THE NATIONAL
ASSEMBLY OF VENEZUELA: THE CASE AGAINST RAFAEL RAMÍREZ AND OTHER EMPLOYEES OF PETROLEOS
DE VENEZUELA
This is a digest of a report generated by the Comptrolling Committee of the Venezuelan National Assembly, in which some of the negligence and irregular actions of Rafael Ramirez and his accomplices in Petroleos de Venezuela are analyzed. It is written for the benefit of english speaking individuals and organizations that would like to know its contents and conclusions. The report is far from complete but it serves as an introduction to the world of corruption in which the Venezuelan oil company has lived since Rafael ramirez took over its presidency.
I.
INTRODUCTION
Rafael Ramirez
was president of Petroleos de Venezuela and, simultaneously, Minister of Energy
and Hydrocarbons of Venezuela, from 2004 to 2014. During this period he was
responsible for the irregular management of the company. Some of these
irregularities, which amount to some U.S. $11 billion, are detailed in a report
prepared by the Comptrolling Committee of the Venezuelan National Assembly. As
a result of this investigation the report concludes that Rafael Ramirez was the
main responsible for the mismanagement of the amounts mentioned above and was charged with Political Responsibility,
a figure that carries sanctions, according Article 222 of the Venezuelan
Constitution. In parallel, the current president of the company, Eulogio Del Pino,
and the Member of the Board, Asdrubal Chavez, were both given a Voto de Censura, a Vote of Censure, for
their manifest negligence in the contracting of Chinese Drilling Rigs for the
amount of US.$ 43 million and for the violation
of the laws and regulations regarding this contract. Asdrubal Chavez was also assigned political
responsibility for this contracting. Javier Alvarado Ochoa, a former president
of Bariven, an affiliate company of Petroleos de Venezuela in charge of acquisitions,
was also assigned political responsibility for his participation in
administrative irregularities amounting to U.S. $ 56 million.
The report by
the National Assembly Committee points out some of the main cases of corruption
which came to the attention of the Committee. These findings can be compared in
significance to the rather minor transgressions by Al Capone of the Income tax
Law that allowed the U.S. government to prosecute him. This is so because the
extent of the mismanagement of Petroleos de Venezuela, the size of the
administrative and political corruption that characterized its history during
the years mentioned above and in the years hence, vastly surpasses the specific
findings of this report by the National Assembly.
II.
THE
CASES INVESTIGATED BY THE COMMITTEE
The cases investigated
by the Committee were:
The Pension
Fund of the Employees; irregular deposits made by PDVSA employees in the bank
of Andorra; irregular financial relationship with the Portugal Bank Spirito
Santo; mismanagement of funds related to the maintenance of the Amuay refinery
and several cases of irregular contracting
by the company. The cases are summarized in the report as follows:
Employee Fund:
A Ponzi scheme that generated a loss of some $20 million to the fund, money unduly
appropriated by PDVSA Financial Adviser Francisco Illaramendi and by some PDVSA
employees. Mr. Illaramendi is now in prison in the U.S.A.
Explosion at
the Amuay Refinery. A 2012 explosion, which took many lives and
caused significant financial losses to the nation, due to poor maintenance and
to operational negligence by the company.
Money laundering
in Andorra. Deposits made in the Bank of
Andorra, the product of kickbacks paid to PDVSA employees.
Bank Spirito Santo,
Portugal. Irregular deposits amounting
to some 800 million Euros made to the Bank by PDVSA and other government
agencies during a period in which the bank was already bankrupt.
Several
contracts, using the company as a vehicle
for kickbacks, extortion and bribes involving PDVSA contractors and members of
the company
III. THE TEXT OF THE REPORT
The report has
an extensive discussion of the legal background that supports its
investigation. It starts with the Article 223 of the Constitution that allows
the national Assembly to conduct any investigation that are considered to be
required and demands full cooperation with these investigations from public
employees. In this connection it is important to know that such cooperation
from public employees never materialized. No member of the government bureaucracy
ever complied with the requests for appearance. This bureaucracy is guilty of
violating multiple laws, decrees, regulations and Constitutional provisions that
demanded their cooperation.
