Archive for February, 2006

Film report: The List, a documentary on the Tascon list and the discrimination it created

February 20, 2006

I went to the presentation of the documentary “La Lista: Un pueblo Bajo
Sospecha” (The list: A people under suspicion”) sponsored by Ciudadania Activa, an ONG focused
on defending people’s human rights, particularly against discrimination.

documentary tells the story of the Tascon
and its successor, the Maisanta
, and how the Government used the first to discriminate and fire
civil servants and the second one to control its own supporters. To do this,
the documentary tells the story of the origin of the list, starting from the
introduction of the recall referendum into the new Constitution by Chavez,
through the three requests for a recall vote by the opposition. It reminds
everyone, those that lived through it and those that did not, the details of
how the first two requests were denied on technicalities and how the third was
blocked by having the Electoral Board create new rules after the signatures had
been gathered and increase the reasons for rejection for a signature from 8 to
39. This allowed 45 out of every 100 signatures to be rejected, but a new
process, the “reparo” was held and people actually went and ratified that their
signatures were approved and the recall referendum was held.

In my
opinion, the documentary is very well done, combining clips from the news, from
Chavez’ many speeches and his Sunday program Alo Presidente, with interviews
and testimonials with politicians and those that were directly affected by the
use of the list.

particularly liked the clip which shows Chavez in his more “democratic” days
talking about the recall being introduced in the Constitution and saying:” If
in three years you don’t think I am doing a good, job you can get rid of me”,
but then, later, when the recall becomes a possibility, he actually says:” Even
if they get 90% of the vote in the recall referendum, I am not resigning”

It also
documents well how the Tascon list was not an accident but a very well planned
program to discriminate and repress. First you see Chavez saying (which is repeated
throughout the film): “Those that sign against Chavez, their names will be left
there registered for history, because they will have to put their first names,
their last names, their signature, their ID number and their fingerprint”

Then you
see Chavez saying that he signed the paper requesting a copy of every single
petition and the corresponding signatures from the Electoral Board and asks
Deputy Luis Tascon, who was present that day on his program, how that is going.
Tascon says that it’s going well and that “by the end of the week we will have
all of the copies and see the true face of this fraud” (referring to the
signatures, which at the time the Government claimed were fraudulent)

It also
shows a clip of Chavez on his Sunday program talking about the list, laughing
about how it has created fear in people and telling everyone on his program to
go and check it on Tascon’s webpage, actually giving out the link.

Some of
the testimonials are heartbreaking, because it shows people from all levels
being fired for signing the petition and talking how it has affected them and changed
their lives. It also shows the President of a Government institution saying
that they have not use lists in any way, only to later show an actual paper
list in which every single person was classified according to how much time
they signed in the three petition attempts. Over 120 of them were fired by the
same cynic denying anything at the beginning…

It also
shows the more candid Chavistas, like the Minister of Health, saying anyone
that signed has to be fired and a Deputy saying that every civil servant that
did not vote in December should also be fired.

it shows Chavez himself saying that the list “should now be buried”, and how
“it played its role in his time”, showing no regrets or remorse about the use
of this discriminatory tool against the people. After that, many Government
institutions joined in the condemnation of the list, but never before, proving
that they have no personality of their own and no conscience and they totally
depend on what their leader says or doesn’t say can be done.

It is a
great compilation of the history of a discriminatory process used by a fascist
Government which claims to be democratic. How it has destroyed lives for
political gain and never showed regret or remorse for it. How it compiled a
list to discriminate the opposition and then it extended it to a database to
control its own supporters. It is proof of fascism and discrimination in the
XXIst. Century, under the eyes of the whole world and even the support of those
that claim to defend human rights but are so fanatical that they don’t want to
see the warts in the fake revolution they so admire. Everyone should buy it and see it, because it
is “Prohibido Olvidar” (To forget is forbidden). It also represents another
document to be shown over and over, the day this nightmare is over. It should never
happen again and those that collaborated with it should one day pay for their crimes.

A version
in English is being worked on and should be out in a couple of months.


