Forbes gets it wrong, admits it, still needs pushback (Derwick, GE)

Hi friends! How would you like to not learn things? If that’s up your alley, go read this Forbes article (oops, they retracted it! but preserved for posterity at the Chicago Tribune) about Derwick Associates, your friendly neighbourhood electric industry middleman, offering Win-Win Solutions for big industry suppliers and corrupt state enterprises alike!

Stock analyst Hilary Kramer visited her old haunts in Venezuela. I’m guessing her trip included more than one visit to a rooftop bar with 400-bolivar cocktails, and very, very few visits to electricity plants. She picked up a tip (though she says not where) that Derwick Ass ociates is the New Big Thing saving her beloved Venezuela from its long night of blackouts and misery. Thanks, Kramer, for offering this delicious antidote to information.

Here’s the problem. Kramer writes about Derwick Ass ociates as though it were something new that had never before appeared in the press. She blissfully lauds the company and its efforts to build power plants.

That might have been excusable sometime in 2010. But in September 2011, César Batiz of Últimas Noticias ran a story that showed that Derwick and several other companies were unknowns who had received sole-source contracts, overcharged for the products they were selling, and then failed to deliver on time if at all. He wrote again about Derwick in 2012. His reporting has yet to be refuted by facts. Rather, time has showed that the Batiz version was basically right. What have we heard from Derwick? Well, there was this paid advertisement in El Nacional which remains viewable on the El Nacional website as though it were a news article. And there was this press release — oh sorry no, that’s actually a lawyer letter demanding that I take down a blog post. My bad!

Other than that, nothing. To my knowledge, they haven’t released publicly this audit report showing that they are clean of corruption (happy to be proved wrong if anyone wants to send me a copy). They very rarely respond to requests for comment from the press. Their website is barely informative. And most importantly for me, they have benefitted from (and possibly paid for) a massive online reputation management campaign to bury their bad reputation in a heap of banality and bullshit. My reward for exposing this unethical behaviour was that someone created slanderous websites about me with stolen photos of my family. (Hey thanks Google, nice of you to host that site, great way to thank me for cleaning up your search results.)

Enter Forbes. Hilary Kramer, writing in Forbes and not disclosing any personal connection to Derwick or its representatives, straight-facedly ignores all the concerns that have been raised about the company. She admits that Derwick uses political connections, not even addressing the real question, which is whether those connections might include bribery, kickbacks or other improprieties.

She glosses over the question of why the government chose to go with Derwick and not with GE or other normal suppliers, saying that GE and other big companies wouldn’t sell to Venezuela for political risk reasons. Ha! Then why do PDVSA’s internal figures (which I happen to have here) show purchases from GE of about $75 million in 2010 and at least $100 million in 2011? Hmmmm…could it possibly be that the Venezuelans were the ones who wanted to go through Derwick, and GE went along for the ride? Yes, that certainly could be. Now why oh why would a Venezuelan procurement manager want to buy from some unknown middleman and not from a major international company? Hmm, that’s a tough one!


Kramer then accepts Derwick’s figures for the number of megawatts installed, without even responding to those who say that much of the work is incomplete. (Those making such an outlandish claim include PDVSA, which on its contractor registry shows all of Derwick’s jobs between 5% and 98% complete — not a single one at 100% — with work due to complete in 2011 or (in one case) 2012. Seriously, I may not understand that web page, but that’s what I see. Is PDVSA just behind on updating its web page? Or has Derwick, heaven forbid, failed to meet its deadlines? I really don’t know, more information is welcome — this is a blog written on Friday evening after all.)

Even the most basic statement, “Derwick Associates builds power plants” is questionable. As Gustavo Coronel wrote on his blog, it’s hard to imagine a 15-person company building much of anything — the company is a middleman that outsources the construction, largely to ProEnergy Services of Sedalia, Missouri. Another company governed by the FCPA, by the way. And one that has ignored my repeated requests for comment.

Anyway, Coronel does a good job pointing out some of the most reasonable questions and concerns that have been raised about Derwick and its relationship to state companies in Venezuela. Here you go, the link again.

Kramer gets even more hilarious. She has made her name as a quantitative-minded person. And yet she says that a 22-MW electric generator — less than twice the size of the one at that powers the Sambil mall in Caracas during blackouts — created 1,100 jobs. I’d love to see the data backing up that statement. 

She goes on to say, “I was relieved to find that RSM International, determined that the company won its contracts legitimately and did not pad its costs with money that ultimately belongs to the Venezuelan people.” I’d love to see that report. Care to share? Why do I suspect that Kramer never saw the report?

(And while I generally shy away from collective guilt, I simply don’t trust anything that comes out of the Venezuelan branch of a worldwide accounting firm. We’ve seen “KPMG” approve PDVSA’s obviously fudged numbers year in and year out, and we saw the managing partner of “BDO” plead guilty in the US to obstruction of justice. I put the company names in sarcastiquotes because these big international companies don’t really have their own offices in Venezuela. Rather, they contract with local accountants and license their names for a fee. Oversight appears to be close to nil, as do the consequences of proved cases of corruption.)

Anyway, I’m getting down into the weeds here. Let’s go back up. Hilary Kramer is a hack. She published a story without disclosing how she got the information, why she published it, or whether she was paid by any party that may have benefited from it. Forbes immediately turned off the comments on the article. A day later, Kramer pulled the article, an almost unheard-of practice. Why not correct or clarify? Here are her tweets:

kramer tweets 27 sept

But meanwhile, the story continues to circulate — on the generally reputable Chicago Tribune website, of all places.

The issue here isn’t that she offended anyone. It’s that she supported a group of people who have made it their business to attack her fellow members of the press. That she ignored legitimate, well documented criticism. That she didn’t seek the slightest bit of outside comment. In short, she disappeared the facts that those of us in investigative reporting have dug up at our own expense, on our own time, in order to help the country she claims to love, this raped place called Venezuela. Instead of helping us expose the facts about what is happening there, she participated in a fraud, she participated in the cleansing of the reputations of a few of the thousands of people who have diverted billions of dollars from the people of Venezuela into the pockets of a very few rich bullies. If she really loves Venezuela, as I do, maybe she will make it right. Not by retracting this half-assed, poorly researched article, but by devoting much more effort to finding the truth about that place and helping the country recover.

I’d guess that will come right around when she wakes up to the reality of Azerbaijan. (Reality here.)

Even if her goal was really to offer stock tips, she was totally off-base. The only time she has ever mentioned Venezuela on her website was in a post about that crap auction site Mercado Libre. Derwick, by bringing GE goods into Venezuela, offers to increase GE’s stock price? Whaaaat? As I said, GE already makes sales to Venezuela, with or without Derwick. No, there’s no trade here. She was obviously shoehorning that trading tip into the column in order to justify a mash letter to Derwick Associates. There are potential trades in Venezuela, but they have nothing to do with the electricity industry.

I want to know the truth. I want to know why Kramer wrote that article.


And in related news, all I have to say about today’s story in El Nacional story is from Orwell:

The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

Late night update:

I just want to be clear that I don’t know if Derwick or anyone else mentioned in this story has done anything to violate the FCPA. But I do know that Venezuelan officials love their bribes, and I can certainly see someone thinking they’d have a better chance of getting a bribe from a small middleman company than from a big multinational under scrutiny from the SEC.


A little bird points out that Kramer previously gave positive play to Ricardo Fernandez Barruecos, another character who got spectacularly rich by working the system during the Chávez years. She specifically calls out blogs as having “vilified” this guy. Now, nobody deserves to be jailed without charges, and nobody should have to tolerate the human rights violations known as Venezuelan jails. Just out of basic humanity, I have no problem with anyone getting freed from those situations. But just as with Derwick, Kramer simply brushes aside legitimate questions, using the usual slur of “blog” to refer to independent investigators like this guy. Hmmm, interesting. What ever could tie Barruecos to Derwick?


10 thoughts on “Forbes gets it wrong, admits it, still needs pushback (Derwick, GE)

  1. pitiyanqui

    Funny thing about the faux-Setty site…

    Horrible English, punctuation, syntax and other issues aside from the Who is Steven Bodzin post, which seems unlikely from a UCB graduate is that if you click on the google+ link for the author, Steven Bodzin, it refers to it as a “her” and has one person in their circles… a company named SanguinesSolutions, an online reputation management company apparently based, or at least outsourced to, India.

    In the event they jack that, I screenied it.

    Amatuerish shenaningans…

    Almost as much as Ms. Kramer identifying Derwick as a potential stock pick. I was completely unaware they are listed anywhere; I can’t find them listed. Or that their financials are publicly available. If they are listed and she is touting them from a financial analyst perspective, then there may be issues with disclosure due to the SEC taking a dim view from pushing a stock without having the information publicly available to all and sundry. Likewise, if she touts it as a stock pick, and she fails to publicly disclose any sort of compensation from Derwick, well…the SEC also takes a pretty non-happy view of that sort of behavior.

    I, personally, would be fantastically interested in perusing Derwick’s financials and I would be willing to bet I am just as qualified as Ms. Kramer in doing so.

    Incidentally, did anyone notice the subheading in the Forbes article showing “Market Analysts” under her name? Is she multiple people?

    Also, just for giggles, I did a “Derwick Associates Stock” search and I found nothing. Well, aside from a “profile” with no signal information on it on the Economic Times of India website. If you click on the profile, it shows a number of quotes from Daniel Duquenal’s website…and that’s about it. Hmm.

    1. sapitosetty Post author

      Thanks for all that, Piti. I hadn’t noticed the India link. Much obliged. As for the stock picks, she ended her article saying that GE and other companies will rise as they are allowed back into Venezuela thanks to Derwick’s brokerage work. Totally ignores the reality that GE, like other big public companies (Chevron, Schlumberger, Halliburton, Procter & Gamble, and many more) have been making sales to Venezuela through this whole economic mess. For some, a more stable economy will be good news, while for others, it will mean they have more competition and margins will shrink. But regardless, I can’t see how having extra middlemen in the deals is a good thing. Even on her own terms, I just don’t understand the logic.

      1. vijay

        Big public companies are having a hard time making sales in this year to Ven. There is a moratorium on taking flights to Caracas because flight costs > 3000 USD. You can have middle men but who is going to install and work the equipment? Also, PDVSA and government has some vague payment methodologies. They will pay some bill in March, then pay nothing invoiced in April, and then pay a few invoices of June. They are very random in paying invoices. I have still outstanding bills from last september.

        1. vijay

          “he has spent his time chasing ghosts in third world countries”
          “and recently in Chile which he has ties with local police”

          What does any of this even mean? What is the “Which” referring to?

      2. pitiyanqui

        I apologize for my obtuseness in noticing she wasn’t referring to Derwick vis-a-vis a stock pick. I was just returning home and thought that perhaps they had performed some goofy reverse-IPO, which I suspect would be a spectacularly good way for them to appear “legit” and stay on something like the OTC, while remaining wholly controlled by their “shareholders”.

        Even so, this article is a travesty of pseudo-journalism and a virtual slap in the face of real investigative work being done. Whomever it is that you’ve annoyed, they are going deep to provide some cover to their activities. I hope the FCPA nails them eventually.

        Funny thing about feds, when they have you targeted, at least initially, one never knows. By the time they knock on the door, you might as well walk straight to the sentencing phase. Lets hope they are aware.

  2. Jeffry house

    She misinforms potential investors by creating a rosy-coloured Derwick and a rosy-coloured Azerbaijan. Is Forbes really so corrupt that they would allow their name to be besmirched like this?

    1. sapitosetty Post author

      Yes. What I realized after I wrote this piece is that most people seem to think that Forbes is a serious publication, when it’s really a sort of right-wing Huffington Post. I guess that’s why my early drafts were pretty indifferent about this Kramer article — it’s far from the worst thing you’ll see on Forbes. Just the worst thing with which I have a personal connection.

Comments are closed.