The Robbery of the XXIst. Century by Teodoro Petkoff

October 2, 2007

Warning: Very long post!

About two years ago, I
began writing about the huge rip off that began with the sale of
Argentinean bonds to local banks, which was enriching local bankers,
intermediaries and Government officials. I even think my blog was the
first place where anyone wrote about this issue even if I had no
particular special knowledge about what was going on. A couple of
months later, Teodoro Petkoff in his evening paper Tal Cual began
describing exactly what I had said in my blog. This gave me great
satisfaction, as I had written about this before anyone.

friends warned me to be careful, because the level of profits being
made by this huge swindle was nothing to sneeze at and if I hit on the
issue too much, some people may be bothered by it. A little while later
Andy Webb of the Financial Times also wrote about it, going as far as
naming the “preferred” banks of the regime. Since then, I have written
about the topic regularly, sometimes translating Petkoff’s Editorial on
the matter as a way of deflecting some of the responsibility about the

funny thing was that despite the supposed freedom of the press, except
for Tal Cual, no other newspaper in Venezuela dared to touch the
subject. As the swindle got more sophisticated and structured notes
were introduced, the profits increased dramatically as the parallel
exchange rate began to increase sharply. Then this summer, as all of
the local newspapers and TV stations still kept quiet about it, the
pro-Chavez Editor of Ultimas Noticias Eleazar Diaz Rangel began writing
about the subject weekly. He gave enough details to prove that he knew
who was benefiting from it, without giving names, in the hope that the
autocrat would something about it. But since corruption is part of what
sustains Chavez, he has done little.

week Teodoro Petkoff decided to take another stab at it and challenged
the President, trapped in his corruption labyrinth. Petkoff has thrown
the gauntlet by writing three Editorials giving even more detail about
this huge rip off and swindle to the Nation, perpetrated by some of the
autocrat’s closest associates and with his full knowledge. Below I
translate all three in a row, which will make it a long post, but is
worth it for all of you to read and as a permanent record of the
absolute levels of corruption reached under the robolution and with the
quiet approval of Hugo Chávez himself.

as he says in the last sentence, nothing will happen, because all
checks and balances have been kidnapped by the autocrat and he has a
hold on many of his collaborators precisely because he allows all of
theses shenanigans to take place.

The Robbery of the XXIst. Century by Teodoro Petkoff

Sunday August 26th. anyone that has the guts to suffer through Alo
Presidente could see Hugo Chavez showing the Sunday page of Diaz Rangel
in Ultimas Noticias, which we show here.
Chavez read aloud the main text of the page by the Editor of Ultimas
Noticias, entitled “As a block or separately”. But just under that
article, the first of the small notes or tips by Diaz Rangel said the

were the banks that issued structured notes valued at US$ 8 billion
owned by the Venezuela State, ordered according to the amount placed:
Barclays Bank PLC (more than US$ 2 billion), Lehman Brothers, Calyon,
Welstb AG, AB Svensk Expotkredit SEK, HSBC Bank USA, Credit Suisse,
Deutsche Bank AG FLR, Dresdner Bank AG, ING Bank NV, Morgan Stanley,
Nomura Bank International, BNP Paribas y JP Morgan.

a few of them (the notes) there was mediation by private individuals in
tandem with high Government officials and they made millions of dollars
in operations where the only loser was the Venezuelan Government”

(the name Petkoff uses for Hugo Chavez these days) had to see that
note, thus we were expecting some reaction on his part, because he
surely believes Diaz Rangel, who at some point uncovered the fraud at
the sugar processing plant in Sabaneta and now makes reference to a
swindle so large that leaves those responsible for the sugar plant at
the level of chicken thieves. However, throughout that week Chacumbele
did not have a peep to say about this monumental fraud. It was as if
Diaz Rangel had talked about a robbery in Uganda and not in the
Venezuela governed by Hugo Chávez. Then Diaz Rangel came back charging
the following Sunday September 2nd. :

