good thing Alek doesn’t live in Venezuela.
      He would of been facing some big time hurt over this.

      • An Interested Observer Says:

        Interesting, yes, but I’ll consider it believable when he specifically claims the signature is false, or maybe only when he attempts to file charges against someone for falsifying his signature.

        “menos por un monto tan elevado. No se ha firmado nada que tenga que ver con esos proyectos ni con programas del Caricom” is the direct quote, so he’s only saying it’s not $2 billion (given that Ven bonds are sold at a discount, this would be technically true if authentic), and that the BCV didn’t sign about those projects or CARICOM (and that would not have been done yet, or have been done by the British folks, not the BCV, so this part could also be true if this is authentic). Very strange denial, IMO. What I can see of it, anyways.

        • Alek Boyd Says:

          but I’ll consider it believable when he specifically claims the signature is false, or maybe only when he attempts to file charges against someone for falsifying his signature.

          Nail, head….

  8. glenn Says:

    Is there any chance at all that this is just another scheme to transfer wealth out of Venezuela through a thinly disguised theft? Or is that too simple?

  9. CharlesC Says:

    What’s the difference between government bonds and men?

    Bonds mature.
    Seriously, just guessing-maybe this is/was a “dirty bomb”
    for the media.
    Look at what is NOT happening today. Why isn’t anyone
    in Venezuelan Government saying there will be an investigation…

  10. bobthebuilder Says:

    Definitely fake documents evidenced by poor English and non-sensical documents. I don’t think this guy Caplin is involved as it looks as though whoever has faked the documents has just done the same search we’ve done on him to include his details. Looks like a case of identity theft. I’m inclined to agree with carne tremula that this is an elaborate 419-type scam.

  11. GeronL Says:

    Probably an effort at distraction. Better keep an eye on what else the government of Hugo is doing.


  12. Good day! My comment is not concerning the above. I was just giving a helping hand as we all do yes!, and heard on the radio Mr. C hablando sobre la situacion, la maravilla de la situacion China, lo que significa todo lo chino. Y despues se escucha un fulano hablando chino en nuestra red radial con una interprete. Sera posible esto!

  13. Alek Boyd Says:

    Page 5 of the document is supposed to be a SWIFT transfer of the bonds. As far as I know and have been able to determine today, SWIFT is a system for the transfer of money, not securities. Securities are transferred either via Euroclear or via Clearstream. The SWIFT document also contains unnecessary explanations of why the bonds are being transferred.

    From what I have been able to learn in the last couple of day, a SWIFT is not a system to transfer bonds, as you correctly say, but rather “a bank-responsible guarantee issued by the sender bank, upon instructions of its account holder, in favour of a particular transaction or counter-party.”

    SWIFT instructions as shown in document do comply with genuine expectations as per explanations / instructions to be included in SWIFT transactions, given its nature as a bank guarantee.

    What this means is that Caplin is meant to hold in BCV an account of $2 billion, hence the letters about the bond from BCV, for the BCV to be able to issue a SWIFT in his favour to Credit Suisse. Put another way, BCV’s letters transferring bond free and clear to Caplin guarantees funds of SWIFT, which he then could use as collateral in raising capital.

    The amount of the SWIFT ($2 billion) is the same amount of the bond, and is an amount that BCV has “blocked” to guarantee that in the event of default by Caplin, the SWIFT covers up to $2 billion which Caplin would have “paid” already to BCV. Put another way, Caplin “purchased” the bond from BCV for which he “paid” $2 billion. That “payment” serves as guarantee for the SWIFT he then asked BCV to issue in his favor.

    However, it does not end there. For for the BCV to issue a SWIFT at Caplin’s request, Caplin ought to have paid the fee for the SWIFT, whose cost ranges between 0.5%-1.5%. That is to say, in addition to the $2 billion, Caplin ought to have “paid” at least 0.5% of $2 billion to BCV.

    Needless to say that Caplin does not have that amount of money, and never paid such amounts to BCV.

    However, he has admitted having agreed to participate in the project as described in letter from lawyer Pruitt and other documents.

    What will Merentes, BCV, government do in this respect?

  14. CharlesC Says:

    After days, no response by the government.
    A. How could Merentes not know anything about ths?
    B. How could BCV not release any statement by now?
    C. Why isn’t the Press involved in finding some answers?
    D. So, now this “thing” is out here and everyone is clamming
    up- well, is it all of them are guilty?
    Why hasn’t anyone concerned themselves about the signatures
    and seals by BCV -for example.

  15. moctavio Says:

    Merentes did deny it, see above.

  16. LuisF Says:

    …metiendo el dedo en la llaga! (Read C above!)….