Rough week for an intolerant Hugo Chavez

February 19, 2006

Hugo Chavez has had a bad week. Everywhere he went, he found protests, except this time they were all protests by his supporters, not by opposition groups. And much like when the opposition held protests against him, Chavez showed his intolerance towards dissent, telling them to shut up in the name of the revolution and respect for him.

As farmers posted themselves all week in front of the Presidential Palace in protest, Chavez went around the country only to find the same, more protests. In Zulia, it was people asking for homes. The protetsers held placards asking to talk to him. But all they found was the President‘s ire. He told them the “leader” was talking and asked them to shut up. The scene occurred twice more during the week. Once he threatened to leave if people kept protesting. During the other, students protested and Chavez told them, once more, to shut up or he would simply leave.

Meanwhile, in the pro-Chavez area of Catia, in the West of Caracas, public transportation stopped for a full day, as drivers protested the death of another driver by criminals. As the President of the National Assembly accused the CIA of generating the protests, the head of the Catia public transportation union, said he did not know anyone from the CIA and challenged the President of the Assembly to even walk in Catia without bodyguards, guaranteeing that he would be robbed.

The problem is that Chavez promised too much but has delivered little. Direct handputs only go so far. At the same time he has managed to give the impression that none of the problems are his fault, but rather that of his collaborators. Thus, people are simply trying to get close to him to ask for what he promised, but nobody seems to be able to deliver. There is simply no accountability.

In some sense, Chavez’ own attempt to control every Government institution and eliminate the rule of law is working against him. There is little follow up to all of the plans and projects that the President announces and unless he asks what happened, nobody checks the progress of the new projects he announces daily. Chavez’s style is to go around the country announcing plans, programs and projects. Curiously, he seldom goes to inaugurate plants, facilities or new building or roads, which is what President’s have always done in Venezuela on election years. There is apparently very little that has been completed.

A case in point has been the sugar plant in Chavez’ own hometown in Barinas state. This project is a showcase of the inability of the Government to do anything as well as the unchecked corruption at all levels which simply blocks anything from getting done and the fact that there are no control mechanisms that work.

The sugar plant is emblematic of how money is being stolen hand over fist. This project was supposed to be the showcase of the military establishment working for the people. The President and the Comptroller have known about the corruption in it for over a year and half, but little was done. Only the publication in a pro-Chávez newspaper of the case in January has opened that can of worms, which has shown a mafia-like organization on the part of the military to simply steal most of the money assigned to the project. Meanwhile, the Minister of Agriculture admitted in his testimony that he had covered up the corruption in the case because elections were coming up. He is still Minister despite admitting to this and neither Chavez, nor the Comptroller nor the Prosecutor General have opened their mouths in the face of what is simply a  cover up, which is a flagrant violation of the anti-corruption law.

Remarkably, the corruption charges being investigated talk about some Bs. 3 billion (US$ 1.4 million missing), but the scale of the graft is surely orders of magnitudes higher. So far, the Government has spent Bs. 596 billion or US$ 277 million at the current exchange rate in the project. Last week, the National Assembly approved an additional Bs. 216 billion more (US$ 100 million) because the project is out of money. But today El Nacional has picture of what has been built so far and US$ 277 million has been used only on cleaning the land and putting a skimpy steel structure in place, since it is being built on Government land and thus no money was spent on real state. And they used soldiers to clean the land, so it seems to me that the money, some US$ 277 million simply evaporated into the pockets of the military officers in charge of the project. But nobody seems to point this out, the investigation is for less than 0.5% of the total funds allocated, while the pictures below shows a structure that woudl cost less than 10% of the total in the worst case. That is why people call this the robolucion.

This may also explain why it is that despite record oil prices and revenues for the country, the Chavez Government has so little to show for it. It has always amazed me how, despite corruption and inefficiency, there was so little evidence of the Government doing anything. in terms of public works, creating infrastructure and generating employment.

Everywhere one looks it is the same, no accountability, no supervision, no follow up. The National Assembly does very little these days in terms of supervision. The Government currently holds US$ 18 billion in the two discretionary funds, the Bandes and the Fonden, which only report to Chavez and nobody knows how the money is used, spent or even if it still there. They report to nobody, it is the President’s petty cash fund.

