Otto Reich, a former high officer of the U.S. government and owner of a consulting firm called Otto Reich and Associates, ORA, has sued Derwick Associates, a contractor to the Venezuelan government for damages against his company. The legal action sheds considerable light on the nature of the perverted confabulation of government officers and well-to-do young members of Venezuelan high society to sack Venezuelan resources at the expense of the people. It shows how the Venezuelan problem is not only one of extreme corruption among the “socialist” and “revolutionary” members of government but also among members of traditional or very rich but immoral families. This explains why the Venezuelan corrupt government of Hugo Chavez/Nicolas Maduro is still in power. The people who would be the natural opponents of their perversion are their allies in the sacking of the nation!
We have extracted, for the information of the readers, the essential contents of the suit in order to understand how Reich explains how this perverted marriage has taken place. We don’t venture an opinion on the legal merits of the action nor I comment on Reisch's assertions.
However, I believe that the arguments included in the action coincide with the investigations of Cesar Batiz for Caracas daily newspaper “Ultimas Noticias” and of blogger Alek Boyd in http://alekboyd.blogspot.com/2013/07/infodio.html and should have been the object of investigation, long ago, by the Venezuelan authorities. But, what authorities, if they are all in the same boat of corruption?
1. The defendants
Defendants are U.S. residents who have amassed enormous fortunes through a
llicit scheme to secure energy-industry contracts in Venezuela for their U.S.-based companies,
Derwick Associates USA LLC and Derwick Associates Corporation ("Derwick Associates").
Known in the press as the "Chavez Kids," "Boliboys," and "the mafiosi of the Fifth Republic,"
Defendants Leopoldo Alejandro Betancourt Lopez ("Betancourt"), Pedro Jose Trebbau Lopez
("Trebbau"), and Francisco D' Agostino Casado ("D' Agostino) have profited wildly from the
corrupt and anti-democratic Chavez regime.
Derwick Associates' "business model" is simple. From the United States,
Defendants offer multi-million dollar kickbacks to public officials in Venezuela in exchange for
the award of energy-sector construction contracts. Once the contracts are secured for Derwick
Associates (and the money ultimately transferred into bank accounts in New York), Defendants
skim millions off the top, which they deposit in U.S. banks. Defendants then subcontract out the
actual work to be performed on site to other U.S.-based companies, including one based in
Missouri. Defendants run their illegal scheme from their homes and offices in New York
through their U.S.-based companies. The scheme has been a huge financial boon to Defendants
Betancourt, Trebbau, and D'Agostino, all of whom enjoy lifestyles of extreme wealth in the
United States….At all relevant times, Defendants Betancourt, Trebbau, and D'Agostino worked
ogether as each other's agents and partners, and were the owners and/or officers, directors, or
operators of Derwick Associates USA LLC and Derwick Associates Corporation
2. Why the suit?
In a series of telephone calls placed from New York in late 2012, Defendants and
their agents told officials of Banco Venezolano and others in the small Venezuelan émigré
community in the U.S., that Ambassador Reich was working for Derwick Associates. That, of
course, was blatantly false…..Nevertheless, the fraud worked. Once Banco Venezolano heard that its potential consultant was working for the people who were suing it (and who had profited from the
corrupted Chavez regime), Banco Venezolano pulled out of final negotiations with ORA.
3. Who is Derwick?
Derwick Associates holds itself out as being in the business of providing
engineering, procurement and construction services involving power plants to the government of
Venezuela. Yet, Derwick Associates itself lacks the technology and engineering wherewithal to
engage in such large scale, heavy duty industrial projects. By its own admission, Derwick
Associates relies heavily on several U.S.-based companies, including General Electric, Pratt &
Whitney, and ProEnergy Services, LLC to provide the materials and services needed to construct
he power plants. Derwick Associates has a website, which is displayed in English.