III A. DOCUMENTS
ANALYZED BY THE COMMITTEE
The report
lists a long series of documents which were analyzed by the members of the
Committee in their work. They included contracts for services and acquisitions
of equipment, letters from companies and countries doing work with PDVSA, decisions
on no-bid contracts, findings about the criminal activities of Bank of Andorra,
Documents on the illegal activities of the Banco de Madrid, Loan contracts
subscribed by PDVSA, Recordings of conversations related to illegal deposits in
the Bank of Andorra, copies of the legal actions introduced against Derwick
Associates, Equipment requisitions originated in Bariven PDVSA’s affiliate
company, contracts between Energy Parts Solution and Derwick Associates, Legal
records of Trial of Francisco Illaramendi, diverse documents related to the
Employee Pension Fund, Annual reports of the company Aban Offshore, India,
Registry of Petro Marine in Singapore, documents related to the case of Roberto
Rincon and Abraham Shiera, letters from PDVCaribe and to PDVCaribe, Bills from
diverse Chinese companies and other diverse documents from Petroleos de
Venezuela. The list is impressive and illustrates the extent of the investigation.
Still, not every document available to the Committee is listed here. I did not
see listed all the material I personally sent to the Committee on the case of
the Aban Pearl barge. I presume that there is much more in their possession
than the list they published.
IIIB.
ACTIVITIES OF THE COMMITTEE
In this
section the report enumerates the multiple activities the Committee undertook
in the course of its investigation, including requests to government agencies
for information related to the cases being investigated and letters to some
40-50 PDVSA current and former managers and to PDVSA contractors asking them to appear before the Committee to
be questioned. No details on the answers to the requests for information appear
in the report but, in the case of the persons requested to make an appearance
before the Committee, the report says that none of them could be found in their
known domiciles to accept the invitation.
IV.
ANALYSIS OF THE FINDINGS
1. Designation of Rafael Ramirez
as President of PDVSA was irregular
When
Rafael Ramirez was named president of PDVSA this designation violated the
bylaws of Petroleos de Venezuela, which stated, Clause 29, that “No Minister
can occupy a position in the Board of Director of the company”. This regulation
was modified after the designation took place. In good practice the positions
of Minister and president of a company subject to ministry’s supervision should
not be the same person.
2. Irregularities detected by
the General Comptroller during the period 2006-2013
The
Committee studied the findings of the General Comptroller on the activities of
Petroleos de Venezuela during the period 2006-2013 and listed these findings by
year. Some of these findings included numerous cases of no-bid contracts; gross
overpricing; contracts without dates; very low percentages of budget completion
in sectors of the company; numerous violations of company regulations and
bidding procedures. These findings are illustrative of a careless
administration. I must emphasize that these revelations by an organism under
the control of the Venezuelan regime only relate to minor transgressions, never
to major criminal activity within the company since this would have been
politically impossible to reveal. Still, when we add the amounts mentioned by
the Comptroller during these years we arrive at a figure in the hundreds of
millions of dollars. This in itself is highly indicative of the real extent of
corruption in the company during these years.
3. The Acquisition of Chinese
Drilling Rigs
In
this case a contract by PDVSA with a company called CONSTRUEMA was found to
have significant overpricing. The proposal by this company was the least
attractive. The amount of damage to the company was of the order of $42 million. The responsibility for this contract
entirely belongs to the Board of PDVSA, namely Rafael Ramirez, Eulogio del Pino,
Asdrubal Chavez, Alejandro Granado, Eudomario Carruyo, Dester Rodriguez, Ivan
Orellana, Bernard Mommer and Carlos Martinez.
4. Pension Fund of the
Employees
This
fund was managed with negligence by PDVSA, to the point of letting it be
handled by a high risk company called Michael Kenwood Group LLC. This company
did not qualify to be selected by PDVSA to manage the fund but the manager of
the fund had been a PDVSA adviser and he had accomplices inside the company.
Board member Eudomario Carruyo was the main responsible for this action, which
involved a substantial loss of millions of dollars to the Venezuelan nation.
5. Money laundering in the
Bank of Andorra
A
group of former employees and contractors of PDVSA, including Nervis
Villalobos, Diego Salazar, Norman Puerta y Javier Alvarado Ochoa, are listed in
the report as being involved in a money
laundering operation of the order of $4.2 billion, according to the report.
Salazar, who was the contractor for PDVSA insurance policies, is a cousin of
Rafael Ramirez and is specifically
mentioned by the report as in “in between” in matters related to kickbacks.
6. Bribing of PDVSA personnel
by contractors
This
case applies to the owner of a company called TRADEQUIP, Roberto Rincon who,
together with his partner Abraham Shiera, established a connection with the
Houston office of Bariven, an affiliate of PDVSA in charge of acquisitions, to
obtain contracts through bribes to
managers of the company. Between 2008 and 2015 this company obtained about 15
contracts worth billions of dollars dispensing illegal payments to the PDVSA
employees in the millions of dollars. The report mentions the amount of one
billion dollars as the loss to the Nation in connection with these criminal transactions.