PDVSA is very much the same. One of Chávez’ themes while campaigning for President in 1998, was the lack of transparency at the Government’s oil industry. All plans then had to be approved by the National Assembly, the financial statements of the company were published yearly, a “shareholder’s meeting” was held every year at the end of which the financials would be distributed to the press. Now, we have financials which are delayed for years (the 2003 was handed in October 2005 and the 2004 financials were promised for February, but time is running out). But today, the Minister of Energy says they will no longer file with the SEC after this report, which will close the only window we have into what is happening to the main industry of the country. In any case, these audited financials only tell us numbers, which is the only thing the auditors can check, and we can’t still confirm how much oil the country produces.

Meanwhile, PDVSA is signing contracts right and left without Assembly approval. It also forced the service agreements on thirty two oil projects, which had been approved by the old Congress, but the new contracts and commitments and costs to the country are unknown today, almost sixty days after the conversion. So much for increased transparency. Does Venezuela really make more money now under the partnerships? How much will PDVSA have to contribute to become a partner in these companies? Where will this money come from? Will foreign oil companies have or not rights over the reserves of each oil field? None of this is known or has been approved by the National Assembly or has been explained to the Venezuelan people. So much for any transparency.

The same with the harebrained gas pipeline to the South. Simple estimates based on the volumes the Government claims it will sell with this pipeline show that it will require from three to four times the available free gas reserves of the country. But in any case, at the cost of the pipeline, without talking about the environmental problems, gas would have to go up a factor of four or five in order to make the pipeline profitable. But nobody knows the details, nor do they appear ready to give them to us. Or to anyone in the country, the Brazilians and Argentineans seem t know more than us.

That is why Chavez is trying to bring the US into the electoral debate. He needs external factors to explain away his incompetence to choose collaborators and execute projects. To distract the attention from these. But the common Venezuelan could care less. They will protest more and more and they will see Chavez’ intolerance day after the day. And the more protests there are, the less he will go out in public for fear of confrontation with his own supporters.

That is why the opposition has a great chance if it can get a candidate and unite behind it, because a good candidate will bring all of these issues to the forefront and Chavez will not be able to avoid talking about them.

Flowers are back!

February 19, 2006

Flowering had dried out, but it started picking up this week into what is ussually the best season of the year for flowers. Above left, a Laelia Gouldiana from Mexico, you can see how similat it is to Laelia Anceps, on the right  Cattleya Lueddemanniana ClinMcDadex Raga

Above left, a “modern” Phalenopsis from Taiwan, it really looks like abstract art is oming to orchids with this. This is a Dpts. Ever Spring “Light” On the right a Cattleya Gaskelliana, the flowers are not great but all of them together make for a very nice sight.

Pictures from the revolution

February 18, 2006

From El Universal, thanks William for finding the link, I couldn’t!

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

February 17, 2006

PEPwatch Venezuela:
Beware of government-controlled private corporations (Part III)

By Ken Rijock

We have
previously discussed the threats posed by private corporations owned by
individuals who front for governments or national leaders, and by the dangers
of governmental minority ownership of closely-held companies. In this, our
final segment, we cover the private corporation that operates as a de facto government agency, and whose
primary activities aid in the implementation of government policy, but in whom
both legal and equitable ownership is privately held.

Skim milk masquerades as

Where it suits national
policy, private corporations are convenient and anonymous instruments that can
perform commercial acts deemed necessary by government. In the intelligence
field, such controlled companies are frequently known as proprietaries. They
often perform covert or illegal operations, such as money laundering, where the
government does not care to be linked to either the activities, or their
consequences. Such companies also are utilised in a combination of both overt,
traditional and legal business, and “black” operations, but both varieties
serve the same master. Today’s analysis of one such organisation is instructive
in both understanding the tactics and strategy typically employed, and the
investigative tradecraft that is necessary to unmask such a company’s true
nature. As we have previously stated, the inability of compliance to timely
identify government-controlled companies can be ultimately fatal to one’s
institution. In the last article, we identified the Lebanese Muslim Khalil brothers
as close associates of Venezuelan national Ricardo Fernandez Barrueco. The
brothers own and operate an organisation dedicated to supplying Venezuelan
government agencies with seafood, high-technology and military equipment. As we
shall see, their operations clearly fall into the de facto government agency category.

