Official version of the intervention of the four banks or why did it take so long to see all this?

November 21, 2009

While I wanted to write about other things the mysteries surrounding the Fernandez Barrueco case draw me back to it. Today, we were able to see the Official Gazette outlining how the Government justified the intervention of the four banks, Confederado, Bolivar, Banpro and Canarias, which all together have about 6% of the deposits in the Venezuelan banking system and about 30% of the deposits of the combined banks come from Government (so called “official”deposits) known to move according to the highest bidder.

As a preamble, I would like to point out a couple of things: First, Fernandez Barrueco became known when Hugo Chavez defended him in one of his Sunday Alo Presidentes. Fernandez had a fleet of trucks that he placed at the service of the Government during the 2002-2003 strike Then, when the Government began Mercal, Fernandez became the “King of Mercal” supplying Mercal with corn and wheat flour and becoming the leading importer of grains in Venezuela. So much so, that he purchased milling company Monaca.

When Eligio Cedeño is jailed, some people thought that he was fronting for Fernandez and that he was sent to jail, because Cedeño did not want to “sell” to Fernandez or they could not agree on the price.

But it was not until September 2008 that Feranndez took over Banpro, Bolovar and Confederado formally. This was after the structured notes that the Government said banks had to get rid of, but would have sent some of this banks into bankruptcy.

Around the banks, Fernandez was known as the “shareholder”, occupying the office of the Presidency of the banks, but mostly keeping a low profile. Instead, the banks were run by el “policia” a former military officer who ran things without consulting Fernandez much.

Fernandez was thought to be untouchable, even the confiscation of his jet plane in Ft. Lauderdale did not stop him locally, even if he shut down his office for a while.

Which is why yesterday’s decision came as such a surprise. Fernandez rose under Chavez and is now being persecuted fully. His banks have been intervened and tonight, the Prosecutors office has had him detained and he will be accused under the “organized delinquency” Law.

But, you may ask, what is it he is being accused of. I will try to explain and be brief.  Recall first, that Fernandez onli acquired Banco Canarias in October, so that this bank is the one that he has had the least time to fiddle with.

But this is what he is being accused formally of:

Banco Confederado:

-Owners have not complied with the recovery plan presented in September 23d. 2008

-Bank has not reserved sufficiently non-performing loans

-Bank financed companies owned by the “Ricardo Fernandez Barrueco” group which is not allowed by law.

-Bank purchased Bs. 400 million (US$ 186 million at the official rate of exchange, US$ 74 million at the swap rate) in rights of Inverfactoring, without approval from the Superintendent of Banks. (This violates the law and is likely a company related to Fernandez)

-Bank purchased rights issued by Activos Corporativos AG in the amount of Bs. 211 million or US$ 100 million at the official rate or US$ 39 million under an structured note, which was explicitly forbidden by current regulations.(This violates the law and is likely a company related to Fernandez)

-The bank failed to meet with the minimum ratio of Equity/Assets of 12% and the ratio Accounting Equity/Total Assets.

Banco Bolivar

-Failure to show the origin of funds when Galopy International and is shareholder Ricardo Fernandez Barrueco purchased the bank as well as the lack of banking experience.

-Failure to replace losses.

-Financing of companies of the Fernandez Barrueco Group (again)

-Acquiring Bs. 400 million in rights from Inverfactoring (same amount as done with Banco Confederado, for a total of Bs. 800 million, This violates the law and is likely a company related to Fernandez)

-Purchase of Bs. 180 million in rights from Activos Corporation (Bs 211 at Banco Confederado for a total of Bs. 310 million, This violates the law and is likely a company related to Fernandez)

Banco Provivienda (Banpro)

-Failure to achieve goals

-Financing of the Fernandez Baruueco group of companies (illegal)

-Acquired rights from Inverfactoring for Bs. 400 million (For a total of Bs. 1.2 billion with Confederado and Bolivar or US$ 558 million at the official rate or US$ 222 million at the swap rate. (This violates the law and is likely a company related to Fernandez)

-Purchased rights from Activos Corporativos AG for Bs. 223 million (For a total of Bs. 443 million or US$ 200 million at the official rate between the three banks or US$ 82 million at he swap rate, (This violates the law and is likely a company related to Fernandez)

-Violation of regulations with the purchase of Banco Canarias, operation which should be reverted.

-Failure to generate cash flow to sufficient to pay its obligations as stated in the recovery plan.

Banco Canarias

-It gave out loans and made operations with related companies, but the magnitude is smaller than those of the other three banks and Fernandez had been running it for less than a month.

In conclusion, using depositors money Fernandez lent his own personal companies Bs. 1.6 billion (US$ 744 million at the official rate, or US$ 296 million under the swap rate) according to the official accusation.