“Of course, the foreign banks mentioned on Sunday obtained significant profits negotiating the Venezuelan structured notes”
as you may suppose, the mediators also enriched themselves: Of the most
important ones, both Venezuelans, one was capable of purchasing a
modest bank in Austria for US$ 15 million and thus obtain a double

The other one met in Washington the wife of a
Veezuelan representative to a multilateral organization, who connected
him with a high Venezuelan official and through that connection he
managed to link himself to these operations. With profits “to be
shared” of course. However, Chacumbele, almost a month after these very
grave accusations, continues to act as if this had nothing to do with
him. The worst part is that Chacumbele, who obviously reads Diaz
Rangel, forcibly had to read the first two notes that had been written
on the subject. The first, on August 12th. :

financial world is full of rumors and questions. What has happened to
the Investments of the country abroad? Who made in 2006 hundreds of
millions of dollars with the transactions that made the Venezuelan
Government lose more than a billion dollars? Which are the European
banks where those transactions took place? Who are the Government
officials or former officials involved in those operations? Who were
the intermediaries in the private sector? Which Government office
controls or does not control these operations?”

In the second note, on August 19th. Diaz Rangel said:

of the questions last Sunday have something to do with these: What is
the origin of the campaign by a weekly against the Minister of Finance
Rodrigo Cabezas? Could it be that they pretend to weaken the position
of the person that has impacted the network of those that were making
multimillion dollar deals with certain placements of the Government
abroad? Didn’t they show their true colors with possible candidates to
replace him, presumably involved in the dirty negotiations that have
affected so much the Venezuelan Government?” Chacumbele can’t say that
he does not know all of these shenanigans.

Rangel spent four continuous weeks calling attention on this topic.
That is why we are taking it over; to ask Hugo Chávez if he is going to
continue looking distracted with this scandalous financial fraud, which
according to an important Venezuelan banker “constitutes the largest robbery of public money that has ever taken place in our history

this what Chávez wants the indefinite reelection for? So that these
gigantic swindles remain unpunished by those who want to govern us for
life? So that corruption with impunity will be as eternal as his term?
In part 2 we will explain the “deal” with these structured notes and
how, since we have no obligations with anyone, we will occupy our time
answering some of the questions that Diaz Rangel is asking.
Part 2

continue with our Topic about the Robbery of the XXIst. Century. (above
in Part I). To facilitate the perception about the magnitude of the
fraud committed with the ineffable structured notes, let us explain, in
the simplest possible way, what the devil they are and how those
financial instruments work.

are securities issued by a bank, with a fixed yield in interest
payments and with a well defined maturity, also determined by the
issuing bank. These structured notes are backed by public debt bonds of
different countries, for example, Argentinean, Brazilian, and
Ecuadorian. The issuing bank makes a “cocktail” with some amount of
each of these bonds and according to their maturity, their yield and
their price, sets the price and the yield of the structured notes it is
going include in it, backing them precisely with those bonds. The
issuing bank does it because someone, whom we will call the
“intermediary”, assures it that it has a client for the securities. The
“client”, of course, is the Venezuelan Government.

“intermediary” acquires a certain volume of the structured notes and
using his contacts with “officials” at the highest levels of the
Ministry of Finance, sells them, to Fonden. The “intermediary” makes an
intere$sting commission, which he shares with the “official”.

issuing bank makes money, the intermediary makes money, the official
makes money, the country loses. In the case of the Robbery of the
XXIst. Century, Fonden acquired US$ 8 billion in structured notes.

can imagine the size of the commission. Diaz Rangel, Director of
Ultimas Noticias, gave us the list of the 15 banks involved in this
operation and gave the “artists rendition” of the two “intermediaries”

of them was a gentleman that with his share of the pie was able to buy
an Austrian bank and on the way, obtain that nationality.
Who could that man be? Who did he deal with in Minpopopfinanzas? Chavez knows who both of them are.

