Luis Giusti, Alange Energy (ALE.v) saga still not over

Alange Energy’s spectacular collapse over the past week, from being one of the great hopes among Colombian oil and gas exploration companies to being a case study in erroneous oil output reporting, surprised a lot of people whose names are not Hugo Chavez. That is, I think that (now ex-) CEO Luis Giusti’s fall has been a surprise because there was a widespread assumption that if Chavez hates the guy, he’s probably a-ok. The history is a bit different.

Giusti, who stepped down yesterday as CEO, was the last president of PDVSA before the Chavez era. Venezuela’s president campaigned, in part, against Giusti’s attempts to privatize state oil company PDVSA. Giusti resigned a day before Chavez took office. At that point their paths formally split — there was no professional relationship. But Giusti made a living in part because of people’s hatred for Chavez, while Chavez has continued to harp on Giusti’s supposed mismanagement of PDVSA.

Giusti did fine as a consultant. He is on the roster at the Center for Strategic and International Studies, a Washington think tank, and his bio there is the kind of honor roll that makes your correspondent feel like an extreme underachiever. Since at least 2007, he has spent most of his time in Colombia. At first, he was consulting with the government to write the country’s new hydrocarbon rules.

That work succeeded. Colombian oil and gas output had fallen from 687,000 barrels a day in 2000 to 525,000 five years later. Under the new rules, output in the next half-decade soared. The most recent figures, from November 2010, show output of 818,000 barrels a day. By comparison, Venezuela is supposedly producing on the order of 3 million barels a day of oil & gas — and Venezuela has a hundred times more oil reserves than Colombia. This new productivity is great news for Colombia in terms of tax and royalty revenue. It’s great news for state oil company Ecopetrol, which is benefitting from dozens of joint ventures with private companies that are coming in to explore Colombia. It’s great news for the junior oil and gas companies, most notably Pacific Rubiales (PRE.to), which has gone from zero to the biggest company on the Colombia stock exchange thanks to surging oil output.

I found Giusti thanks to my work as a Venezuela oil correspondent. Everyone pointed me to him as a smart, connected person to talk to about the oil industry. That said, there was a prescient warning that he wasn’t to be relied on for numbers. I met him on a warm night in Cartagena in 2008. His white hair and strong presence stood out among the swarm of oil-industry suits at an energy conference. He was warm and welcoming and introduced me magnanimously to his old friend and former PDVSA right-hand-man Ronald Pantin, founder and top dog at Pacific Rubiales.

Giusti then went on to start an oil company, Alange. But before it could go public, a pair of disasters struck. First, just when the company was supposed to get funded, the financial crisis dried up the money. Then, while the company (still private) got its affairs in order, Stanford Bank imploded. A Venezuelan financial analyst named Alex Dalmady published a now-famous article called “Duck Tales” analyzing the bank in the wake of the Bernard Madoff pyramid scheme. His article began: “One does not have to be a detective, or even a financial expert, to spot financial institutions that may prove insolvent, or worse, with the passage of time. As the saying goes, if it looks like a duck, if it waddles like a duck and if it quacks like a duck, it must be a duck.”

It soon turned out that Stanford “bank” was, in fact, a duck. A pyramid scheme. Venezuelans lost as much as $2 billion as the institution collapsed, making the Antigua-based company the biggest pyramid scheme in the history of Venezuela — a country with a long history of pyramids, now chronicled in real time at the blog Venepiramides. It then came out that Giusti was on an “advisory board” at Stanford. The board may never have had any power, but Stanford certainly benefitted from being associated with such an established character, while Giusti benefitted from networking opportunities. One friend of mine remembers Giusti’s wife pitching Stanford products. And when it collapsed, Giusti’s son was actually working at the bank.

But the story never got legs. There was — and is — no evidence that he had done anything except get suckered along with a lot of other people.

Alange finally went public in July 2009. For your typical stock trader, Alange’s story was compelling. You had the Venezuelan expat, out to redeem himself in the underdog country, Colombia, which makes up for limited oil reserves with some pro-corporate rules and a government willing to help out. Big bad commie Chavez tried to push him down, but capitalism will get the last laugh. That was the basic message of this article, published Jan. 11. Over time, oil discoveries seemed to bear out the story.