4. The background
Bribing public officials is illegal in Venezuela. Nevertheless, the country has
become a breeding ground for public corruption, especially when it comes to the awarding of
public contracts. As noted by the U.S. Department of State and others:
• The U.S. Department of State recognizes Venezuela as being corrupt and
of risk to companies seeking to do business there. As stated in its 2013
Investment Climate Statement on the country, the State Department warns
U.S. businesses that "Venezuela's regulatory system lacks transparency
and suffers from corruption," and notes that "Venezuela has not adopted
he OECD Convention on Combating Bribery of Foreign Public Officials
n International Business Transactions. Venezuela is ranked number 165 out
of 176 countries in the world.
5. The Crimes.
Defendants use Derwick Associates to secure inflated public contracts in
Venezuela, paying public officials large payments in exchange for awarding them contracts, and
unjustly enriching themselves in the process. In the Defamation Suit discussed above [against Banco Industrial de Venezuela] , Defendants Betancourt and Trebbau
admit that "[b]between 2009 and 2010, Derwick [Associates] submitted more than 25 bids on
EPC projects and received EPC contracts on twelve of those projects." The truth, of course, is far more complicated (and much less flattering to Defendants). As discussed in more detail below, from 2009 to 2010, Derwick Associates obtained at least a dozen energy-sector contracts valued at approximately $1 billion from agencies of the Venezuelan government, secured via illegal bribes, kickbacks and other unlawful activities, all in violation of United States law.
In mid-20l0, PDVSA awarded contracts to Derwick Associates for the construction of four power plants in Venezuela. The plants in question were to be located in the cities of Las Morochas, Barinas, EI Furrial, and El Morichal. These contracts were not the subject of a public bidding process…Upon securing
the inflated contracts, Derwick Associates would subcontract out the work to various U.S.-based
companies, including Missouri-based ProEnergy Services, LLC, who would do substantially all
of the actual construction. Derwick Associates, having done almost nothing beyond merely
procuring the contracts, would keep a substantial percentage of the contract proceeds for itself….in November, 2012, while in the United States, D'Agostino told a friend
that "of course" Derwick Associates paid kickbacks to secure its energy contracts; he noted that
in Venezuela, "you always have to pay" what D'Agostino called "consulting fees," in order to
secure the contracts. Of note, the U.S. Department of Justice has declared that payments to
foreign officials to influence their decisions violate the Foreign Corrupt Practices Act even if
they are accounted for as "consulting fees." Although the exact details of the PDVSA kickback scheme (including the amount of the kickback and the dates it was offered and paid) remain shrouded in secrecy given its illegality, it is believed that through an individual named Francisco Convit-Guruceaga ("ConvitGuruceaga") (who is Defendant Betancourt's first cousin, and is also a part owner of Derwick
Associates), Defendants Betancourt, Trebbau, and D' Agostino contacted Nervis Villalobos
("Villalobos"), a former Vice Minister of Energy, about obtaining the contracts to build the
plants. Upon information and belief, Convit-Guruceaga, pursuant to Defendants'
instructions, told Villalobos to extend an offer of a substantial payment on their behalf to Rafael
Ramirez ("Ramirez"), President of PDVSA.. Upon information and belief, Villalobos did so, and Ramirez accepted the offer.
6. In bad company
At all relevant times, Defendants' personal banker at J.P. Morgan was Eduardo
Travieso ("Travieso"), a Vice President in the Private Banking Division who was located in New
York, New York. On March 21,2013, according to a required U.S. regulatory filing with
FINRA, Travieso separated from J.P. Morgan following allegations that Travieso had potentially
committed violations of investment-related statutes, fraud, or failure to supervise in connection
with investment-related statutes, arising from certain undisclosed customer interactions by
Travieso. In the filing, J.P. Morgan has stated publicly that "Mr. Travieso acted in a manner that
is inconsistent with the Firm's policies and procedures," and had "fallen short of the standards"
of financial industry employees.
