Archive for March, 2008

March 23, 2008

It’s always difficult to understand what is going on from afar,
particularly during Easter week or Semana Santa, when even reporters seem
to leave Caracas and politicians dissapear.

But I had to comment on
two pieces of news which may be unconnected, but I believe are clearly
linked. There is a lot of interest here in Mexico on what happened at the
border between Colombia and Ecuador because some Mexican students were
killed at Reyes’ camp. Thus, coverage has continued and reports are that
there is lots more to come from the computers as Interpol examines them.
Meanwhile, Correa is reported to be nervous in Ecuador, even suggesting
that things with Colombia may heat up if an Ecuadorian citizen was killed
in the raid. (I guess it’s more permissible to kill foreign guerrila

But then two pieces of news go by and they puzzle me:
Insulza comments on the information on the computers dismissing a priori
part of it, saying that not everything in the computers is necessarily
true. Why does the Secretary General of the OAS even bothers to to say this
at a time of slow news?

And then, in a surprise and almost phantom
visit, Lula’s main advisor on international matters Marco Aurelio Garcia
shows up in Caracas to talk to Chavez about common projects between the two

Yeah, sure, as if Marco Aurelio and Chavez will both take
time out for this at this time.

If you ask me, something in those
computers in making a lot of people nervous at this time and expect
something unusual to be revealed from them. Expect denials too. It will be
all the work of the Empire, the CIA, whatever.

But don’t expect a
condemnation of the Tibet killings. When the Government’s friends kill, it
always has a justification.


Semana Santa is here, posting will be light to scant

March 14, 2008

Tomorrow is the beginning of Easter week or Semana Santa here in Venezuela, a week in which everything dies all over the country. Scools are out and this time around Wednesday is a Catholic holiday too, making it even shorter in some sectors. Government also shuts down, so it is likely that little will happen for the next ten days. I will take off also, going to the Pacific side of Mexico for a few days of rest. I will have Internet access but updates are likely to be sporadic and only if events deserve my attention.

Have a good one!

Sad acts of anarchy surface in daily life in confrontational Venezuela

March 14, 2008

One has to get concerned when besides all of the problems the country is facing, there seems to be developing a level of anarchy in Venezuelan society, where both sides of the polarization in which the country is immersed act out destructively and with hate. It is truly bothersome when groups alternate in acting outside of the law violating teh rights of others and then the opposing groups comes back seeking revenge. This happened this week in Barquisimeto at a public University, the Polytechnic University Antonio Jose de Sucre.

It is a long story of political demands that began last Fall, when a group of students began demanding that the “Professor’s House” be made available to all of the members of the University’s community, not just a privileged few. A group of students too over the House in protest.

A few days later, a different group of students, those that have not been admitted to any university too over the same House in protest. They did this On November 6th. and managed to stay there until mid-February when the police removed them from the Professor’s House. In the process, six students were detained and jailed. This outraged some pro-Government students who then went in and under the passive watch of the National Guard, went in and and took over the House again, this time protesting the jailing of their friends.

Then a couple of days ago, 1,500 students (Yes, mostly anti-Government students!) met at a student Assembly and found a somewhat perverse way of ending the conflict: They decided, despite the opposition of the leaders of the student union, to go and simply destroy the “Casa del Profesor” by taking it apart brick by brick, roof tile by roof tile, which you can see happening on the picture above. A tragic, barbaric and absurd act by any measure.

Thus, one more example of the many types of anarchy that are suddenly surfacing in Venezuela lately and which bodes badly for our future as a tolerant and democratic society.

Truly sad.

The revolution never ceases to amaze with its deeds and words

March 14, 2008

It was one of those days when one gets simply incredulous at what is said and done by the revolution. Among the highlights:

—Minister of the Interior and Justice Rodriguez Chacin found a novel and original explanation for the shortages in Venezuela, which he gave to the Government’s TV station VTV: “The US is in a war with us and they are blocking the purchase of food and military parts”. I imagine we will hear this one more often as the Government can’t solve the problem with shortages.

—And El Universal uses the annual report of the Ministry of Education to conclude that there were 2.5 million fewer students in 2007 than in 2006. The reason? According to the same report, the number of students enrolled in the educational “Misiones” went down by 2.4 million students. I guess the cheerleaders of the revolution are likely to tell us that they are all well educated by now. Yeah, sure!

—And the more the Government creates shortages, the more it believes the solution resides in even more intervention and participation by the Government in the production of foodstuffs. Today the Government announced another purchase of a diary company, it was Lacteos Los Andes’ turn to be bought off by an inefficient and incompetent Government. I don’t know who I should feel worse for, the workers that are likely to lose jobs slowly over time or the Venezuelan people that will see more and more shortages as these companies are destroyed by bad management and corruption. Remember Invepal? Remember the sugar processing plants? Just watch…

—And you have to love it when the Minister of Finance says that his objective is to bring the parallel market rate down to Bs. 3.5 per US$. I thought it was illegal to talk about “that” market. I certainly hope his parallel market objective is a little better than his inflation objective of 11% for the year. I also wish him good luck with all of the new bond he plans to issue his year, maybe he is ot aware of the liquidity problems in international credit markets. I do hope Bear Stearns is not the investment bank leading the sale in April.

—And remember the guy who was supposed to be a guerrilla member and none other than the Minsiter of the Interior and Justice (again) told us he was not? Well, based on the fingerprints that the same Minister gave Colombian authorities, it turns out they are not only members of the FARC but part of the High Command of the 38th. Front of the FARC. Do these guys even check things out before they speak?

New York Times: Venezuelans flock to Curacao to get their preferental dollars

March 13, 2008

The New York Times has this slideshow of how Venezuelans flock to Curacao to obtain their preferential rate dollars. Very pictorial, I have heard gripes from people from Curacao that we are making life miserable for them, because we empty their ATM’s of US dollars and there are periodic shortages. So now we also export shortages…

(Note added: I was not aware the slide show accompanied an article on the subject, thanks to “Gringo” for pointing it out in the comments)

Piensa mal y acertaras: PDVSA buying back EDC’s 2014 bond

March 12, 2008

There is a local saying: Piensa mal y acertaras (Think the worst and you will be right) and the announcement by PDVSA that it was buying back Electricidad de Caracas’ 2014 Senior Notes or Bonds reminded me of this criollo saying.

You see, Electricidad de Caracas was taken over less than a year ago by the Venezuelan Government and the company had this bond with a 10.25% coupon maturing in 2014 and in the amount of US$ 260 million. The bond can be called back in October 2009 at a price of 105.125%. Thus, as of last Friday the bond was priced at 108% and was yielding around 8%. This may sound great to most fixed income investors in the world, except that PDVSA 2017 is yielding 10.6% and PDVSA happens to be the owner of Electricidad de Caracas, so the 8% makes little sense, simply too low.

By decree, Electricidad de Caracas will cease to exist in May 2010, when it is merged with the National Electric Company (CNE in Spanish, no pun intended in terms of funny business going on). Thus, logic would dictate that the bond would be called back at 105.125% in October 2009 and that would be the end of that.

Except that nothing is what it seems in the robolution. The first strange thing is that the day that the ExxonMobil injunction came to be known, PDVSA 2017 bond dropped by almost 10% points, while the EDC bond barely moved from 108% to 107%. Same company and the lower yielding bonds moves less, weird no?

Then last Friday, the long rumored buyback of the bond is announced by PDVSA. The price? Well, with a 10.5% coupon and call feature at 105.125%, you would think a price in the low teens (111%-112%) would be more than necessary and reasonably priced for PDVSA to do a buy back. But no, the price is somewhere between 119-120%, which makes little sense. At that price the yield to maturity to the first call is 1.6%, a truly ridiculous value.

So, the owners of this bond will get about 120% by April 9th. and they can take their money and invest it in PDVSA 17 at 10.6% if they trust that risk. Not a bad deal after all.