But this is not new. This has been going on for quite a while. Bolivar was purchased in 2003 for US$ 45 million. Then Bolivar bought Banpro and Bolivar bought Confederado forUS4 110 million and now Fernandez squeezes out of all three US$ 296 million to do whatever.

Obviously, nobody stopped Fernandez on the way so he got cocky, but something happened. We don’t know taht and we may never know. Fernandez was allowed to use people’s money at will, creating one of the top three fortunes in Venezuela.

And someone felt offended. That is the story to look at now, but we may never know.

The Devils Excrement has been relating schemes and rip offs for the last few years under the Government’s blind eyes. The cheerleaders of the robolution have defended them, suggesting this was the result of a hyperactive anti-Chavez imagination. The numbers give out today by the Ministry of Finance leave no room for error. This was allowed to go on and on, unsupervised until something happened. There are at least three similar groups doing this in competition with Fernandez. Same rip off, different names.This is coming out of people’s deposits. Fernandez should have never been allowed o buy or run even one bank.

The evidence is there, it is indeed a robolution and not a socialist one at that.

13 Responses to “Official version of the intervention of the four banks or why did it take so long to see all this?”

  1. Go-sho Says:

    Plus they had a good plan! The only way to print money legally (and launder a bunch of cash) is by printing Cellular Pre-paid cards. You print them and sell them (or not) and then register the income.

    I think that was the main reason for trying to purchase Digitel.

  2. go-sho Says:

    I think that his masters caught him with the hands in the cookie jar and decided to take him down. Bad, Bad Testaferro!

  3. moctavio Says:

    My fault framethedbeate, I could have said who won, but wanted to compare the two runners up, movie by movie and have not had the time.

  4. He was voted of from the venezuelan version of The Apprentice… “El Testaferro”

  5. framethedebate Says:

    It may shock some readers of this blog to know that the same type of insider activities have occured in the U.S. One merely has to look at the 24 hour seizure and sale of Washington Mutual (once the largest thrift in the U.S.) to JP Morgan for roughly $1.9 billion. The windfall gains has been estimated to be as high as $78 billion. Or,,,consider the government’s funneling of $ billions thru AIG to Goldman Sachs. Such transfers occured under different circumstances but the resulting effect was concievably the largest transfer of wealth in modern history. We are not talking millions but rather billions. The results of such activities have destroyed confidence here and abroad that our government can effectively regulate or oversea the financial industry: especially since those that have overseen these titans are former employees of same financial enities. Here, the lack of transparency and trust has kept an economic recovery from moving forward. Combined with the minimal impact such spending has had in hard economic improvement and the fact that same groups that caused our meltdown are now earning record bonuses, our government is far from viewed as “for the people.” Perhaps when Venezuealans begin questioning or concerning themselves with what the economic impact all these activities have had on their nation’s economy will the details surrounding such shady dealings be revealed. By the way Miguel, don’t bother holding contests going forward as some readers expect the follow up promised. No big deal but it does have the scent of the Fat Man on it.

  6. moctavio Says:

    Just surfing around, I had to remove because it had a name in the background I did not notice and it created some confusion. Did not even notice it when I posted it.

  7. GWEH Says:

    correction: EG = Eligio Cedeno (EC)

  8. trip Says:

    Great article, and great image… The author of said image, who happens to be my grad school friend Fish, probably wouldn’t mind if you read a bit about the project that this particular poster belonged to:

    What a coincidence…. how did you find this Miguel?


  9. GWEH Says:

    Everyone is guilty of sin down there and what the banks where doing was known and RFB was protected… Chavez even defended him in public. It’s anyone’s guess what happened but Diosdado could have been conspiring against Chavez for example.

  10. GWEH Says:

    Nothing is what it seems and the real reason(s) for RFB’s falling out are yet to be known. Chavez gave the order meaning RFB or his pals pissed Chavez off. I disagree with Miguel in that we will not know. We will know.

    Regarding EG, the real reason he is behind bars is because his partner slept with Chavez’s daughter and dumped her. That is the plain and simple truth.

  11. Kepler Says:

    Perhaps they found out he wanted to distance himself from the “revolution”, perhaps they want to use him to show how tough they are with corruption but will never go after Arné chacón who, if Miguel is right, should be over 1 billion dollars worth now

  12. Alek Boyd Says:

    Incredible. So is he going to share a cell with EG now? What’s with these bankers that voluntarily go and hand themselves in in El Helicoide? Fear or Rodriguez Chacin perhaps?

  13. HalfEmpty Says:

    I suspect much discussion is underway has to how and most importantly how much, will it take for these charges to go quietly away. The charges against the principal make it sound like a seriously regulated banking regime.

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