Derwick Associates takes the show to Mexico

In Venezuela, they insisted they were a construction company. Now, they just “intervene” in infrastructure projects, whatever that means. (My slightly edited Google translation below).

Published on Feb 4, 2015

Ciudad Obregón, Sonora 03 February 2015

Solar farm installation ensures electricity savings in the municipality

With the installation of the first “Cajeme 10M Solar” panel farm in Ciudad Obregón, Mayor Rogelio Diaz Brown Ramsburgh placed the Municipality at the forefront of renewable energy policies nationwide.

That is by establishing a project in which a municipality and a drinking water agency are supplied by solar, starting one of the most momentous development schemes for the region.

“This farm will produce about 70 percent of the energy consumed by the Municipal Government, whether in public lighting, buildings, courts, public spaces, among others,” he said during his speech.

For two years he sought to attract this photovoltaic generation park…

Like other success stories of this administration, with this project, established molds are broken in the quest to become a self-sustaining municipality, he said.

In addition to saving 20 percent in energy expenditure by City Hall, he said, clean energy will be produced for a period of 20 years at a cost below that of the Federal Electricity Commission.

To realize this plan, he stressed, the investment of 25 million dollars from the company Zigor Mexico and Latam, and the intervention of the Derwick company have been necessary.

The event was attended by the federal manager Faustino Felix Chavez, the local deputy Rossana Coboj García; the Town Clerk, Antonio Alvidrez Labrado; director of Zigor Mexico and LATAM, Alfredo Garcia de Jalon; and Derwick vice president, Pedro Trebbau López, among other officials.

Good to see Derwick moving on from Venezuela’s empty piñata and finding new business development opportunities.

Deadlines are for little people

It being April, the ancient Roman “Tax season” that for some reason remains “tax season” in both the US and Canada, I am quite aware of deadlines right now. So it came as a bit of a shock to check out the SEDI page for NioCorp. SEDI shows insider stock, bond, option and warrant trades by insiders of Canadian listed companies. NioCorp is a junior miner trying to build a niobium mine in the US. As Otto has harped on a bit this week, Tommy Humphreys’s CEO.ca site was or maybe still is a paid promoter of Niocorp. (Not that Tommy hid that. Check out the 1,827 words of disclaimers and cautionary notes on this page, where the main article is just a video and 118 words of text.)

James “Casey” Forward (not to be confused with football player James Casey, or Louis James of Casey Research) was CFO of the company until a couple weeks ago, when there was one of those cryptic separation statements: Continue reading

Gold Reserve cases vs Venezuela tick on

Get all the background from Reuters’ story today.

For some reason they didn’t include the current legal situation. Court had declared that Venezuela lost the case on default a few weeks ago, on the basis that Gold Reserve said service of process was successful in January and Venezuela never responded. This led to all sorts of gnashing of teeth, especially by a Twitterer named Federico Alves, who has 50,000 followers who like to retweet him. He was going on and on about how this was the worst thing that had ever happened to his country. I told him to chill, that this isn’t a debt default and the case would go on. I am no expert in these things, but the experts I talk to say it will be a while yet before any assets get attached, at least from the US case.

Yesterday, the court agreed with me:

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So now you know, watch that court in early June. Anyone want to make odds on how long the case drags on? I am starting to think Luxembourg and France are going to go faster.

The most remarkable thing about this whole arbitration situation in Venezuela is that there are now more than $3 billion in well adjudicated claims against Venezuela (Gold Reserve’s $750-odd million, Owens Illinois at around $450 million, ExxonMobil at about $2 billion, plus a bunch of smaller ones), all of them already smaller than the original claims, and it is taking a long time to seize assets. For all the worries by people like me about the possible problems of an international system in which companies can sue countries, it looks like states still have the upper hand. (As Noel Maurer likes to point out.)

US offers actually helpful energy aid for Caribbean

The US is offering to pick up where Venezuela’s PetroCaribe has left off, by offering financial aid for Caribbean nations that want clean energy. Solar and wind resources in the Caribbean are huge, and unlike cheap oil, they are likely to last for the next few million years.