Of course, if you read the legalese associated with the buyback, it reads something like: “PDVSA will buy it back at 105.25% plus an early consent fee of 2%, plus the future value of all cash flows up to the earliest redemption date, discounted at a rate equals to the yield of the US Treasury Bond which matures on October 15, 2009 plus 50 basis points”. Which if you have an MBA and sa good spreadsheet you can interpret means 119-120% depending on the mysterious yield of that Treasury Bond.

So, there was no rush to buy it back, the price is extremely high for what you would expect and even compared to the country’s yield. To Top it all off, the bond was already trading at a high price.

Yeap, there is no question about it: Piensa mal y acertaras!, This is after all called the robolution.

(Note: The author holds Electricidad de Caracas notes and he will benefit from this peculiar largesse of the robolution. The poor of Venezuela I can assure will not)

Structured corruption by Veneconomia or why this regime is called the robolution

March 11, 2008

And yesterday it was Veneconomia’s turn to add its two cents about corruption in the sale of structured notes right under the nose of the almighty Chavez. Of course, by now, it is not US$ 600 million that have been sold, but US$ 750 million. Everybody denounces the hundreds of millions of dollars robbed in this way, while not a single investigation has been opened on the case, by the Prosecutor General or the National Assembly. Which must mean that much like other corruption cases in the robolution, such as “maletagate” or the precious kids jailed in Miami, who are miraculous multi-millionares thanks to the “process”, that Chavez himself has ordered that nothing be looked into in any of these cases, because in the end corruption represents a form of control.

And there is so much corruption that even superficial investigations turn up the most remarkable cases. There is teh structured notes and Argentinean bonds, which has generated almost a billion in wealth to those participating. There is “maletagate”, a small US$ 800,000 case of a suitcase full of hundred dollar bills which is small sample of what is going on in a larger scale; it was not gratuitous that the Minister of Foreign Relations asked incredulously that how could Chavez give US$ 300 million o the FARC, it would take 300 suitcases. Yes, he knows even the exact measure, it is such a regular procedure by now. But in a country with exchange controls and cash limits per person, there has been little movement in investigating “maletagate”, since the money certainly came from PDVSA and clearly with the knowledge of Minister Rafael Ramirez, who by now knows some many secrets that Chavez can’t get rid of him. And then there is the Chavez family who have gone from the fake poverty that Hugo Chavez claims he had when he was a kid to huge landowners and have created the new Macondo in Barinas State. To say nothing of Minister Rodriguez Chacin, the man who gets credentials for FARC leaders, has two indentities himself and has gone from having little to spending lots of time at his daughter’s huge ranch in teh same state. Pity that his good life was interrupted to become a Minister again, but it is a good sacrifice, who knows what unknown “guiso” (criollo for racket) he can stumble upon in the position this time around,

In any case, by now there are so many public denunciations of the structured notes racket that it should be investigated only based on these noticia criminis. Don’t hold your breath, it ain’t called the robolution for nothing!

Structured Corruption by Veneconomia

A few days ago, it was learned that, over the past four weeks, the Finance Ministry had placed some $600 million in structured notes.

Apart from that, several analysts, among them Orlando Ochoa, an economist with a degree from Universidad de Los Andes, and Jose Guerra, former Economic Research Manager at the Central Bank of Venezuela, have been denouncing a series of irregularities having to do with the fact that the government is using the sale of structured notes as a mechanism for stabilizing the swap market.

For example, Jose Guerra affirms that since 2004 “more than $10 billion have been placed in those structured notes and Argentine bonds without information having been made available on the financial terms of those placements, and with gains for the operators of more than $1.5 billion.”

Neither the Finance Ministry nor Fonden nor the Central Bank has given information on the terms on or the price at which these notes have been sold, much less has anyone revealed the names of the banks that have taken part in these transactions.
In order to explain how the mechanism of the structured notes works, VenEconomy has prepared a hypothetical transaction, in which the prices used are simply by way of example:

Let us assume that Fonden buys $100 from the Central Bank at the official rate of Bs.F.2.15:$, making a total of Bs.F.215, and that, with those $100 Fonden then buys $100 in structured notes in New York.