7. The second corrupt government agency that contracted with Derwick
CORPOELEC stands for Corporacion Electrica de Venezuela. CORPOELEC is
the successor entity to Electricidad de Caracas. It is the state-owned entity responsible for
supplying power to the Venezuelan capital of Caracas. It was created in 2007 via the merger of a
number of Venezuelan state-owned power companies.
Like the PDVSA, CORPOELEC has been widely recognized as a target for
exploitation by corrupt public officials. For instance, The Economist observed that "[tentative
efforts to tame corruption [in Venezuela's energy sector] have  been undermined ... On [Hugo
Chavez's] watch, [Chavez's brother] had led the electricity ministry as well as Corpoelec, the
graft-riddled state-run electricity giant" CORPOELEC's "graft-riddled" nature asserted itself
in 2009 with its solicitation of construction contracts….Upon information and belief, Defendants Betancourt, Trebbau, and D' Agostino set out to offer millions of dollars in kickbacks to CORPOELEC officials in exchange for awarding the contracts to Derwick Associates. Upon securing the inflated contracts, Derwick Associates would then subcontract out the work to another U.S. company, Missouri-based ProEnergy Services, LLC, which would do substantially all of the actual work…. Derwick Associates, having done almost nothing, would keep a substantial percentage of the contract
proceeds for itself… Defendants would later brag to their friends and acquaintances in the United
States that Derwick Associates secured these contracts by giving kickbacks to the right people.
8. The third corrupt government agency that contracted with Derwick
The Corporacion Venezolana de Guayana, CVG is a state-owned company that controls energy production in the Guayana region in southeast Venezuela. In late 2009, CVG awarded two contracts to Derwick Associates for the construction of energy plants in Puerto Ordaz, Venezuela named Sidor Planta A and Sidor PlantaB. The contracts were not the subject of a public bidding process.. Upon information and belief, Defendants Betancourt, Trebbau, and D'Agostino
set out to offer millions of dollars in kickbacks to CVG officials in exchange for awarding the
contracts to Derwick Associates. Upon securing the inflated contracts, Derwick Associates
would then subcontract out the work to another U.S. company, Missouri-based ProEnergy
Services, who would do substantially all of the actual work….it is
believed that through an intermediary [named] Convit-Guruceaga, Defendants
Betancourt, Trebbau, and D'Agostino contacted Rodolfo Sanz ("Sanz"), the Venezuelan
Minister of Basic Industries and Mining…. Upon information and belief, Defendants Betancourt, Trebbau, and D'Agostino together authorized Convit-Guruceaga to offer Sanz a substantial payment in order to obtain the contracts. Convit-Guruceaga did so. Betancourt later personally negotiated with Sanz over the terms of the payment. Upon information and belief, Sanz accepted…Upon information and belief, the monies that Derwick Associates received from the contracts were wired to accounts at J.P. Morgan and Davos Financial Group in New York, and were used, in tum, to pay millions of dollars in kickbacks to Sanz
9. Derwick in the eye of the U.S. authorities
The incredible manner in which Derwick Associates secured more than a billion
dollars in complex energy construction contracts in such a short time has drawn scrutiny from
the United States government and numerous media sources.
10. The defamation suit against Banco Venezolano de Credito collapsed.
[In this trial] through discovery and trial, each of Betancourt, Trebbau and D'Agostino
(through Derwick Associates) would have had the opportunity to pursue a legal process that,
ostensibly, could have cleared their sullied reputations. Rather than pursue the discovery
process and prove up their claims, each of Betancourt, Trebbau and D'Agostino opted to settle
he case. Indeed, Defendants agreed to dismiss their lawsuit in April 2013 - mere months after it
was commenced - and before any material discovery could take place. It has been reported that Betancourt, Trebbau, and Derwick Associates agreed to settle their $300 million defamation suit without having received payment of even a single dollar from Banco Venezuela or anyone else.