Both Rincon and his partner are awaiting judgement by the U.S. justice.
7. The case of the barge Aban
Pearl
This
offshore barge was rented by PDVSA in 2008 to a company called Petro Marine, registered
in Singapore. The contract called for a 5 year rental for the amount of $ 1.4
billion, this is, some $730,000 per day. Petro Marine, owned by Enoch Martinez
and Hidalgo Socorro, paid the owner of the barge some $286000 per day, causing
a loss to the Nation of some $257 million up to the moment the barge sank (NOTE
by Gustavo: the text of the report seems to have an error in the paragraph
which relates to the amount of loss to the Nation). Inexplicably the report does
not mention the details related to Petro Marine and its owners, details which I
supplied to the Committee during the course of their investigation, including
the possible links of the Petro Marine owners with Directors of PDVSA.
8. Bank Spirito Santo,
Portugal
In
this case there was a loss to the Nation for an amount estimated in some 800
million Euros. PDVSA was one of the main investors in this bank, including the
period in which the bank was already in serious financial problems.
9. The case of “Liaoning
Northern Steel Pipes”
This
case, which I did not know of, has to do with a contract for $56 million in
steel pipe with the company Liaoning Northern Steel Pipes” through a group of
Venezuelan intermediaries, with an overprice of some $12 million. A letter sent
to the Committee by one of the members of the Venezuelan group, Mr. Joseph
Benoudiz, reveals that the irregularities were bigger than previously assumed.
The president of Bariven at the time, Mr. Javier Alvarado Ochoa, acted with
negligence, failing to cancel the contract
10.
The
case of corruption in PDVAL and Bariven, affiliates of Petroleos de Venezuela
These
two companies imported food during 2007 and 2008 following an order from the Venezuelan
regime. The amount of imports was of the order of $2. 2 billion but only 25% of
the food paid for reached Venezuela, while only 14% of the imports were
effectively received by PDVAL. Contracts were given mostly to intermediaries. More
than $100 million were paid in advance, without guarantees of any kind. The
amount of money lost to the Nation was of the order of $1.9 billion, the
responsibility of Rafael Ramirez and his Board
11.
The
case of the National Housing Program managed by the Simon Bolivar Fund and
financed by PDVSA
Although
the amount PDVSA reports to have contributed to this Fund is $4 billion the
Fund reports to have received $4.9 billion (?), a difference of $900 million
that remains unexplained. Much remains to be investigated about this case. This
entry in the report contains a significant mathematical error, since the
difference between $4.9 and $4.01 billion is not $787 million, as printed in
the report. I would not take this Case into account,
unless the Committee clarifies it.
12.
The
auditors of PDVSA appeared before the Committee
Although
Rafael Ramirez and Eulogio Del Pino were asked to appear before the Committee,
together with the representative of KPMG, the auditors of PDVSA, they failed to
do so. Only Mr. Mauro Velasquez, representative of KPMG, did attend the
request. The auditor reported that their auditing is done on the Consolidated Statements
supplied to them by PDVSA. They are not oriented towards the detection of
financial fraud and simply report to the Audit Committee of PDVSA any
irregularity they find. PDVSA, therefore, is fully informed of these
irregularities but they do not conduct investigations of their own.
Surprisingly
the report contains no mention of the contracting with Derwick Associates,
although there is abundant information about the gross overpricing and the
irregular nature of the contracts signed between PDVSA and that company.
MY CONCLUSION
The report
deserves an A for effort but a C for substance. It is not very well written and
is lacking in details that the Committee should have in their possession. It is
far from being exhaustive, since many well documented cases of corruption were
not mentioned. The cases of Derwick Associates, Wilmer Ruperti, the bank deposits
of Rafael Ramirez in Florida, the corruption in the programs of the Orinoco
region, as reported by members of the government themselves, the cases of
corruption denounced by Chavista deputy Luis Tascón, all of these cases and
more, have been published in the Venezuelan and in the international press. In
spite of its shortcomings the report opens a window on the substantial levels
of administrative waste and corruption in the PDVSA managed by Rafael Ramirez,
Eulogio Del Pino and their companions in the boards of the company. The lack of
attendance of the members of the government to the Committee of the National
Assembly is enough indication that this group is outside the Venezuelan laws.
I am glad I could contribute to this report
and remain totally willing to contribute further, if so requested by the National
Assembly. It is my intention to continue working to denounce corruption in the
Venezuelan state oil company and to contribute all I can, to put the guilty
managers and contractors of PDVSA in prison, where they belong.