Let us also assume that, the next day, Fonden sells that structured note to a consortium of Venezuelan banks for Bs.F.360, so netting Fonden a spectacular “gain” of Bs.F.145.

Now, let us suppose that the Venezuelan buyers do not keep that structured note either, but sell it in New York, also for $100 and that those $100 are then exchanged for bolivares fuertes in an operation on the swap market, obtaining a “gain” of Bs.F.100.
To cut a long story short, this mechanism allows Fonden to post an alleged gain of Bs.F.1.45 for every dollar invested, while the transaction brings the intermediaries a gain of Bs.F.1 for every dollar invested. So it is that the intermediaries obtain a spectacular gain of Bs.F.600 million, equivalent to some $125 million in only four weeks.

While this is a simple operation, it is also an unorthodox and opaque one that produces fictitious earnings where there should be none, besides generating inflationary pressures.

It is worth remembering that, in 1961, the last time a government intervened in the foreign exchange market in a proper manner, it did so in a way that was totally transparent, via the stock market.

Chavistas prove more democracy is needed as they rebel against their imposed leaders, the opposition should follow them

March 10, 2008

I have repeatedly argued, whenever I have been allowed to say so, that Venezuela needs more democracy in the selection of both party leaders and candidates, because it seems as if most political parties in Venezuela were created to satisfy the ambitions of one person and that there is no common vision for Venezuela, but that of the individual leaders who create and control these parties, in ways that would make Stalin proud.

The usual argument against my idea of more democracy is that any primary-like process to elect party leadership or candidates would cost a lot of money and in the end wear out political figures.

I don’t buy it, I think that rather than “wearing out” what any primary process would do is to “weed out” those that have little acceptance by the voters, despite their personal belief that they are what the country needs. In fact, I think that a primary within a party will get little attention outside of those involved and candidates from various opposition parties could then meet at a run-off election which if held within a short period of time after the party primaries, would not be able to “damage” candidates as many believe would happen.

This all comes to mind because this weekend Chavez’ new party PSUV, held primaries to elect the leadership for the next few years. While you can criticize many things about the process, such as the fact that Government resources were massively used for a party activity, that only candidates that had Chavez’ blessing made it to the final list and the process had close control fromm party authorities, I have to praise the fact that some form of democratic process took place and that in itself is a huge progress to me.

But even more interesting, is the fact that the results were quite different from what everyone expected. The election selected principals and alternates for the party leadership and surprisingly, the man most likely to succeed Chavez if can’t run for a third (or fourth?) period in a row, Diosdado Cabello, failed to make it as a principal to everyone’s surprise. He will have to be happy as an alternate.

And he was not alone, as other leading figures of Chavismo, such as Hector Navarro, Freddy Bernal, Luis
Reyes, Rafael Rami­rez, Willian Lara, Ramon Rodri­guez
Chaci­n and Rodrigo Cabezas, also failed to make the cut as principals, as
lesser figures such as Aristobulo Isturiz, Adan Chavez, Mario Silva, Jorge
Rodri­guez, Antonia Munoz and Carlos Escarra did make it, proving that even almighty and seer Chavez can be wrong also about who can get elected or not in Venezuela. In fact, it is relevant to note that in a machista/militaristic Chavista leadership, seven out of the ten women won the election as principals. Similarly, only one, yes just a single one of the five former military in the running made it as principals, sort of the antithesis of the structure of the  Chavez Government.

And while I certainly believe there were orders from above to vote in a certain way, I do not believe that Diosdado Cabello was not among the chosen few, nor do I believe that Aristibulo Isturiz was among those favored by the leader himself.

Which indirectly proves my point about the opposition and the need for more democracy: they should allow the party members to elect candidates and leaders, because those that they see as their “natural” leaders may be nothing more than political mirages, within their own Stalinist structures.

And the PSUV elections show this, despite the strict “controls” and candidate selections, the PSUV party members, however few of them actually voted, silently rebelled in their own way.

Maybe if the opposition allowed the people and their members to shake them up and rebel, Venezuela politics will be irreversibly changed forever.

Just because there was more democracy…

Un hombre detras del “maletagate” ilustra la vida e influencia de los boliburgueses

March 10, 2008

Del Wall Street Journal de hoy: Un hombre detras del “maletagate” ilustra la vida e influencia de los boliburgueses

(En ingles aqui)

En diciembre pasado, el multimillonario
venezolano Franklin Durán le dijo a agentes de la Oficina Federal de
Investigación de Estados Unidos (FBI) que le encantaba viajar a su
mansión en la isla de Key Biscayne para “bucear, nadar con los delfi
nes y estar tranquilo”.

Sin embargo, la tranquilidad es algo que
Durán no puede encontrar fácilmente en estos días. El dueño de
Industrias Venoco CA, una petroquímica y fabricante de lubricantes
líder de Venezuela, está arrestado sin derecho a fi anza en Miami bajo
cargos relacionados con una maleta llena de efectivo que se convirtió
en el epicentro de un escándalo internacional que involucra a Estados
Unidos, Argentina y Venezuela. Enfrenta hasta cinco años en prisión y una multa de US$250.000.

Después de su arresto en diciembre, Durán
fue interrogado por agentes del FBI. En la versión del FBI del
interrogatorio, (a una copia de la cual tuvo acceso The Wall Street
Journal), el empresario describió una corrupción generalizada en el
gobierno de Hugo Chávez. En un momento de la entrevista, según la
versión del FBI, Durán dijo que su ascenso como hombre de negocios fue
pavimentado por el soborno de “políticos, funcionarios del gobierno y
funcionarios de alto nivel”.

Las declaraciones de Durán también ofrecen un vistazo fascinante de los “boli-burgueses”:
la clase de empresarios acaudalados con un estilo de vida extravagante,
que se jactan de sus lazos con el gobierno de Chávez y su
autoproclamada “Revolución Bolivariana” y que han escogido Miami como
su refugio predilecto. Según la versión del interrogatorio del FBI,
Durán dice que lo único de lo que es culpable es de “tener montones de
dinero, negocios exitosos, muchas admiradoras y autos costosos”.

El caso en contra de Durán, de 40 años,
y otras tres personas deriva del descubrimiento en agosto de una maleta
en el aeropuerto de Buenos Aires con US$800.000 en efectivo, los cuales
llegaron en un avión privado desde Venezuela.

Los fiscales estadounidenses dicen que el dinero provino del gobierno
venezolano e iba destinado a la campaña presidencial de la nueva
presidenta de Argentina, Cristina Fernández de Kirchner, acusación que ella niega. Durán no estaba a bordo de la aeronave.
Pero el gobierno estadounidense dice que él y otros cuatro hombres
volaron a Miami en los meses posteriores al descubrimiento de la maleta
para presionar al hombre que la transportaba, un
venezolano-estadounidense llamado Guido Antonini, para que ocultara la
fuente y el destino de los fondos.

Los hombres están acusados de actuar como agentes no registrados del gobierno venezolano en EE UU. Edward Shohat, el abogado de Durán, dice
que su cliente es inocente. En documentos judiciales dice que las
acusaciones contra su cliente son un intento del gobierno
estadounidense por difamar al gobierno venezolano.

los documentos, el abogado asegura que Durán simplemente se limitó a
prestar asesoría a Antonini. Dos de los otros acusados, incluyendo su
socio en Venoco, Carlos Kauff mann, se han declarado culpables en un
caso que en América Latina se conoce como “maleta-gate”.

Durán, un ex mecánico proveniente de
una familia de escasos recursos, ha probado todo tipo de negocios,
incluyendo la venta de armas y equipos de control de disturbios al
gobierno venezolano.

el control de Venoco después de que el ex presidente ejecutivo tomara
parte en el golpe de estado de 2002 en contra de Chávez.