Compliance officers please

– Khaled Khalil Majzoub,
born Galed Khalil Massub, on 26 August 1965, Cedula No. 6290182, sometimes
incorrectly shown as 6290185. The validity of his identity document was an
important issue in the past with a large North American multinational firm,
which terminated its relationship with a firm when Khaled purchased it. Was he
really born in Lebanon
? We cannot say, but his birth certificate was not filed until 1970, one day
after his brother’s was registered. Khaled is a reputed radical Islamic
fundamentalist, and the communications director of Sheikh Ibrahim Bin Abdulaziz
Mosque in Caracas

– Majed Khalil Majzoub,
born Massed Khalil Massub, on 23 April, 1970, but incorrectly appearing upon
his birth certificate as 23 January, 1970 . His Cedula No. is 13526338. He
enjoys close relationships with pro-Chavez politicians and the military.

The benefits of preferred

The Khalil brothers, like
their comrade, Ricardo Fernandez Barrueco, emerged from obscurity during the
early years of the Chavez government, which has favoured certain companies with
major contracts, easy access to loans, and tariff-free import licenses. Such
preferred companies are assisted in placing their products in the local market
through government-funded social programs, through entities such as CASA, the
Agricultural Service Program, and PROAL, the Strategic Food Program, both of
which bought from the Khalil organisation. The Venezuelan government has also
assisted, or conspired with certain preferred companies in tax evasion and
customs crimes. We note that the Khalil companies are believed to evaded large
amount of taxes, notwithstanding their many lucrative businesses

Evidence of the incestuous
ties between the Khalil companies and the Venezuelan government:

– They purchased the Eveba
Group, a major seafood provider, from the Castro Iglesias family, a transaction
that reportedly was facilitated by Diosdado Cabello Rondon, born 15 April,
1963, Cedula No. 8370825. Sr. Cabello, was formerly Venezuela ’s Vice President, and
Minister of Infrastructure, and is presently the Governor of Miranda State . He
is one of the most powerful men around Chavez. Also linked to the sale was Adan
Coromoto Chavez Frias, born 11 November, 1953 , Cedula No. 3915103. The
President’s brother, he is currently Venezuelan Ambassador to Cuba .
Distribution of Eveba products is currently being conducted by Molinos
Nacionales C.A, a/k/a Monaco
, owned by Mexican agro-giant GRUMA, whose recent sale of part of their
enterprise to Ricardo Fernandez Barrueco was detailed in our last article. This
but another demonstration of the close ties among the New Bolivarian Elite.

– They shipped computer
equipment and, reportedly, sophisticated surveillance equipment, to Venezuelan
military and intelligence agencies. Majed Khalil, who is said to have a close
relationship with Francisco Rangel dating back to the period when Rangel was a
general officer, is alleged to have outfitted the situation room, in the
basement of the Miraflores presidential palace, with electronic espionage

– Their organisation was
reported, by Venezuelan media, as having supplied Maiquetia Simon
Bolivar International
International Airport
with new radar, communications and navigation equipment. It is also believed by
Venezuelan media to be supplying Venezuela ’s military with weapons
and other hardware.

– Rumours abound of
involvement of the brothers in money laundering, counterfeiting, drug
trafficking and contraband smuggling, in concert with corrupt Venezuelan
politicians and military officers.

Companies associated with
the Khalil brothers are:

In Venezuela:



In the
United States :



In the
Republic of Panama :


As we have shown, though
these companies may appear to be privately owned, their acts and deeds are
clearly governmental in nature. Money laundering reporting officers and
compliance officers must practise enhanced due diligence when considering
account relationships with any company located in a jurisdiction where covert
governmental ownership is probable, or where recent events suggest the possibility.
Compliance vigilance is made even more urgent by the realities of the post 9-11
world, where nuclear, chemical, or biological agents may be on the hidden
agenda of the government-controlled company or its masters.
Government-controlled companies are wisely avoided as unacceptable high-risks.
Watch out for them.

