PDVSA, its Pension Funds and the SEC freezing a US Investment Fund

March 1, 2011

This post dedicated to Setty. My friend, if this stuff was fiction, nobody would believe it…

I will not bore you with the details, Setty has done an outstanding job in covering (and uncovering!) them, but basically a fund in the US, a very capitalistic hedge-like fund, is halted from operations by the SEC. It turns out that 90% of the money in the fund is money from PDVSA’s employee pensions funds. Then, it turns out that the fund was involved in illegal foreign exchange operations. But with whose money?  PDVSA or the PDVSA pension funds? And when the investment funds are stopped from functioning, two private companies in which the funds invested (the very reason for the SEC intervening) need money that was coming to them, but the money is trapped in the funds.

Who comes to the rescue?

None other than PDVSA, who is willing to “help” on demand, just like that

So, what gives?

The funds are managed by a Venezuelan, Francisco Illaramendi, who acted as an adviser to PDVSA in the past. But these days, he seems to be a vehicle for PDVSA acting. Except that initially PDVSA was hiding behind its pension funds. Or so it seems.

This leads me to ask a simple question: Who was PDVSA acting for, the funds or PDVSA? Who made money from the deals, PDVSA or its employee funds? Why did the funds invest in a company developing small nuclear reactors? Was Illaramendi simply acting on PDVSA’s orders? How was he being paid? (Other than getting US$ 482 million into his funds)

The funny (not funny ha, ha, just weird) thing is that Minister Ramirez said last week in the National Assembly that PDVSA had nothing to do with the managing of the funds. Union workers and pensioners say they have seen no information on how the funds are managed for years, ever since PDVSA’s Treasury Depratment took over its management.

And Ramirez looked very uncomfortable answering these questions. And he should. What the funds/or PDVSA/or Illaramendi were doing was simply illegal in Venezuela and the details of the flow of money could be even more illegal.

But nobody knows. Nobody answers, nobody says anything. Nobody questions it. The Comptroller is nowhere to be seen. Ditto the Prosecutor.

But this memo from the fund’s lawyer shown by Setty is simply priceless, almost as good as a suitcase with $800,000 in cash, opened at customs in a Buenos Aires airport.

It reads:

“As MKG has indicated, in order for STLF (Short Term Liquidity Fund) to conduct Venezuelan currency transactions in the permuta market, it must furnish its own Bolivars…”

Except the permuta market has been illegal since May, so what the hell is this lawyer talking about?

but then, this same memo, dated Jan. 04th. of this year says:

“MKG has stated that the Bolivar providers need to be paid, in no small part to assure that they will be willing participants to future transactions requiring Bolivars”

This says, we have been involved in transactions which are illegal in Venezuela and need to pay our counterparties in order to keep participating in them.

And PDVSA was right in the middle of things. And this is all managed from PDVSA’s Treasury Department and PDVSA’s pension fund contributed 90% of the money to the investment fund.

Not clear enough for you? How about:

“STLF purchased Bolivars from non-US participants at an agreed exchange rate, to be paid at this point in the transactions”

Jeez, last year in May, the Chavez Government shut down 46 brokers and jailed people who were doing legal transactions and banned currency exchange transactions and these guys are doing them now, with PDVSA money to boot?

As far as I know, the only country that trades and accepts Bolivars is Venezuela, where any of these transactions is illegal. Where do these Bolivars flow? In Belaruss? Or Zimbawe? Or is it Lybia? I bet it is more likely to be in Caracas.

And PDVSA is in the middle of all this?

No wonder Ramirez and Giordani talked openly about lowering the parallel market! They are apparently running it!

The revolution never ceases to amaze me!

(P.S. And don’t forget, these same funds invested US$ 1.15 billion dollars in the PDVSA 2017 bond earlier this year. Add it up: US$ 1.15 billion plus 482 billion is 1.632 billion. How much money do these funds have? Is this the revolutionary idea of “diversification”?)

26 Responses to “PDVSA, its Pension Funds and the SEC freezing a US Investment Fund”

  1. […] Illaramendi and his MK funds, which involved money invested from PDVSA’s pension plans (One, Two, Three). Our friend Setty has also devoted a few posts to it, here is one, there are many […]

  2. […] Lina Ron, revolutionary icon, dead at 51Ten Questions to the Board of the Venezuelan Central BankPDVSA, its Pension Funds and the SEC freezing a US Investment FundLonely at the top for Hugo ChavezGriping About the Students Hunger StrikeDespite the oil windfall […]

  3. geronl Says:

    Che also hated decadent rock music but that doesn’t stop idiot rockers from wearing his ugly face on their shirt.

  4. Kepler Says:

    Life is not fair. THAT lives and Bach had to die.

  5. Juan Says:

    Hola Miguel Octavio, a pesar de que tengo anhos leyendo tu blog esta es la primera vez que te escribo … y te estoy escribiendo para pedirte algo… A travez de los anhos he visto varias presentaciones en Power Point en tu site, o a la cual has hecho links. Me encuentro haciendo un trabajo acerca de la situacion de Venezuela. Tendras a la mano, alguna de estas presentaciones? Ingles o Espanhol funcionan, ideal en Ingles. Saludos Juan

  6. jsb Says:

    And here’s his Che shirt. I guess he hasn’t heard that Che shut down independent trade unions like his…

  7. Kepler Says:

    Jsb, did you see what the fat German’s T-shirt says? Ostalgie.
    This is the word people have in Germany for those nostalgic of Ostdeutschland, Eastern Germany.