Durante su conversación con el FBI, Durán
asumió una actitud despreocupada e incluso prescindió de su derecho a
un abogado. Cuando los agentes le advirtieron que era un crimen
mentirles a los agentes del FBI, discrepó. “El ex presidente Clinton y
el presidente Bush no se metieron en problemas por mentir”, les dijo a
los agentes, según la versión del FBI del interrogatorio. Al igual que muchos en la burguesía bolivariana, Durán hace alarde de su riqueza y su acelerado estilo de vida.

Posee una mansión de US$4,6 millones en Key Biscayne, a tan sólo unos
cuantos kilómetros del centro de detención en Miami donde ahora pasa
sus días. El año pasado, Durán estrelló su Porsche Carrera GT de
US$600.000 en el rally de millonarios Gumball 3000 en Europa. Su
compañero de equipo en la carrera era Antonini, el hombre que fue
atrapado con la maleta con el dinero. Kauff mann , el otro dueño de
Venoco, también participó en el rally, conduciendo un McLaren Mercedes
SLR de US$500.000.

Durán, Kauff mann y Antonini eran muy
amigos y socios. Antonini ejercía como el “presidente en EE UU” de
Durán, según la trascripción del FBI. A los tres les gustaban los autos
de lujo. Antonini incluso manejaba un Porsche Boxster con un adhesivo
que ensalzaba la revolución socialista de Chávez. “Venezuela ahora es
para todos”, decía. El destino de Durán mejoró después que
Chávez llegó al poder en 1999. En 2002, Durán y Kauff mann compraron
Venoco a sus propietarios poco después que el presidente de la
compañía, Pedro Carmona, asumiera un papel principal en un intento de
golpe de estado contra Chávez. Durante el golpe, Carmona se nombró
“presidente interino” hasta que Chávez retomó el poder dos días más

A Carmona aún se le llama en broma “Pedro el Breve”. Chávez
no le vio la gracia. Tras recobrar el poder, cortó a Venoco los
suministros de derivados de petróleo que necesitaba para producir sus
lubricantes, y golpeó la fi rma con auditorías impositivas sorpresa,
haciendo que los propietarios estuvieran ansiosos por vender.

“[Fue] prácticamente regalada”, recuerda Durán a sus entrevistadores del FBI, explicando su compra.

En la narración de la entrevista del FBI,
Durán dijo que el valor de su compañía se ha triplicado desde que la
compró gracias a sus contactos en el gobierno y a una relación casi
“simbiótica” con la petrolera estatal Petróleos de Venezuela SA, o
PDVSA. El año pasado, Venoco compró 49 estaciones de servicio a Exxon
Mobil Corp. después de que la compañía texana decidiera dejar Venezuela
dada la política petrolera nacionalizadora de Chávez.

dijo que su negocio se vio impulsado por su relación íntima con los
servicios de inteligencia de Venezuela, donde conoce a “todo el mundo”.
Según la trascripción del interrogatorio, dijo a los agentes
que otra clave de su éxito es la costumbre de pagar a importantes
representantes venezolanos, entre ellos “políticos, representantes del
gobierno, y representantes de alto rango”. Durán no quiso dar nombres
por “temor a represalias”, dice la declaración.

pesar de su ascenso, Durán mostraba desdén por sus maestros políticos
en Venezuela y sus benefactores. “Venezuela está siendo gobernada por
gente ignorante y sin educación”, dijo a los agentes, según la
declaración. El abogado de Durán, Shohat, no confi rmó que
Durán hizo esas declaraciones al FBI, diciendo, “Eso es lo que el FBI
dijo que él dijo. Shohat agregó: “no veo que la declaración posterior
al arresto sea problemática”.

Durán ha estado bajo el escrutinio de las
autoridades anteriormente. Hace una década, las autoridades de EE UU y
Venezuela le investigaron por lavado de dinero proveniente de la droga,
muestran los documentos. Dos grandes jurados federales en EE UU
escucharon el testimonio referente a las supuestas actividades de
lavado de dinero de Durán, según tres personas con conocimiento de la
materia y una revisión de The Wall Street Journal de extensa
correspondencia legal. Las autoridades de EE UU recibieron información
detallada sobre al menos US$13 millones en transacciones fi nancieras
sospechosas realizadas por Durán y sus asociados entre 1998 a 2001,
según los documentos.

nunca fue acusado, dice Shohat, quien no quiso discutir el fundamento
de las acusaciones de lavado de dinero. Los procesos del gran jurado
son secretos y no fue posible determinar el resultado de la
investigación. En un intento por convencer al juez de
su caso actual para que le permitiera salir bajo fi anza, Durán ofreció
contratar a una importante compañía de seguridad para que le

El juez sentenció que Durán, propietario de un avión privado, corre el riesgo de salir volando y le negó dicha fianza.