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

– 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

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.

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

February 15, 2006

In the last few weeks, I have been writing about
corruption in the revolution and how there are so many things going on in the
country allowing a few to get rich, while the revolution looks the other way. Thus,
nothing has changed in Venezuela,
except that before there were independent institutions to denounce and watch
over corruption. Moreover, Venezuelans elected Hugo Chavez in part because he
said he would get rid of corruption, but corruption is worse than ever and
remarkably the revolutionaries are getting richer while allowing their
opponents to share the bounty.

Below, I post the first part of three articles which were
originally posted in complinet and
written by investigator Ken Rijock. Financial institutions have to deal in the
modern world with problems with money laundering, corruption and terrorism. Thus
they have to know their clients and understand the origin of the funds that
move through it. There are regulations to comply with, as well as the ability
to create the rules to eliminate the risk of dirty money flowing through your
institutions. Complinet helps British institutions do this by providing
training, databases of individuals and institutions that have to be monitored
and avoided as well as creating the environment for institutions to prevent the
flow of such funds through it. These three articles were published originally
in complinet, apparently as an example of the difficulties created by
Government corporations when they move money around the world. Remarkably, the example
given is that of Venezuela.
For those that don’t know, PEP means Politically Exposed Person, one category
that those opening accounts in financial instutions have to watch out for in particular.

These articles appeared in vcrisis in three parts (1,2,3) as well
as in IVAC but both were posted during the
holidays and unfortunately I missed them. I repost them here, because the charges
made in them are quite serious but they are very specific and precise and should at least be investigated,
in a country where lawlessness seems to be the rule of the day under the
watchful eye of those that are supposed to keep Government and corruption in
check. This is part I. Part II and III will be posted in the next few days.

PEPwatch: Beware of
government-controlled private corporations (Part 1)

By Ken Rijock, Originally appeared in COMPLINET

One of the most perplexing
phenomena for money laundering reporting officers and compliance officers is
the government-controlled corporation for profit, a prominent feature of the
Venezuelan Government’s recent attempts to launder money. Such corporations are
dangerous to Western financial institutions when their officers try to conceal
government ownership or control.

When a bank realises that
it is dealing with such a company, it knows immediately that its officers,
directors and agents rank as “politically exposed persons”. They
probably have access to “arranged” financing, public treasury
receipts, illicit funds and sundry other corrupt or criminal profits that they
can divert to the company’s accounts. The sources of these funds can range from
money stolen by the officers of the corporation to money laundered on the
orders of government agencies or leaders. At the same time that this happens,
the affiliated and subsidiary firms owned by a governmental, though private,
entity become high-risk companies in their turn. They require an extremely
“enhanced” form of “due diligence” before any bank can
accept them as customers.

Towards a command economy

The government of Venezuela
currently enjoys high-risk status. Its six-year history is littered with instances
of missing oil revenues, the diversion of funds to support and encourage
political chaos in the Western Hemisphere,
cooperation with Colombian terrorist groups such as FARC and the ELN, and more.
Any company or group that the government controls or owns beneficially must
also pose a high risk. Compliance departments must therefore insist on treating
the leaders of such companies as PEPs automatically. They must subject them to
the deepest of enquiries into the sources of their funds, whether in their personal
accounts or in company accounts located overseas. Venezuela-watchers believe
that the Chavez government is moving the country towards a command economy on
the Cuban model and is trying to acquire monopolies in crucial industries that
are presently in private hands. In one such area, the production and
distribution of food, it is believed that groups fronting for the government
are now acquiring some of the major companies.

