Receiver of Illarramendi Funds Sues A Former PDVSA Executive For Receving US$ 35.7 Million In Bribes

February 6, 2012
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I wrote a few posts last year about the Ponzi scheme set up by Francisco Illarramendi 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 others. The jist of this case, was that Illarramendi, a former PDVSA adviser and  consultant, set up some investment funds that  did not work out well and then were involved in a series of complex transactions to hide the losses, which included using PDVSA funds as investments, but also using PDVSA to make transactions. PDVSA pension funds/Savings Plans lost US$ 475 million or so, if my memory serves me right, in the process, but somehow nobody in Venezuela was responsible, as both The Board of PDVSA and the Venezuelan National Assembly found that there was no responsibility for the loss within the company, exonerating every one.

Only in Venezuela and the revolution can there be so much irresponsibility, US$ 475 million missing and it was nobody’s fault.

But today, the receiver for the MK Funds, the funds that were involved in the Ponzi scheme, the man who is in charge of trying to recover the investors money, brought suit in US Court in Connecticut against “Juan Montes, corporate manager of finance, investments and property insurance at PDVSA and its pension funds” for receiving bribes and other fraudulent transfers in the amount of…drum roll…US$ 35,744,561. Yeap, you read it right thirty five million dollars…in bribes…in only five transactions.

Only in Venezuela…

Just to make it clear and put it in black and white: The PDVSA funds lost almost half a billion dollars and just one PDVSA official, functionary, whatever, received bribes in the process for US$ 35.7 million dollars. Pocket change, no? No wonder investigators found nobody responsible.

Such are the ways of the Chavez revolution.

I will not go into all the details of the accusation, you can read the document above, it reads like a detective  story, but essentially, Illarramendi is accused of using fake emails and ID’s to have Montes help him in investing the money and setting up the transactions, so that the funds could make money and hide or try to hide the huge losses in his investment funds. Montes took the fifth amendment on all the charges. The case may go to a jury trial.

Other people are mentioned, but not accused, of helping Illarramendi funnel the bribes to Montes through their banks/companies/structures. It does not sound like the case or the story ends here. Stay tuned.

At this point, let me clarify something. In the above document, the receiver, not an expert on Venezuelan financial affairs, mentions the “permutas” made by IIlarramendi’s funds with PDVSA to make money to cover its losses. But these were not “permutas” in the traditional sense, from what I have been able to gather. In the now forbidden “permuta” market, you would swap a bolivar denominated  security for a dollar denominated security. But in the defunct “permuta” market, the difference between the “buy” and the “sell” prices was typically small Bs. 0.05 or Bs. 0.1 at most.

But what the receiver seems to be saying is that PDVSA sold dollar securities for Bolivars to Illarramendi’s funds at the official rate of exchange and Illarramendi’s funds resold those dollars at the parallel rate of exchange, essentially arbitraging the Government via PDVSA. The difference was as much as Bs. 4, 5 or even Bs. 6 per dollar depending on when these transactions took place. Just recall that when the Government banned the permuta market, the “official rate” was at Bs. 2.6 per dollar , while the parallel rate was near Bs. 8 per dollar.

And this is where these bribes apparently came from, from the huge difference between the two. Buy a million dollars with Bs. 2.6 million, sell the dollars for say, Bs. 8 per dollar, the difference (8-2.6)=Bs. 5.4 million was pure profit. 207% profit to be more precise.

And we are to believe nobody else knew about this at PDVSA? Only Montes knew? He could have access to “official dollars” with nobody knowing?

Yeah, sure…

14 Responses to “Receiver of Illarramendi Funds Sues A Former PDVSA Executive For Receving US$ 35.7 Million In Bribes”

  1. I find your comment very strange.

    What information?

    I do not mention Beracha in the post at all. This post is exclusively about the accusation against Mr. Montes. If Beracha is mentioned in the complaint, then you, or his lawyers, should write to the receiver, not to me. I really find your comment curious and weird, what is its purpose, you deny something that is not even in the post. Very strange. Are you being paid to go around blogs making denials, even if the posts are irrelevant to the case? Is that your real email? What is your relationship to Mr. Beracha? Why do you come here and make irrelevant comments?

  2. John Kelly Says:

    The information about Beacha is not true. You can find a lot of blogs explaining how Illaramendi has lied to everyone in the case, Beracha included, with the colaboration of UBS. El Universal published recently new data

  3. Kelly Hearn Says:

    I write for The Washington Times. I am writing a story on cooperative agreements between China and Venezuela in the oil sector. I would appreciate observations and insights from informed observers on this topic. I am also looking for any angles that the media has missed, as well as information on Chinese refineries that are capable producing Venezuela’s heavy crude. My email is Thank you, Kelly

  4. CharlesC Says:

    Breaking News! Last minute! This letter can change everything! I take back every bad thing I ever said about Pablo Perez.
    Mr. Perez delivers the perfect message. This IS a knockout of Chavez.
    It is perfect! This is what I have been looking for from the opposition!
    FInally Perez hits the biggest one -out of the park!!! Take a look!!!

  5. Omar Says:

    They sure know how to make a buck or two gotta love the gauche caviars.

  6. […] Devil's Excrement Receiver of Illarramendi Funds Sues A Former PDVSA Executive For Receving US$ 35.7 Million In BribesA Horrifying Scene From The Caracas I Don’t MissFebruary 4th. 1992: A Day Of Shame For […]

  7. Juan Cristóbal Nagel Says:

    Great post, Miguel.

  8. Isa Says:

    I wonder if Rudy will say: Hey! That happens in the US every day. Yeah! We know, that happened in the US! But the money was all Venezuelan.

  9. An Interested Observer Says:

    “Only in Venezuela and the revolution can there be so much irresponsibility, US$ 475 million missing and it was nobody’s fault.”

    BANDES has been blowing through billions, and no one is held responsible there. The excuse is “generating economic activity,” or something like that. Never mind that much of that money gets spent on one-and-done imports of consumption goods. The most important thing is it makes the voter think Hugo loves them. (Same with the folks who got the $35 million.)

  10. island canuck Says:

    The thing is this news will not make much of a splash here in Venezuela.

    It will be covered for 24 hours & then forgotten.

    The AN will refuse to believe it or investigate it & VTV will advise their devotees that this is a CIA plot to affect the election.

    Ha, ha. It just mas de mismo.

    • Roy Says:

      I was thinking the same thing even as I was reading it. For the Chavistas, it just won’t matter to them. They figure that this kind of corruption has always and will always exist, and better if it is their own that benefits. For the Opposition, this is just one more proof of the righteousness of there cause that will make headlines and then be be forgotten, because you just can’t stay outraged in the face of indifference.

  11. captainccs Says:

    One needs to go to first causes, in this case exchange controls. Like a good friend of mine used to day: “The only thing I cannot resist is temptation.” When you have rules of men instead of rules of law and an effective division of powers, you open the gates of Hell.

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