Venezuelan Industrialist Describes Corruption, from the WSJ

March 10, 2008

Venezuelan Industrialist Describes Corruption
, from today’s Wall Street Journal

(In Spanish here)

In December, Venezuelan multimillionaire Franklin Duran told agents from
the U.S. Federal Bureau of Investigation that he loved traveling to his
mansion on the wealthy island enclave of Key Biscayne to “scuba dive,
swim with the dolphins and have peace of mind.”

Peace of mind for Mr. Duran may be hard to find these days. The owner of
Industrias Venoco CA, a leading Venezuelan petrochemical company and
lubricants manufacturer, is being held without bail in Miami on charges
related to a cash-stuffed suitcase at the center of an international
scandal involving the U.S., Argentina and Venezuela. He could face up to
five years in prison and a $250,000 fine.

After his December arrest, Mr. Duran was interviewed by FBI agents. In
the FBI’s account of the interrogation, a copy of which was reviewed by
The Wall Street Journal, he described widespread corruption in the
Venezuelan government of Hugo Chávez. At one point in the interview,
according to the FBI account, Mr. Duran says his rise as a businessman
was paved by bribing “politicians, government officials, and high ranking

Mr. Duran’s statements also provide a fascinating glimpse into
Venezuela’s “Boli-burgueses,” or Bolivarian bourgeoisie, a class of newly
rich businessmen who share an extravagant lifestyle, boast close ties
with Mr. Chavez’s government and its self-proclaimed “Bolivarian
Revolution,” and make Miami their playground of choice.

According to the FBI account of the interrogation, Mr. Duran says the
only thing he is guilty of is “having lots of money, successful
businesses, many lady admirers and expensive cars.”

The case against Mr. Duran, 40 years old, and three co-defendants stems
from the August discovery at the Buenos Aires airport of a suitcase
stuffed with $800,000 in cash flown in on a private jet from Venezuela.
U.S. prosecutors say the money came from the Venezuelan government and
was destined for the presidential campaign of Argentina’s Cristina
Fernández de Kirchner. Ms. Fernández, now president, denies the

Mr. Duran wasn’t on the plane. But the U.S. government says that he and
four other men flew to Miami in the months after the discovery to
pressure the man caught with the suitcase, a Venezuelan-American named
Guido Antonini, to cover up the source and destination of the money. The
men are accused of acting as unregistered agents of the Venezuelan
government in the U.S.

Edward Shohat, Mr. Duran’s lawyer, says his client is innocent. In court
filings, he said the prosecution is an attempt by the U.S. to smear
Venezuela’s government. In the filings, the lawyer says Mr. Duran was
merely giving advice to Mr. Antonini.

Two of Mr. Duran’s co-defendants, including his business partner in
Venoco, Carlos Kauffmann, have pleaded guilty to the charges in the case,
which in Latin America has been dubbed “Maleta-gate,” or “Suitcase-gate.”

A former auto mechanic from a lower-class family, Mr. Duran has tried his
hand at all kinds of businesses, including selling weapons and
riot-control equipment to Venezuela’s government. He won control of
Venoco after its former chief executive took part in a 2002 coup attempt
against Mr. Chávez.

During his talk with the FBI, Mr. Duran was nonchalant — and chatty. He
even waived his right to counsel. When FBI agents warned him it was a
crime to lie to federal officials, he disagreed. “Former President
Clinton and President Bush didn’t get into trouble for lying,” Mr. Duran
told the agents, according to the FBI’s account.