Not just the usual suspects

The country’s major
“agribusiness” organisation is Grupo PROAREPA, which is the main food
supplier for the government’s food assistance and distribution programs, CASA
and MERCAL. Grupo Proarepa owns a number of companies, including at least one,
ALMACENES Y TRANSPORTES CEREALES or ATC. Venezuelan web bloggers and other
commentators believe that Adan Chavez, the brother of Venezuelan President Hugo
Chavez, owns this subsidiary beneficially. Adan is the Venezuelan Ambassador to
and an avowed Marxist. The group is also closely aligned with Argenis, another
of the Chavez brothers. That these individuals are high-risk PEPs is

There are several
“giveaways” that suggest that the government is controlling Grupo
Proarepa. People at the top in Venezuela
have used it to cover up a criminal investigation and have prevailed upon it to
turn a blind eye to tax evasion. In 2003 they also prevailed upon the National
Assembly to vote for a very suspicious credit, in the amount of $ 41,833.702,
to subsidiary PROFINCA. At the time, the subsidiary appeared to have no assets.
On the same day, the two speakers whose job it was to pilot the relevant bill
gave the chamber conflicting reasons for wanting the subsidy. Now, on to the
listed pro-Chavez group leadership. The “officers of record” ? i.e.,
the listed officers, of PROAREPA and its many subsidiaries ? are a curious cast
of characters. /Cedula/ numbers are national identity numbers.

* Sarkis
Beloune Arslanian
, cedula 9280364, born on January 1 1953, is a
Venezuelan of Syrian extraction who was deported from the United States
and had his visa cancelled on December 6 2004. Such an extreme action generally
only occurs when US
law enforcement authorities have strong evidence of continuing criminal
activity. There are reports that he is under investigation for trading in
narcotics and laundering money.

* Ricardo
Fernandez Barrueco
, cedula 9095496, born on April 9 1965, a
Venezuelan who possesses passports under both his Venezuelan citizenship and
that of a Colombian with a similar name, whose identity he is known to use. He
has accumulated a substantial fortune in an amazingly short time and associates
with such members of Chavez’s inner circle as Diosdado Cabello, the governor of
Miranda State, and President Hugo Chavez’ father and brothers. A Venezuelan
government criminal investigation by the national intelligence agency, DISIP,
of FERNANDEZ’S activities was terminated mysteriously in February 2001.
FERNANDEZ was being investigated for customs offences and other crimes related
to “agribusiness”. He authorised multi-million-dollar deals with
PROAL, the government food entity.

* General
(retired) Gustavo Adolfo Sanchez Gonzalez
, cedula 4115600, born
March 5 1956, who was the director of PROAL at the time of the DISIP
investigation. SANCHEZ is an officer of American Air Conditioning, a Floridian
corporation, as are Fernandez and Arslanian.

Other persons associated
with the Proarepa Group, and thus holding PEP status, are Bernard Gerald, Angel
Fuentes Fragile, and the brothers, Adan, Edwin and Abraham Easer. The companies
that are part of PROAREPA are listed below. There are many of them and they are
of recent vintage; only three of them date to before 2000. Because most of them
were set up after the advent of the Chavez government, they must all be
considered as government entities for compliance purposes.

Venezuelan Government-controlled corporations










INC. (See note *)


















* This is a
Curaçao-registered company that is an authorised PDVSA broker. It is also the
vehicle through which Fernandez purchased a 50 per cent stake in Demaseca, a
subsidiary of Mexican food giant Gruma.

The Proarepa Group is
reputed to have as many as 40 overseas bank accounts, many in tax haven
jurisdictions such as Switzerland,
the Channel Islands and the Cayman Islands.
Complinet’s sources say that it focuses its efforts almost entirely on domestic
food production and distribution. Why, then, does it maintain such an extensive
network of offshore accounts? This should raise a major “red flag”
for compliance officers. MLROs and compliance officers should be mindful of
powerful private companies from countries where governmental influence intrudes
into the private sector, for they may very well be dealing with a wolf in
sheep’s clothing. Financial institutions that bed down with corrupt PEPs always
seem to have to suffer a barrage of bad publicity. They should therefore demand
proof positive of beneficial ownership whenever they encounter suspect
companies. This evidence should include sworn affidavits signed by partners of
major law firms and accounting organizations. Even then, they should verify the