Tag Archives: courts

Derwick Associates has a very good day


As they portray themselves

Yesterday was a good day for the guys in charge of Derwick Associates.

Last week, a group of three companies, two in Panama and one in Barbados, disclosed they had bought a bit more than 10% of Pacific Rubiales Corp. The Panama companies were well anonymized, but the Barbados one less so. Alek Boyd said on Twitter April 28 that he got the paperwork for the Barbados company. It belongs, he says, to Alejandro Betancourt, chairman of Derwick Associates. This was a surprise, given as I’ve covered each of those companies extensively and the last we heard, a top Pacific Rubiales executive was saying he didn’t know the Derwick guys. 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.

Arevenca in Aruba: The locals get restless

For those late to the story: Arevenca is a Venezuelan company that may have once been a gravel yard. It has little history in Venezuela, but has a spectacular website advertising vast holdings in the oil shipping and refining industries. Almost everything on the site appears to be false. None of its refineries exist. No ships registered to Arevenca appear in any shipping databases. A supposed Nigerian company, which also has no paper trail, sued Arevenca in the US for allegedly accepting payment for a shipment of petroleum products and then failing to either deliver the fuel or return the cash. Separately, I have heard from various sources that a company in the US paid Arevenca US$7.8 million for petroleum products that never arrived. Just after that transaction, Arevenca leased an Airbus jet and tried to start an airline in Aruba — investing, according to a recent company statement to the press, 14 million florins, which coincidentally is equal to US$7.8 million. Aruban authorities haven’t yet given this airline, Fly Aruba, an operating license, so the jet has been sitting on the runway, gathering salt in its engines. Fly Aruba had started to train workers, but the workers have recently been getting impatient about the company failing to make payroll. Those workers have started sending lawyer letters to Arevenca.

Reader JS sends these news clippings from Aruba newspaper Bon Dia.

Our trusty correspondent summarizes the reporting thus:

The process has started [in which the workers get the court to] declare the company bankrupt…. The newspaper spoke to 2 employees but the lawyer of the employees could not be contacted…. The date for this process is not yet known and it is in the hand of a judge to decide the future of Fly Aruba.

In the other article [Arevenca President Francisco Javier Gonzalez] is saying he doesn’t understand why they want to declare the company bankrupt as he doesn’t owe the employees anything. He says he was giving the employees a gift [rather than salary] while they were in training. The newspaper is asking, is this stated in the contract of the employees and how is it possible that workers get a gift instead of wages? And is FJG paying taxes on this gift to the employees? FJG did not want to answer these questions to the newspaper but confirmed that he is operating under local law and conditions. He explained that the thousands of question they had for him will be answered when the time is right.

Now just to game this out a little, if the Aruban authorities go along with this idea of declaring Arevenca bankrupt and seizing some of its goods to pay workers, that is less money for the US company and the Nigerian company who are also trying to get money out of Arevenca. Could be a mess.

Coming late to the indignation party: Chile

Monday and Tuesday, Chile charged eight emergency response bureaucrats with negligent homicide for calling off a tsunami warning after the 8.8-magnitude earthquake of 27 February 2010.

That quake sloshed the Pacific ocean so hard that it generated a tsunami wave so high that it soaked land as much as 20 meters above sea level and hundreds of meters inland. The wave killed 156 people and left 25 missing. But even as the wave was hitting towns and villages, emergency response agencies were saying there was no tsunami. This week, some people in charge of the agencies were charged with negligent homicide in a trial that is drawing national attention. Some Santiago newspapers are blogging the trial live; here is La Segunda’s version.

Among other tidbits already to emerge from the trial, according to La Segunda (translation mine): Continue reading

Polar vs. Venezuela — interesting news that got lost in the shuffle

Amidst the flurry of news in the middle of February — Chavez cancer, Venezuela shipping diesel to Syria, my folks coming to visit — I never even noticed this article come out. But man, it’s interesting. I had no idea that Empresas Polar had taken the Venezuelan government to international arbitration. This is at least the second case of an ostensibly Venezuelan company using a foreign shell company to get protection under international arbitration rules, rather than being stuck with the rather weak protections of Venezuela’s domestic court system.

Let the brainiacs at Reuters tell the story:

Top Venezuela firm files arbitration against Chavez government

(Reuters) – A Barbados-based holding company led by executives of Venezuelan food and beermaker Empresas Polar has filed an international arbitration claim against President Hugo Chavez’s government over its nationalization of a fertilizer project, documents show.

The move may set a precedent for Venezuelan companies seeking access to international courts to settle disputes with the socialist government that otherwise would be litigated by local judges, who critics say are controlled by Chavez.

You can read the whole thing here. Continue reading

Mexico: Fuel theft on the rise

Noel Maurer has a couple interesting posts about the rise in fuel thefts by Mexican Organized Crime Organizations, or MOCOs. First, he gives some numbers. Then he explains the logistics, as laid out in a US lawsuit.

Pemex filed a federal lawsuit … against a group of American refineries for knowingly buying stolen natural gas condensate…

The Zetas intercept the oil in one of three ways. The major one is to simply tap into the transfer and delivery systems. (To do this, the Zetas needed to build their own pipelines, a pretty impressive accomplishment.) The secondary one is to hold-up the tanker trucks on their way to Reynosa. The final one is to kidnap Pemex officials and force them to divert condensate.

Now, the Zetas can easily fence refined products inside Mexico, but they can’t sell condensate: Pemex operates the only refineries! So they have to move it to the U.S. According to the lawsuit, the stolen condensate was moved by tanker truck (think about that for a moment) to the border. Before crossing, however, the Zetas transferred the stuff to newer trucks that meet U.S. regulations. The drivers then presented forged export documents, sometimes mischaracterizing the condensate as naphtha. They would then sell the stuff to the U.S. defendants.

Big Star and F&M Transportation bought the oil from Ygriega Energy Corporation of Edinburg, Texas, whose owner, Arnaldo Maldonado, has already pled guilty to felony conspiracy to receive and sell stolen goods… Finally, Western Refining bought condensate from companies like Continental Fuels, whose president confessed to trafficking in stolen goods.

In other words, according to Pemex, Big Star, Superior Crude and F&M “actively and knowingly participated in a conspiracy to import and market the stolen condensate in the United States.”

Interesting stuff for those of you who are interested in the antics of the many actors who are drawn to Latin America’s oil wealth like flies to shit. Go take a read.