Here’s a note just posted by the White House (hat tip to Boz, who tweeted it and is probably writing a more insightful note on the topic at this moment):

Today, President Obama met with Caribbean leaders in a U.S.-CARICOM Summit in Kingston, Jamaica… Discussion focused on the importance of improving energy security, reducing energy costs, and fighting climate change… Initiatives:

Clean Energy Finance Facility for the Caribbean and Central American (CEFF-CCA): The United States will launch a $20 million facility to encourage investment in clean energy projects…

Clean Energy Finance: In January, OPIC formed a dedicated financing and insurance team to advance development of the Caribbean renewable energy sector. OPIC is in advanced talks to finance a 20 MW solar farm in Jamaica, and has already committed financing to Jamaica’s largest private-sector wind farm, a 36 MW facility in Malvern, St. Elizabeth Parish. OPIC is actively looking for opportunities to support solar and wind energy projects in Jamaica and throughout the broader Caribbean region…

Clean Energy Economy Transition: The Department of Energy assembled U.S. and Caribbean stakeholder working groups to look at opportunities ranging from clean energy, efficiency, diversifying electricity generation, clean transportation and energy education, at the Caribbean Clean Energy Technology Symposium, held in St. Thomas in March…

Greening Tourism: … Caribbean Hotel Energy Efficiency and Renewables (CHEER) initiative, which supports projects to improve energy and water efficiency as well as the exchange of best practices in the hotel and tourism industry. USAID is launching a complementary project focused on the Eastern Caribbean that will develop new financing tools for energy efficiency and renewables.

I am skeptical of PetroCaribe because I don’t like anything that encourages poor people or countries to increase their fossil fuel dependence. Oil is likely to get more expensive over time and even if it doesn’t, burning oil and gas contributes to climate change and increase dependence on global trade, both of which are especially risky for small island countries.

I know the US is doing this out of self-interest, both trying to get brownie points with small countries that have votes at the UN, OAS, etc. and also trying to expand markets for big solar and wind companies. I’m sure there will be criticism of the program because it’s not altruistic, while PetroCaribe arguably is/was. But if that’s the best criticism of this project, bring it on. A world full of that sort of problems would be a world I’d be happy to live in.

In a way, this is the best possible result of PetroCaribe. I can’t prove this, but I suspect that if it weren’t for competition for regional loyalty from energy-rich Venezuela, I doubt the US would be doing this right now. But the competition is there, and this relatively interesting program is born.

This is part of why it is so sad that the Venezuelan revolution was so laden with hypocrisy and corruption. The basic idea of a “mundo pluripolar” is sound.

Bolichico biographic info (partially) unsealed

For those coming late to the party: Washington insider/anti-Communist crusader Otto Reich has been pursuing a lawsuit against a group of young men from Venezuela who are associated (exactly how associated is a matter of debate) with Derwick Associates. Derwick is a middleman company that got some sweetheart deals in the Venezuelan electricity industry around 2010 (just how sweet is a matter of debate). Reich claims that these guys messed with his reputation and income, and he sued them not just for defamation but also for racketeering, fraud, foreign corrupt practices and conspiracy. The court tossed the racketeering and conspiracy charges, while the rest of the case has moved ahead.

The issue currently at hand is whether the court has “personal jurisdiction” over two of the defendants, Leopoldo Alejandro Betancourt Lopez andPedro Jose Trebbau Lopez. Both sides are presenting heaps of evidence to show that these guys were or weren’t connected in legally binding ways to New York. The defendants are trying to show that they have so little connection to New York that a New York court has no right to judge them. The other side, meanwhile, has to share all sorts of facts about these guys in order to show that indeed they are connected to New York. As a result, the court gets to see what the Derwick guys do in New York.

For the past four-plus months, most of the substantive filings were under seal. This was annoying. It was annoying enough that when Reich moved to unseal some documents, I wrote a letter to support that measure. It went into the record March 24. It was probably just a coincidence, but less than three hours later, the judge ordered the sides to convene March 26 to talk about unsealing the docket, and on that date the judge ordered the parties to prepare redacted versions of their filings so that they could appear in the public record rather than being kept under seal.

The redacted documents were released Friday. They lack much of the financial info that some people would like to see. Instead, most of what’s in there is a pretty detailed level of stuff that only a real geek would care about, like:

Continue reading

Illarramendi in his own words: He was a pawn

Francisco Illarramendi, who is currently appealing his 13-year sentence for securities fraud related to the pension fund of Venezuelan state oil company Petroleos de Venezuela SA, filed this interesting document into the federal court docket back in January. I missed it, but if you were interested in his case, it’s worth reading. It’s basically his version of events, laid out in very long form. Among other details, he basically claims to have invented Venezuela’s permuta Bs./$ bond sales system:

Prior to the instant offense, Mr. Illarramendi worked in the securities industry with Credit Suisse from 1994 to 2004, conducting extensive work in Latin American countries, including Venezuela (“BROV”). PSR, at 23. While at Credit Suisse, Mr. Illarramendi was the leader of a team that developed a bolivar to U.S. dollar (“BVD/USD”) arbitrage mechanism that spawned the BROV’s ability to fund itself at significantly discounted interest rates. In 2004, he took a sabbatical from Credit Suisse, and began a special assignment as an advisor to Venezuela’s national oil company “Petroleos de Venezuela, S.A.” (PDVSA). PSR, at 22-23. During this assignment Mr. Illarramendi generated approximately $1.6 billion in savings, when based on his advice, PDVSA was able to repurchase $2.0 billion in outstanding bonds, utilizing Mr. Illarraendi’s arbitrage innovation. Thereafter, the BROV began issuing profitable bonds. PSR, at 22. Specifically, Mr. Illarramendi advised the Venezuelan government to issue bonds denominated in U.S. dollars, which were purchased using bolivars (“BVD”) at the official exchange rate. This allowed the financing of currency exchanges, and lower yields than would otherwise be available in the international markets. PSR, at 5. Ultimately, Mr. Illarramendi’s instruction and advice paid dividends well into the future, to the tune of billions of dollars for the BROV and PDVSA.

He then describes what his fund, Highview Point, did to make money. If you are keen on finance, go read it. He then describes how he ended up stuck in a bad deal: Continue reading

In which I ask US courts to unseal some documents

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I wrote to US District Court to encourage the court to unseal some documents in the case of Otto Reich against the Derwick Associates guys. It’s a bit amusing to see my name on the docket, as I didn’t realize my letter would end up part of the official record, available on PACER and such. But of course turnaround is fair play — my whole point is that open court should be open, and other than some personal data, the public has a right to know what the court is hearing. So, no problem at all.

Here’s what I wrote:

Judge Oetken,

I am a reporter who has been following the proceedings in Reich, et al. v. Betancourt Lopez et al., 13 Civ. 5307. I am writing to support the plaintiff’s motion to unseal documents. The public has an interest in transparency of as much information as possible from this case. I have no financial, political or other interest in the case and my only relationship with the parties is one of journalist-subject.

As the writer of the blog Setty’s Notebook (https://settysoutham.wordpress.com) and occasional contributor to Venezuelan news outlets, Vice magazine, Mother Jones and the Texas Observer, I have been one of the few journalists to keep track of the long international saga of alleged corruption in the contracting for Venezuelan electricity plants since 2012. Readers of many news outlets are interested in learning more about Derwick Associates and its principals, as I can see in the visitor logs to my blog. Aside from the general public, there are also state authorities that rely on the press to help them discover and understand the complexities of Venezuelan business. Access logs show the FBI, US Senate, SEC and US District Court have all visited my blog seeking information about Venezuela in recent months.

Information from the sealed files could help, for example, to accurately report on Banca Privada d’Andorra (BPA), an Andorran bank that the US accused last week of being involved in money laundering. Two people whose names appear in the Reich case, Nervis Villalobos and Javier Alvarado, may have laundered money through BPA, according to Spanish newspaper El Mundo.

It is a challenge for reporters and the public that so much of the world’s business happens in places like Venezuela, Spain, and Caribbean island nations, with their opaque court proceedings and corporate registers. The US’s relative transparency helps people everywhere. When people decide to do business in the USA, they get the benefit of a stable, trusted economic and political system. One of the few “risks” they take is that in case of a dispute, they may have to tell the truth in public court.

Opacity leaves the field open for lies. In Venezuela, where I used to work as a Bloomberg correspondent, some local press responded to the dismissal of part of this case by reporting that Derwick and its principals had won outright. One headline focused on you: “New York judge ratified the honesty of the bolichicos of Derwick Associates.” (See http://www.primicias24.com/nacionales/justicia-norteamericana-ractifica-honestidad-de-los-bolichicos-de-la-empresa-derwick-associates/)

Obviously, there is personal information that should be kept out of public view. I just find it frustrating that so much material is currently being submitted under seal. I was driven to write by an article by the Reporters’ Committee for Freedom of the Press, which said that reporters could sometimes get documents unsealed in the public interest (http://www.rcfp.org/browse-media-law-resources/news-media-law/news-media-and-law-fall-2014/first-step-unsealing-court-re). I hope that you will do so in this case.

Thank you for your time,

Steven Bodzin

Unlike some things I’ve written, I’d say that’s a fine first entry into the records of US court.