    • Javier ( notiven ) Says:

      LuisF, why isn’t the Press involved – CharlesC’s letter C. ? On cases that involve things where there is a lot of detail, lately bloggers are the ones that are writing and doing much of the initial work and research based on their knowledge which main street journalists may lack on the case. So, what may have started as a rumor is backed with facts is when the big press jumps in, verifies the blogger’s findings and complements the case with sources bloggers don’t have access to and then, then is when they call it news.

  17. CharlesC Says:

    Merentes said” he signed nothing to do with Kelmar Assoc.
    Why doesn’t Merentes say -Yes, that looks like my signature,
    and another thing- Shouldn’t the bank BCV -have copies of this document
    and the law firm – ask them if they have a copy and who signed it-
    (with Merentes name).
    Why doesn’t Merentes want to say “someone one forged my signature”?
    Why doesn’t Merentes call for an investigation?

  18. CharlesC Says:

    Not trying to be a bugger, but, I find Merentes statement a bit formal
    and dry. Why not just come out and say plainly-
    Someone forged my signature and I damn well want to know who
    and why? Instead he answers like a snob, that is what I think.
    A snob that really don’t give a damn. Or a damn big lying snob…

  19. Artemisa Says:

    This has happened many, many times at the Ministry of Finance and the BCV in the IV and the V Republic. I would say that when I was working at the Ministry of Finance we received one of these cases MONTHLY. Some of these people carried also a signed personal letter from Miraflores or any other deputy as support. Eventually some National Assembly member dared to call to the MF to get sure they were received.

    I personally don’t think these institutions are obliged to make a legal statement every time this happens. Most of the time, these people showed up at the BCV or the Ministry with completely fake, unprofessional documentation, dressing cheap clothes and using confusing “English wording” and wrong financial expressions. Sadly, Venezuelan law/justice system is not strict and Venezuelan police does not care about this kind of cases (basically they do not understand what’s wrong)…although sometimes this kind of shows worked to cause political distractions.

    Bloomberg and Reuters are information systems, so they release information that they have confirmed as valid with issuers and intermediary banks. There are a lot of signed transactions they have not recorded in their systems. One of the reasons can be either the transaction is not public or the bank has agreed with the issuer not to release it. Sometimes the issuer can hide behind a bank or any other 3rd party. This can happen even within SEC regulations but it’s more common when a financial instrument is registered in other location.

    • CharlesC Says:

      Artemisa- I don’t believe what you are saying.
      I would like to see you walk into a bank with some bogus signed, sealed
      documents and see what happens. I AM NOT GOING TO TRY THAT.
      Actually- I am shocked by your whitewashing of this subject.
      Are you a troll?
      YOU SAID_”I personally don’t think these institutions are obliged to make a legal statement every time this happens.” Bull!!! This is criminal and should be reported everytime.
      YOU SAID-“Venezuelan police does not care about this kind of cases (basically they do not understand what’s wrong” Bull!!!! Any idiot knows this is criminal.

      • Artemisa Says:

        Charles,
        Believe it or not, bogus bonds existed and people who carried them showed up freely. As far I remember, the use of digital databases in Venezuela was only possible after the MF released a special decree that enforced BCV and of course MF not to print more physical bonds. This was done in 2001. Remember that the “Cero Cupon” bonds were issued physically… I’m not kidding… sad you consider me a troll.
        Venezuelan police is not specialized in anything that has to do with financial crime… They don’t know what’s a bond, they often ignored what was wrong since “paper” seems to worth more than “digital” records. Hence, once this was reported to the Venezuelan police, they tried to “meter el paro”, take notes in a piece of paper and interview people in a dark area -like the movies- but, there were no consequences… They don’t care. They might say “too much effort for a low salary. Sorry”.


    • Artemisa:
      Along your first two paragraphs seems you don’t mind leaving the situation as it is because it’s what has happened before. This is not the way it should be and I don’t know what kind of Venezuela you want to live in.

      Venezuela should be known for serious people and not add the bogus bonds. Alek and others are trying to get to the bottom of this because it goes against the credibility of Venezuela, the Bond’s secondary market in general and goes against the strenght of the Bolivar and the US Dollar.

      As a reference, when these things happen in the US the Secret Service investigates because it’s like printing fake money.

      • Artemisa Says:

        Javier,
        It is hard to change a system from the inside. I tried very hard but there were too many people profiting from obscure accounting methods, disorganization, lack of systems, bad backoffice practices and illiterate government officials that I was asked to leave [or else...].

        How much do you think I should have put at risk?

        As the Devil’s words said one: “I won battles but overall I lost the war”.
        I gave up. I moved on, in other country.


  20. [...] Did Venezuela Really Give US$ 2 billion in Bonds For Humanitarian Projects? [...]


  21. [...] posts of November 2011 are here and here. Devil’s Excrement also wrote about this matter here. Please read the comments to all three posts [...]


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