Meanwhile Pacific Rubiales was turning into one of those stocks that made market watchers say “why didn’t I buy that at $3” as it soared to $30 a share. Petrominerales (PMG.to), another Colombia oil stock, rose 6-fold from its early-2009 bottom. Gran Tierra Energy (GTE.to), which has had more than its share of problems getting oil out of the remote southern Colombia jungles, rose 3-fold. Speculators were looking for the next big thing. Why not Alange? By the end of October, the company’s stock was on its way to a double. In 2010, it had by far the most volume of 273 oil & gas stocks (Excel) on the Toronto Venture Exchange. In fact, in terms of number of shares traded, it beat all Canada-listed oil and gas stocks except Suncor Energy, the mammoth oil sands company that trades on the Toronto Stock Exchange.

In the course of all of this, the world forgot that it wasn’t Chavez who first accused Giusti of mismanagement back at PDVSA. There was a wide group of people in Venezuela, including at times the newspaper El Nacional (here’s a particularly harsh article) and some nationalists and leftists who questioned his management of the company: for using company jets as ministerial shuttles, for not disclosing his salary, but most of all for selling out to foreigners. (Before you send the hate mail: I know, the current PDVSA does all of this and more, and that makes 1990s-era critiques seem almost quaint. I know.) PDVSA was supposed to be a state company. The law was clear: the oil industry is for the pueblo. Giusti not only pushed the apertura, which gave attractive deals to private companies while PDVSA was in its worst possible bargaining position. He also promoted the partial privatization of the company. Now, as it turns out, that may have been good policy — it’s working well enough for Ecopetrol and Petrobras. But is it really the job of a state employee to agitate against the expressed will of the people and the country’s laws? After the oil strike in 2002-03, the “new PDVSA’s” big complaint about Giusti was that he contracted out the company’s computer systems to SAIC, the big U.S. defense contractor. That made it possible for angry managers to shut down and in allegedly wreck wells and pipelines, while loyal workers who stayed on the job were locked out of the system. Sort of a self-imposed Stuxnet.

Now, I have no idea if Giusti ever did any of this maliciously. He has always been decent to me and is a gentleman. But there are a couple lessons here for both Venezuela and for the rest of us. First of all, just because Hugo Chavez talks badly about someone does not indicate that the person deserves your money. I have a thousand problems with Chavez, but if there’s one thing he does well, it’s critique. (Of others.) Second is something I learned from Dalmady. You see one little scandal, like PDVSA jets being used to shuttle ministers to Fort Lauderdale, you say, “eh.” You see a bit of a cavalier attitude toward authority (or the hydrocarbons law), you say, “that’s leadership.” You see a guy get wrapped up in Stanford “bank,” and you say, “hey, we all make mistakes.” But then you hear this same guy telling a TV audience that his oil company is producing (not “has the potential to produce”) 4,100 barrels a day when he either knows or should know that’s not the case. The guy signs off on financial reports that say output is much higher than it really is, and it takes months to correct the figures. Then, when all this comes out and the stock price tumbles, no doubt costing some suckers a lot of money, the company and regulatory officials who should be punishing misbehavior just leave him on the board (along with Horacio Santos, who sold all of his shares “for tax reasons” three weeks before everything fell apart at Alange). And now, the company dilutes its shares by selling shares to suits in Toronto at an implied value of 24 28* cents apiece, it gets harder to shrug. As Colombian exchange Interbolsa wrote today in its morning report (cutting out some of the more technical points):

Alange: There is NO protection for current shareholders and no type of corporate rights for the people that have deposited their confidence in management! … WHY did Alange not offer this conditions to current shareholders? … Is the situation that BAD? … It’s a shame how a person that had the goodwill in the industry as Luis Giusti Sr destroys so many years of accomplishments and disheartens so many shareholders leaving by the back door. Forget of a dual listing in Colombia for sure as this story is finished from my
point of view, as confidence is totally lost.

Just to be clear here: This story in the end isn’t about Giusti, it’s about how we make decisions, how we judge credibility. Alange is still out there, with another 7 million shares changing hands today.

So let’s go back to Dalmady. At some point, when you see the waddle, hear the quack and notice a few feathers, you have to wonder if you’re looking at a duck. Do you entrust money to ducks?

*Note that there was an incorrect number in the first published version of this article. Note that even working here from my couch, with no boss looking over my shoulder, and even though this error is not likely to cause anyone to mis-invest their money, I am correcting the error within a few minutes of first publishing the post. I don’t understand how publicly traded companies go so long before correcting errors in their filings.

44 thoughts on “Luis Giusti, Alange Energy (ALE.v) saga still not over

  1. Jordan Farzier

    This guy should go down hard, a sure Pump and Dump scheme in the horizon. 4 + quarters of illegitimate production numbers….he and the board owe mysel and all its shareholders that had faith in the company a legitimate apology for driving them off a cliff in Horacios new MAserati convertible.

  2. Juan Cristobal

    A compelling read. Your best post in a long time.

    My only quibble is with your characterization of the apertura as giving “attractive deals to private companies while PDVSA was in its worst possible bargaining position.” While that is, prima facie, true, it can be argued that this was the only way to go, and that it worked out in the end. Without the low tax rates, companies would probably not have ponied up the initial investments required, and today we would be producing half of what we are actually producing (never mind what the government claims to be producing). Furthermore, those low tax rates resulted in incredible revenue for the government once the price of oil went up and it reneged on its commitments to the investors. Waiting for PDVSA to be in a better bargaining position was never really a choice, since the political economy of oil in Venezuela would have made expanding production a less urgent matter.

    The historical verdict on the apertura is yet to be written, but your characterization makes it sound a bit more negative than it deserves, in my view.

    But these are minor quibbles on a terrific post.

  3. sapitosetty Post author

    Thanks so much Juan Cristobal. I guess this is the benefit of actually rereading a few times before hitting “post.” I hear you about the benefits of the apertura, and I’m guessing Chavez’s people more or less agree with you — I mean, they left the apertura contracts in place until all the Orinoco projects were up and running!

  4. moctavio

    The conditions of the apertura were at the time attractive, remember Venezuela was coming out of controls, nobody trusted the country and it was open and public bidding. same with the Faja, the terms of the Faja were copied from the Canadian terms, when you look back they should have been easier, there was no law to protect them!

    Great post! The best I have found so far on the subject, the only missing fact is that the company had also announced in October/November that it would start trading in the Bolsa de Bogota in the first quarter of 2011, that alone was sufficiently positive to invest in it (Like I did!)

    Now, it may never happen!!!

    1. Francisco Toro

      What I don’t understand is why the Gov’t Media isn’t jumping all over this. Does Setty really need to do Eva Golinger’s job for her?

      I’m frankly appalled by the incompetence in the government propaganda machine. They seem entirely uninterested in, y’know, running with actual stories. It’s as though if it’s not trumped up, it leaves them cold…

      1. sapitosetty Post author

        Francisco thanks for the offer. About Golinger I’m guessing she doesn’t want to risk looking at back issues of El Nacional — realizing that she is on the same side as that newspaper could cause permanent damage.

        Thanks so much Miguel for the kind words. Bummer about the stock. I wonder if you’ll get an exit point. The shares may have some life in them yet — you have Tom Calandra on your side!

  5. hugo chavez

    i lost lots of $$$ with this fraud. the insiders selling weeks before the fraud must pay back their ill gains. if one director sold then all of them sold shares with insider knowledge. where are the authorities ??? in the USA they would pay and go to jail !!! ALL OF THE DIRECTORS THAT WERE participants in this fraud…and ALL DIRECTORS are at fault…every single one

  6. Armando

    While Noticias24 earns its clicks with “peleas de gallo” in the National Assembly, Setty`s blog write this excellent post about things I didn’t know…
    I remembered back in those Cátedras Pio Tamayo at the UCV where experts in the oil industry questioned the Apertura, “the only auction in the world with upper bid limits”. I totally agree with Miguel and “Katy”, with oil prices so low there was no chance to invest here by that time.

  7. Alek Boyd

    This is a very good read, the kind of blogging I’d like to see more often. If Giusti was involved in the scams of Stanford and Alange, then let’s use appropriate language, and call him a duck. However Setty, could you please point at the specific instances of corruption of Giusti in PDVSA? Plane rides, or Apertura, in today’s scheme of things, don’t qualify I’m afraid.

  8. Alek Boyd

    Well, it doesn’t, for the reason explained by you and others above. Hindsight is just such a phenomenal thing, isn’t it? Again, I think a bit of context always helps. The fact that the Chinese, with whom Chavez is so keen on doing business, landed in Venezuela in great part thanks to Apertura, and your own argument of chavismo leaving Apertura contracts in place until all projects were up and running signals that something was right about it, after all the nonsense that has been said.

    I am still interested in learning about Giusti’s alleged corruption in PDVSA though.

      1. Alek Boyd

        Oh I remember what people said at the time Setty, I was there and recall very well the stories about las colitas de PDVSA, la caja negra, dizque inescrutable, privatizacion, etc. From there, to use those arguments sort of as evidence that the guy was already quacking, I think is flimsy.

  9. Johnny

    Excellent post! I am not familiar with the apertura scheme, but business in the government’s hands in Venezuela has always led to corruption and PDVSA was no exemption then; today it is a prime example. There were quite a few cases that never made the newspapers but were common hearsay about political patronage, kickbacks, business shady deals and more, mostly involving, sad to say, former Shell Venezuela executives; they are abroad now and some may be up to the same as before.

  10. otto

    Interesting how the story of a Canadian oil company opera operating in Colombia has turned into a discussion about Venezuelan politics and a proven idiot like Boyd shows up and twists it into an attack on Chávez. Nobody could accuse you guys of being insular.

  11. pretoazul

    Interesting read, indeed – thank you for this. I have been following Alange Energy’s corporate development for a couple of months and was taken by surprise when the company revised production figures a couple of days ago.
    What I could not find anywhere else – apart from your post – is the reference to the fact that Horacio Santos sold shares shortly before the company released these facts. Both, Santos and Giusti, are still board directors, according to the company’s website.
    A possible explanation why current investors were exluded from the ongoing recapitalization might simply be the “need for speed”. By securing capital within a short time frame, the company was kept “afloat” without running into a liquidity squeeze. This might serve as an explanation to the substantial discount granted – and the subsequent stock market reaction.

  12. Per Kurowski, Rockville, Maryland

    “In the course of all of this, the world forgot that it wasn’t Chavez who first accused Giusti of mismanagement back at PDVSA.”

    Just as one part of society hails a hugo Chavez because he is in the possession of the oil check book another part of the society hailed a Luis Giusti thinking him the owner of the oil check book

    That is Venezuela!

    http://petropolitan.blogspot.com/1999/09/close-to-crying-yankee-go-home.html
    http://petropolitan.blogspot.com/1998/05/as-we-all-know-by-now-pdvsa-has.html
    http://petropolitan.blogspot.com/2000/04/giusti-el-petrleo-no-es-leche.html

  13. Francisco

    For what I learned in Colombia last week, the guy was never a “field” guy, i.e., never had oil between his fingernails like Pantin and others had for many years operating fields in remote locations inside and outside venezuela. He was a politico, who happened to know about oil and many paid the price of this difference, including myself.

    1. Pedro

      Francisco;
      your information is not correct, I was in the Venezuelan Western fields when both of these guys worked there. Both are Petroleum Engineers , Guisti even got his MS in the USA , neither got much oil under their “fingernails” , since they worked in the offices of the Petroleum Eng. Department. Pantin mostly in evaluations.

    2. Alejandro

      You are wrong, Pantin is not God. He is a money guy who always is thinking in get oil company, invert money, increase capital and sell it. I am almost sure that Pacif Rubiales is the principal author about Alange Collapse, they want to take the power!!!! so old friends pass to second plane like Giusti – Panti, when we are talking about money friends disappears, Giusti is a really Great Man, Pantin is just money

    3. Tony

      I worked with Giusti in the 80’s in Lagunillas. Believe me, he was a field guy, but he had a meteoric rise inside the Company. That’s why most people don’t remember him as a plain old Production Engineer.

  14. Pedro

    Francisco;
    Cont.
    Both Pantin and Giusti , had a meteoric career development in the Venezuelan Oil Industry , accentuated after 1976 nationalization.
    In the last Goverment of President Caldera, Giusti became President of Petroleos de Venezuela , greatly helped and influenced by his political affiliation to the ruling Party Copei , thus overtaking several layers of more senior executives.

  15. Fred

    I am saddened by this turn of events if they are true, which I do ont dispute but have no way of confirming. Mr Giusti was a formidable President of Pdvsa and was able to convince the top oil companies to invest in Venezuela during the Apertura. The process was transparent and public, and would greatly benefit the country if it would have been allowed to fully develop. Unfortunately as it happens when the goverment changes from one party to another, that was not to occur and much less with the Chavez regime.

  16. Jonathan

    The saga is not over. Canada as well as the USA have laws to protect investors in their Stock Markets. If the Alange Energy Directors sold shares before the colapse of the stock, they did Inside Trading and will be prosecuted and punished. Too bad that Giusti is “connected” to Stanford Bank Pyramid scheeme and to the Alange fraud in reporting production figures, however it may not be a coincidence, since Venezuela and Colombia are countries of “Picaros”

  17. Jonathan

    Francisco : Most CEO and COO of Oil companies are not people “with oil under their fingernails”, they are smart people with excellent managerial skills. Both Giusti and Pantin qualify: Pantin has MS degrees in PE and IE with honors from Stanford University and Giusti has MS in PE from Tulsa Univ. Castillo and Quiroz Corradi of Maraven saw the potential of Giusti and took him under their wings to make him President of PDVSA overtime, when Copei was in power. Giusti saw the same skills in Pantin and made him his Right Hand. Now other people appreciate Pantin’s skills and named him to their Boards, assuring him a Salary of 3.5 MM $/year: not bad at all, when many of his colleagues in Maraven with Oil Field skills just make “average” PE salaries. Now, Giusti’s predicaments with Stanford Ponzi scheeme and with Alange Energy are another matter and not lack of managerial skills.

  18. Reginald Rodríguez

    This Giusti guy is simply a vulgar thief!
    I can’t believe why so much people believed in this criminal and invested their money in his frauds. Just because Chavez said the real thing about him? That’s stupid man!
    First the Stanford “bank” and now Alange Energy. Beware of this man!! Your money is not secure in his hands!!
    Will ever the authoritys put this delinquent in jail?
    Americans! Canadians! send Luis Giusti to our country, and we promise you we put this swindler in a very comfortable cell, the one he deserves for destroying lives in, at least, four countrys (Colombia,Venezuela, Canada and USA)

    What a crook!

  19. ivan

    Giusti wished always that the Venezuela Oil production were high in order that the oil price fall. When he worked in PDVSA he worked for his interest not for Venezuela. This Giusti guy is simply a vulgar thief!.
    This case is happening in Colombia not in Venezuela.
    Why to speak about Chavez.
    Why dont speak about Uribe, Santos, Paras, Narco, Plan Colombia, Usa.

  20. Alberto Rial

    Conspiration theories apart, it is not the same (and skills required may be totally different) to manage a 40 billion $ company and a 3,000 bd upstart oil venture. In fact, having been a big CEO might be a liability, instead of an asset, to take charge of a small company, where every penny counts. Everyody likes to have a villain, specially if the current satan was once a sucessful big shot. I don’t automatically buy the Ponzi-thief-deceiving point of view. I think it is less intentional -and more humane- than that. Just not having the right focus and priorities.

  21. crios

    The Giusti’s success as a President of PDVSA is no questionable. Under his management PDVSA lived one of its greatest moment. The “Apertura” was a big thrust for the company in a time where investing in heavy oil upstream business was almost unthinkable. Alange’s affair serves the plate to feed the human morbo.

  22. gustavo coronel

    I would like to comment, at this time, on a portion of your post, the one that goes:
    “There was a wide group of people in Venezuela, including at times the newspaper El Nacional (here’s a particularly harsh article) and some nationalists and leftists who questioned his management of the company: for using company jets as ministerial shuttles, for not disclosing his salary, but most of all for selling out to foreigners. (Before you send the hate mail: I know, the current PDVSA does all of this and more, and that makes 1990s-era critiques seem almost quaint. I know.) PDVSA was supposed to be a state company. The law was clear: the oil industry is for the pueblo. Giusti not only pushed the apertura, which gave attractive deals to private companies while PDVSA was in its worst possible bargaining position. He also promoted the partial privatization of the company. Now, as it turns out, that may have been good policy — it’s working well enough for Ecopetrol and Petrobras. But is it really the job of a state employee to agitate against the expressed will of the people and the country’s laws? After the oil strike in 2002-03, the “new PDVSA’s” big complaint about Giusti was that he contracted out the company’s computer systems to SAIC, the big U.S. defense contractor. That made it possible for angry managers to shut down and in allegedly wreck wells and pipelines, while loyal workers who stayed on the job were locked out of the system”.
    My comment is as follows:
    1. The article you mention, from El Nacional, is an interview with Giusti and is, if anything, favorable to PDVSA and Giusti. What I read in the link you provided is not a criticism of Giusti but an explanation by Giusti.
    2. You wonder, when talking about the “apertura” and joint ventures with the private sector if it is the job of a state employee to “agitate against the express will of the people and the country’s laws””. I believe the job of a manager is to do what he feels, professionally and responsibly, is in the best interests of the company. PDVSA has always been partially privatized (now significantly so) in the sense that the private sector has always had participation in portions of the activities of the company: petrochemicals, production sharing, joint companies, research agreements, even in the most “sacred” areas such as exploration and production in the Faja. What you call the “express will of the people” has never been against these joint activities while Congress approved most if not all of these joint activities. I feel you are wrong in your criticism of this aspect of Giusti’s role.
    I also believe it is wrong to extrapolate the current situation to say that all what the man did in the past was wrong. This is far from the truth, the apertura was a success. He made errors, which I have discussed at length in my book “El Petróleo viene de La Luna” ($20 a copy, I will be glad to send you a copy). It is even more wrong to use this affair (that awaits for an explanation from Giusti, meanwhile I will hold my judgment), as Francisco Toro does (he has not apologized for being wrong, as he should), to jump the gun and say that Giusti had no oilfield experience when, in fact, he possesed ample experience in production. I can say that Giusti was one of the most brilliant field engineers of Shell in his time.
    There are things that require an explanation from Giusti and some aspects of this sad affair that I deplore. When the time comes I will say my piece. In the meantime, I would ask fro restraint from your excellent blog and from those who hold passionate views.

  23. Oilkritik

    I think very positively of Giusti “apertura” but very negatively of its reorganization of PDVSA. Since its founding PDVSA had been organized as a conglomerate of decentralized campanies, all owned by PDVSA. This allowed a certain degree of management freedom (at a cost) from the all powerfull and ineficient Venezuelan State, a positive in my view.Giusti “disapeared” the semi independant companies and concentrated all power in one big PDVSA. A very bad timing considering Chavez rise to power, but also a very bad idea considering the repeated failure and poor management of Venezuelan state companies in the last 40 years. Maybee it was hubris, and a “privatization” poker play.But who wants poker players as managers ?

  24. Donald A. Goddard

    After wasting 1/2 an hour reading so much rubbish by questionable people who don’t even know Mr. Giusti nor anything about his back ground, I noticed that only Crio’s, Mr. Rial’s and Mr. Coronel’s input make any sense. The mistake of stating that Alange Energy “is producing 4100 bopd” vis a vis that ” it has the potential to produce 4100 bopd” is what this is all about?? I consider this a mistake but one that can be easily made or perhaps “a slip of the tongue”. BIG DEAL!! Perhaps the correct manner to approach this situation is to give Mr. Giusti the benefit of the doubt, rather than to judge him wrongly.

    All of a sudden, this excellent, petroleum engineer and brillient, skilled manger and executive is described by a few ridiculous, lying critics, as a fraudulent Stanford ponzi scheme expert, corrupt politician, a thief, a delinquent, bad boy of the international oil scene and everything imaginable. Such critical blogs abound and are typical of misguided, jealous leftist, Chavez lovers (brown nosers) out to get revenge. They make me laugh.
    Mr. Giusti, there’s this great Venezuelan saying that we always have to pay attention to and it is like this: ” A palabras necias, oidos sordos”. It sounds easy to do but after your name has been dragged throught he mud, it’s no easy task clearing your good name.

    1. sapitosetty Post author

      A little slip of the tongue repeated in investor presentations, securities filings and television appearances for months on end is no longer a slip of the tongue. Mr. Giusti is one of two things. He may be a bit bad with figures and out-of-touch with his own company, in which case it’s understandable that he may have trusted production numbers that turned out to be wrong. Or he may be, as you say, an “excellent, petroleum engineer and brillient (sic), skilled manger and executive.” In that case, he should know the difference between production and potential production, and he should know which of his wells are producing what. In that case, he was lying in a manner that cost his shareholders millions of dollars. This is known as securities fraud. Personally, I think the former explanation is entirely possible — but like I said, I was always warned that he was bad with figures. You seem to be implying that the latter is more likely.

      My delving into the long history of questions around Giusti were not meant to defame in any way. Rather, I wanted to look at this person with different eyes. Rather than seeing him as some sort of hero for having been hated by Chavez, why not look at him as a person with a real history? I think any investor should know whether he is investing with someone who has been accused of corruption, whether or not that’s ever proved. This is not a criminal case. The “benefit of the doubt” that you request has no place in investing.

      That said, maybe you want to give him the benefit of the doubt. Go buy ALE.v. In fact, why don’t you buy so much that you drive the price back to 50 cents a share, so those people who bought on Giusti’s promises can be made whole? Oh wait, that would be almost impossible now that they diluted the shares with a $60 million issue — one that judging by the speed with which it was bought up, may have been arranged before the bad news was even announced. So yes. “BIG DEAL” indeed.

    2. Per Kurowski, Rockville, Maryland

      Hold it there. I do not know about others but my post said not one single word about the Alange Energy issue… how could it, I have no real knowledge of what happened there.

      But to dismiss any criticism of Mr. Giusti´s management of PDVSA as just something coming from the left, shielding him as a commie-fighter is wrong.

      Besides Coronel’s point of Giusti centralizing PDVSA and getting rid of the subsidiaries which competed and kept an eye on each other, there were other issues… like for instance that the aperture contract did not include any clause considering what to do if oil prices reached levels that were obviously not being valued in what was being paid… like for instance that PDVSA raised much money they said they needed urgently, only to use it remodeling service stations instead of beefing up their own explorations.

  25. Donald A. Goddard

    Sapiosetty: I appreciate your honest and prompt reply. I get your point. Regarding the investors, there’s this term you are familiar with and it’s “CAVEAT EMPTOR” . Investing in general is risky especially in upstream petroleum ventures. Not only for reasons we are discussing (e.g Giusti said this or that), but because of erroneous reserve estimates, operational risks, reservoir unknowns, commodity price fluctuations, and on and on. Anyway, I’m going to enjoy Setty’s notebook because from what I’ve notice to date is that discussions tend to be held in a polite and civilized manner as it should be.

  26. Juan Tovar

    Not sure if I understand your line of thinking here, it is not about Alange but the title of your article says so. Are you trying an apology for L. Giusti who has been caught this time finally ??, what he has done over the years has been widely documented(facts rather than hearsay) so everybody can make their own judgement. How can somebody miss how much oil is your own company pumping out being the MD ??. No wonder why his PDVSA days are not what he claimed in his CV. Interesting writing, not sure whether you wanted to write about Venezuela rather than Alange and had to disguise it ??

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