    The guy is just a sad case. I’m sorry for him, but it would be nice if he does not troll here anymore and he can only troll.

  8. BB Says:

    By the way, you can get out of Venezuela, but Venezuela won’t get out of you. It happened to me after decades of being away. I’ve been back some decades now and hope I don’t have to leave again. I’ll be praying that many of those who were forced to leave for one reason or another, will be able to return to help rebuild this country from the ashes after this regime is gone and merely the remnants of a very bad nightmare.

  9. BB Says:

    I had to chuckle at Roy’s statement (especially the creepy part). The character is cuckoo — obviously nothing of import to say:

    “He has gone beyond merely insulting and crossed the threshold into creepy. Miguel, I don’t think anyone would argue against erasing his posts. This kind of juvenile behavior detracts from the seriousness of your posts.”

    I’m sooo glad you are still posting, Miguel! Thanks — making our day.

  10. jsb Says:

    His name is Jens-Torsten Bohlke. He likes his beer so he can’t be all that bad… 🙂

  11. Mick Says:

    Truly, Roy is correct. The common folk just don’t get it. And, the bigger the numbers the more confused they become. They need to be told in everyday terms (e.g. how much a case of beer will cost next year, how many people will be murdered in their neighborhood in the next month.)

  12. Roy Says:

    Re: Jens-Torsten:

    He has gone beyond merely insulting and crossed the threshold into creepy. Miguel, I don’t think anyone would argue against erasing his posts. This kind of juvenile behavior detracts from the seriousness of your posts.

    Moving on…

    It occurs to me that one of the problems of explaining the cost of this sort of corruption to the average Venezuelan is that it is so massive and so complicated that it defies comprehension. What if each case of theft via corruption, or loss due to incompetence were translated into Cases of Polar Beer per Capita? That way, Jose Perez, the Carnicero in San Constanifacio de Cochino Frito can have something he can grasp.

  13. Roberto N Says:

    Jens-Torsten Says:
    March 2, 2011 at 5:46 am
    “Smart questions? Heee, old geezer alias wrinkled turtle got you all wrapped up again?”

    It is better if you zip up your pants and look at the keyboard while typing, Jens.

  14. Eduardo Says:

    In Peru, 1980, the military left the government to an elected president.

    One cartoon around this time showed the military saying “We ran oput of money, let’s leave the power to the civilians”.

    Chavez folks wouldn’t even think to leave power until they “spend” all the money.

  15. gd Says:

    Miguel this reminds me of a bumper sticker I saw once: “Don’t steal, the government hates competition”. So if PDVSA does it, its ok!

  16. tleon Says:

    Appears that Chevez and the gang are not only using PDVSA as their personal piggy bank but also the PDVSA’s employee pensions funds.

    Isn’t life great.

  17. Kepler Says:

    Ah…and there are now just a fraction of what we use to see 4 years ago.
    Most PSFs have abandoned Hugo between 2006 and 2008.
    The real fight is in Venezuela, specially in those municipios where abstention is 10% higher than elsewhere.

  18. Kepler Says:

    Not really. They are just very noisy. There are a couple of them at the EU, as all of them have to meet in Brussels,
    Jens is a German who works just Northwest of Brussels at Zaventem at a call centre, getting calls for Sony. The party he is in got 1.5% of national votes. A couple of other wallies support Chávez in the French-speaking Socialist Party.
    I think there are more of them in Paris and London.

  19. jsb Says:

    What is the significance of Jens-Torsten’s references to “turtle”? Is it just name-calling or is there some meaning behind it?

    PSFs abound in Brussels.

  20. NicaCat Says:

    Oh, and by the way, Jens-Torsten, if you insist on posting here, could you at least learn how to spell? Of course, that won’t help your cause at all, but at least others could get an idea of the pure tripe and shite that you put out.

  21. A_Antonio Says:

    100% agree with Kepler, Jens’ comments is not worth to be read.

  22. Kepler Says:

    Jens-Torsten, how is that work at your call centre in Zaventem going? Why don’t you stop working there and go over to Venezuela to live? I assure you Tocuyito or El Valle are more fun than Leuven.
    Stop trolling, clown. I’m sorry you have to work at that call centre, I wish you the best, but just stop trolling.

  23. Jens-Torsten Says:

    And can you see how nice they clap?
    Thats how you can distinguish a real revolutioner from the fake ones. And of cource old, wrinkled turtles and geezers.
    They copy the style of the great leader of the 20th centuary. Papa Josef.

  24. Jens-Torsten Says:

    Smart questions? Heee, old geezer alias wrinkled turtle got you all wrapped up again?
    As usual he is taking some numbers, some facts and than he twists them around and around that the old farts can´t follow up any more and puts them here. As the almighty truth.
    And you all chear him up.
    Tomorrow I shall give you a list of different links to wake you up and make you truly free.

    Turtle, how it comes that you have so much spare time at hand?
    Should write some fary tales for children or look for a very young mistress. That would keep your mind and body busy.

  25. sapitosetty Says:

    Thanks very much for the link and for asking smart questions. The story is likely to keep unfolding. As far as the amount of money in the funds, you have that information in your files. The short answer is, “nowhere near enough.” The actuarial assumption of average 8% annual returns may be the relatively innocent explanation for the funds’ venture into the black market.

  26. Eduardo V Says:

    The revolution never ceases to amaze you?
    How about some government institution selling 200 million of Global 22 at 89% in bsf?

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