Hugo Chavez using proxies to prosecute critics in US Courts

London 19.11.2011 - Imagine a rock solid, private bank, led by a reputed and prudent banker. While much of our world is yet to come out of a financial crisis caused by irresponsible bankers, who were ultimately bailed out at huge cost to taxpayers, there's this guy in Venezuela, trying to avoid a government-led raid on his bank's funds. His name is Oscar Garcia Mendoza, the bank he directs Banco Venezolano de Crédito (BVC), and the assault he's trying to fend unprecedented. Since 2011, Venezuela's Central Bank has been lowering reserves requirement (or liquidity ratio). The aim is to free cash held with the Central Bank, so that private banks can in turn purchase government bonds issued to fund housing projects (Misión Vivienda). In four separate issues since 2011, the Chavez regime has raised in excess of $9 billion from Venezuela's private banks. So far, so capitalist, right? Not quite, financial institutions that refuse to risk it with Chavez bonds are effectively penalised by an unexplainable increase in liquidity ratio.

Garcia Mendoza leads the only “non-compliant” bank. He is challenging the punitive measure in Venezuela's kangaroo courts. So what's Chavez to do, with the oddity of a responsible banker, trying to protect his clients' money? He will probably be made an example, just like RCTV. Locally, there's not a single chance that chavista judges will rule in his favor. But how about assets and funds held abroad? Enter Derwick Associates.

Derwick Associates shot to fame in August 2011, when Cesar Batiz, an investigative journalist working at Ultimas Noticias (Venezuela's largest newspaper), exposed Derwick's inexperience and lack of track record, in relation to 12 public contracts for procurement and installation of power plants awarded by the Chavez regime in a 14-month period. In September 2011, Batiz published a second article, where he exposed overpricing in the contracts. Two days later, the editor of Ultimas Noticias, Eliazar Diaz Rangel, formally requested that the Venezuela's Comptroller's Office launch an investigation into the affair. The story was to take another twist though: a telecom impresario tried to bribe Batiz, offering hush money and shares of CodigoVenezuela.com, a site critical of the Chavez administration. Batiz then introduced his own FOIA-like request with the Supreme Court, after failing to get any information about contracts from chavista officials. Predictably, judges quickly dismissed Batiz’s request.

So why would an obscure, fly-by-night company have the temerity to sue Venezuela's most solid bank and its CEO? In Florida? How come none of the other parties that have either republished, or expanded on Batiz's original investigation, been sued by Derwick anywhere? The corruption trail goes cold once it reaches the Chavez government. Other investigations related to previous corruption scandals led nowhere. Prior to the Derwick caper, its founder, Alejandro Betancourt Lopez, was the star in a different scandal involving a “lost” $500 million wire. His fax number was used to issue the instructions to wire $500 million worth of payments to a numbered-account in Gazprom Bank Lebanon controlled by Rodolfo Sanz, former head of Corporacion Venezolana de Guayana. Betancourt’s Gazprom connections already speak volumes about the man.

The most plausible explanation, in my opinion, is that Team Chavez is orchestrating the whole thing, for financial and political reasons. The first clue, is the decision by Venezuela's Central Bank to target “non-compliant” banks, read Garcia Mendoza's, by imposing a 6-point liquidity ratio increase, forcing a huge spike in cash held by the Central Bank. Refusal to purchase Mision Vivienda-bonds could, potentially, end up costing Garcia Mendoza's bank hundreds of millions in loss revenue from funds that could have otherwise been used for more sound investments with higher returns. Purchase of bonds is equally risky, for what official institution will guarantee funds and returns if the regime decides to default, or renege his debt with Venezuelan banks? A no-win situation.

The second clue to this working hypothesis are statements from Jose Vicente Rangel, former VP of Venezuela, trusted advisor and confidant of the caudillo, taking Derwick's accusations against the banker at face value, repeating it almost verbatim. It would appear that chavismo has already taken sides in this dispute. Rangel, however, went further, and announced that Derwick would also sue Garcia Mendoza and Venezolano de Crédito in Venezuela. How can he be privy to such information, when not even those accused by Derwick in the Florida lawsuit are aware of legal actions against them in Venezuela? Rangel is a Chavez enforcer and Venezuelans know that Rangel’s TV programs are a taste of what the government is thinking and where the sabres are rattling.

Garcia Mendoza could well find himself in the near future with a besieged bank on its way to expropriation. The $300 million defamation suit is likely to fail, inasmuch as truth is a defense to libel, and Team Derwick has a lot to lose in any discovery process -their connections to Davos International Bank may surface. With their lawsuit, Derwick has unnecessarily alerted the American authorities that they want high profile attention. American authorities would do well investigating Derwick Associates sudden wealth and use of US stream of commerce instead. The lawsuit has opened a wide door for that. Special attention should also be paid to Chavez attempts at using the US judiciary to: a) corner his critics, and b) misappropriate millions of dollars through proxies. If the Venezuelan State is afflicted by a housing crisis, which it is, surely the solution, after nearly a decade of record oil prices, ought not be to raid private banks. The whole thing is a disgusting travesty, monetary mechanisms used in perverse ways to punish, an abuse of courts' roles. Beyond probable violations to recently revised Foreign Corrupt Practices Act, Derwick was incorporated in Florida after all and has business relations with American companies (ProEnergy Services and FTI Consulting for instance), it seems unthinkable that individuals with such disreputable credentials can take advantage of the US legal system to advance their fraudulent agendas under the guise of defending their reputations.

Cesar Batiz collaborated with this article.

No comments: