The problem with collaborators (Galt’s Gulch Chile, Argentine dictators, and Derwick Associates, oh my)

Ken Johnson, head of Galt's Gulch Chile, looks at proposed subdivision map at Curacaví city hall.

Ken Johnson, head of Galt’s Gulch Chile, looks at proposed subdivision map at Curacaví city hall.

I’ve been thinking about collaborators: people who go along with situations where they aren’t comfortable. Resisting or opposing would be hard, or cause legal inconveniences, or burn bridges, or ruin the chance of making big bucks. Some are just afraid. Collaborating with misbehavior, from a petty lie up to a major human rights violation, is normal and human. I probably go along to get along 99% of the time. But anyone who counts on reluctant collaborators is taking chances.

One example is Galt’s Gulch Chile (GGC). This is a proposed real estate development in the suburbs of Santiago, Chile, marketed toward libertarians and others who think the US, Canada and Western Europe are likely to collapse. Among its problems are that its managing partner, Ken Johnson, alienated a lot of workers, investors and buyers. By last November, when I visited the place for a Spring Celebration, some of the big names that were promoting the project were already feuding with Johnson over money and employment conditions. I sensed there were some odd personal dynamics but I figured they were the usual things one would get between a bunch of lone wolves trying to work together. Turns out it was worse. A few people have privately complained about Johnson; then a couple weeks ago, an early buyer went public alleging financial malfeasance. That broke the dam.

Suddenly, the interpipes were flooded with people who had been suspicious, those who claim to have warned buyers against the project, and even promoter-in-chief Jeff Berwick, saying that he was hoodwinked. He now claims he was already disillusioned with the project last August but chose to keep going along to get along so as not to cause other people any problems. Lawyer Erin Gallagly (who has never returned my calls seeking comment), in a now-deleted comment on Facebook, said she “witnessed a plethora of horror” in three months at GGC: failure to pay vendors, withholding pay from employees, threatening employees, financial mismanagement, and demanding that salespeople not share information. 

And it would seem that a few other folks are no longer GGC team players (as they were when this video was made):

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Johnson has denied wrongdoing in posts online. In an e-mailed reply to me, he also said Berwick intentionally sabotaged the project and those criticizing him had been turned against the project by a single bad actor. He denies that unpaid bills are anywhere nearly so big as McElroy claimed. You can read some of his responses hereherehere, here and here.

Arguments could rage all day about who is right and who is wrong. I see a lot of people arguing from interest, rather than principle, so I say be skeptical of everyone involved. But the point remains: People stayed silent long after they wanted to speak. So when the dam broke, it really broke.

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IMG_6029-600x450A much more important case was the story of El Fotógrafo. This remarkable radio documentary (co-produced by Alex Hall, who by coincidence also once produced an interview with Ken Johnson) is about how a political prisoner in the Argentine dictatorship was forced to help military officers make fake ID’s. He eventually found ways to secretly keep records, but he had to keep his mouth shut. He was allowed to visit his family and had to tell them that everything they had heard about the torture camp was wrong, that things were fine there, that he was being treated well. Once released, a military minder checked on him frequently. Years later, he gave his collected evidence to authorities. Revenge, served cold, he says. Listen to the radio piece. Learn Spanish first if necessary.

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I’ve also been thinking about the people who work with the curiously successful Venezuelan middlemen I sometimes cover around here. These companies benefit from what appear to be crazy deals, where Venezuelan state industries pay tiny middleman companies prices far above market.

For years, people have raised questions about whether such companies pay bribes to get contracts. And for years, the companies have denied corruption charges, without disclosing much information. Basically, we have a circumstantial case on one side, and these little companies on the other saying “trust us, we’re not corrupt.” It’s an annoying argument.

This pattern carries through the contracting for drill ships to the tale of PDVSA’s insurers to capital projects in the electricity industry, which I’ve written about enough to bore everyone.

But the super-rich company owners at the top need peons. Those people don’t share the owners’ interest in secrecy. They need to be bought or scared into silence. There are confidentiality agreements. People who quit some companies face spurious but life-devouring lawsuits that can be settled with gag orders. Companies may try to bribe workers with big payoffs. I believe all of these tactics have the same strategic goal: secure the silence of those who know, and sow doubts in the minds of authorities, the press and the public.

One company that has gotten famous for its efforts to avoid negative coverage is Derwick Associates. It pursued a huge defamation case against a perceived enemy which apparently ended with a gag order. As part of it, they had lawyer letters sent to me and others. They ran an ad saying reporters were “agents” in a defamation campaign, they were supported by a dubious “reputation management” company, and someone continues to push a whisper campaign claiming that criticisms of Derwick are the result of a mere family feud.

Such tactics pressure people into silence. It works for a while: Check out recent stories published in Venezuela about the company. But it isn’t sustainable. We saw the same thing with the Argentine generals, and that didn’t end well for them. We hear the same complaints in the allegations being made about GGC. And things may be playing out the same now for some of the Venezuelan middlemen.

Look at a couple recent blog posts about Derwick Associates at Alek Boyd’s Infodio site. One is just an inside-baseball look at a previously unknown character in the years-long relationship between Derwick Associates and Proenergy Services. The other is a look at Derwick Associates’ latest batch of advisers. Neither is earth-shattering. But they are revealing for their minute detail. For example, in the first article, he publishes what appears to be a private letter between Proenergy and Derwick dated 2008. Those are pretty deep leaks.

I suspect that the middlemen are losing their ability to secure the silence of those in the know. There are quite likely collaborators who are still smiling and nodding and “yes sir”ing in every interaction, but who have also been collecting evidence. This isn’t just about Derwick Associates; the point is general. If this is happening to them, it’s almost certainly happening to others. It’s just a matter of time before we hear more from the people who previously found silence more convenient. Derwick, meanwhile, may have changed tack. It didn’t reply to my request for comment for this note, but it did recently grant an interview to the Wall Street Journal. It now has an e-mail address for press inquiries. Maybe the same will happen in PDVSA’s insurers, the little maritime contractors, the food suppliers, and so on. Maybe openness is contagious. I look forward to learning the answers to those long-standing questions.

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