also knows who the other “intermediary” is, whose artist rendition Diaz
Rangel gave: Someone, a trader, via a girl who works in a multilateral
organization in Washington, got in touch with an official of the
Venezuelan Embassy in Washington, today a big shot in Minpopopfinanzas,
and using that route reached the level at which decisions are being
made. This “intermediary” is the same one that appeared in the first of
the frauds of former Minister Nobrega, a crime which is still remains
impune, denounced at the time in Tal Cual. Chávez knows who this
“intermediary” is, as well as who the “official” is, involved in the
operation. In conclusion, Chávez knows everything that has happened
and, nevertheless, has not done anything about it, unless you interpret
as such the removal of Minister Merentes and that of the Director of
the national Office of the Treasury, the then Captain of the Navy,
today Admiral Carmen de Maniglia.

the swindle has had other consequences. The price of the structured
notes in the hands of Fonden suffered a large drop when the President
of Ecuador suggested the possible moratorium on the payment of that
country’s debt, because of part of the backing of the notes is in
Ecuadorian debt. That is, the country suffered a big loss in its

bought something at 100 that today is worth 85. Who is accountable for
that gigantic loss in the country’s equity? The Government is
persecuting some credit card holders that supposedly “sold” their
insignificant dollar quota, but it washes its hands in the face of a
loss of US$ 1.2 billion in the fraud with the structured notes. Those
that cover up, are as corrupt as those that steal.

Part 3

already explained what happens at one end of the swindle, the
international one; let’s see what happens to the national end of it.
happens here to the structured notes? Simply the same that happens with
the Bonos del Sur or with the Venezuelan sovereign bonds; that they are
used for financial trades in which high Government officials are
involved with bankers-not all of them, but only those that can be
considered to be bankers of the regime, which can be counted with the
fingers in two hands, and some fingers are left, who in this “socialist
revolution” have made money like they never had in their whole history.

Fonden creates a stock of US$ 8 billion in structured notes, the great
swindlers of the regime counted with an instrument that allowed them (Still allows it? Let Cabezas tell us) to make the following operation:

Minister Merentes, through officials with the appropriate attribution, offered structured notes to the bankers of the regime.

notes, as is obvious, are denominated in US$, but they are to be paid
in Bolivars at the controlled exchange rate (Bs. 2,150 per dollar).
Thus, the banker buys the paper at Bs. 2,150 per US$ and later, either
he take his dollars abroad or he sells them in the parallel market,
where the price is around Bs. 5 thousand (Even if yesterday it reached
Bs. 5,259). The profit that one obtains with this comfortable business
is divided between bankers and Government officials, who, of course,
always ask that their share be deposited in numbered accounts in Swiss
banks or in fiscal paradises like the Cayman Islands. Moreover, they
always let you know that the money is not for them, but “for the party”.

deal is so juicy that the distribution is made on the bases of 30% for
the banker and coworkers and 70% for “the party”, although when the
swindle involves brokers or investment banks, since these have less
access to the privileged circles, they have to pay off as much s 80%
and even 90% of what is generated.

Imagine how juicy this swindle is…

When Rodrigo Cabezas arrived at Minpopopfin he found this piece of cake and suspended the placement of structured notes.

who was headed towards the Central Bank, was all of a sudden left in
limbo. Navy captain Maniglia was removed from the Office of the
Treasury, without any explanations. Nevertheless, recently Cabezas put
into action again the mechanism of handing over structured notes but
according to the usual conditions: handpicked banks, no auction, all of
it opaque. Given the patrimonial loss that the Republic suffered, which
we told you about in the previous part, the structured notes have above
the official price of the dollar, a premium, to recover part of the
loss. Its real price, the one they call “implicit”, ends up being
around Bs. 4,000 per US$, but since the parallel dollar is around Bs.
5,000 there still is a comfortable margin in the exchange to pocket a
huge amount of money.

Will anything happen with this? What a stupid question!

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