Like many of the Bolivarian bourgeoisie, the young businessman flaunts
his wealth and fast-paced lifestyle. He owns a $4.6 million waterfront
mansion in Key Biscayne, just a few miles from the downtown Miami
detention center where he now spends his days. Last year, Mr. Duran
totaled a $600,000 Porsche Carrera GT in the Gumball 3000 millionaires’
road rally in Europe. His driving partner was Mr. Antonini, the man
caught with the suitcase. Also taking part in the rally was the Venoco
co-owner, Mr. Kauffmann, driving a $500,000 McLaren Mercedes SLR.

Mr. Duran, Mr. Kauffmann and Mr. Antonini were all close friends and
partners. Mr. Antonini acted as Mr. Duran’s “CEO in the U.S.,” according
to the FBI document. The three shared a love for fancy cars. Mr. Antonini
even drove a Porsche Boxster with a bumper sticker that extolled Mr.
Chávez’s socialist revolution. “Venezuela is now for everyone,” it said.

Mr. Duran’s fortunes soared after Mr. Chávez came to power in 1999. In
2002, Messrs. Duran and Kauffmann bought Venoco from its owners shortly
after the company’s chief executive, Pedro Carmona, took a lead role in a
failed coup attempt against Mr. Chávez. During the coup, Mr. Carmona
named himself “interim president” until Mr. Chávez retook power two days
later. Mr. Carmona is still jokingly called “Pedro the Brief.”

After Mr. Chávez regained power, his government cut off supplies to
Venoco of oil derivatives that it needed to make its lubricants, and hit
the firm with surprise tax audits, making the company’s owners eager to
sell. “[It was] practically being given away,” recalled Mr. Duran to his
FBI interviewers, explaining his purchase.

In the FBI’s account of the interview, Mr. Duran said that his company’s
value has tripled since the purchase thanks to his government contacts
and an almost “symbiotic” relationship with state oil company Petroleos
de Venezuela SA, or PDVSA. Last year, Venoco bought a concession to
supply 49 service stations in the country from Exxon Mobil Corp. after
the Texas company decided to leave Venezuela over Mr. Chávez’s
nationalistic oil policy.

Mr. Duran said his business is helped by an intimate relationship with
Venezuela’s intelligence services, where he knows “everybody.” According
to the interrogation account, he told agents that another key to his
success is his habit of paying off important Venezuelan officials,
including “politicians, government officials, and high-ranking
officials.” Mr. Duran didn’t want to name names because of “fear of
retaliation,” the statement said.

A spokeswoman at Venezuela’s embassy in Washington said that she wasn’t
authorized to comment on Mr. Duran’s allegations of generalized
corruption within the Venezuelan government.

Despite his rise, Mr. Duran showed disdain for Venezuela’s political
masters — and his benefactors. “Venezuela is being governed by ignorant
and uneducated people,” he told the agents, according to the statement.

Mr. Duran’s lawyer, Mr. Shohat, wouldn’t confirm that Mr. Duran had made
those statements to the FBI, saying, “It’s what the FBI said he said.”
Mr. Shohat added: “I don’t see the post-arrest statement as problematic.”

Mr. Duran has come under scrutiny by law enforcement before. A decade
ago, U.S. and Venezuelan authorities investigated him for drug-money
laundering, records show. Two federal grand juries in the U.S. heard
testimony concerning Mr. Duran’s alleged money-laundering activities,
according to three people with knowledge of the matter and a review by
The Wall Street Journal of extensive legal correspondence. U.S.
authorities received detailed information on at least $13 million of
suspicious financial transactions made by Mr. Duran and his associates
from 1998 to 2001, according to the documents.

Mr. Duran was never charged, says Mr. Shohat, who declined to discuss the
substance of the money-laundering allegations. Grand-jury proceedings are
secret, and it wasn’t possible to determine the outcome of the

In trying to persuade the judge in his current case to allow him bail,
Mr. Duran offered to hire a reputable security company to monitor
himself. The judge ruled that Mr. Duran, who owns a private jet, is a
flight risk, and denied him bail.

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