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 →
What appears to be a leak of internal documents from Missouri electricity industry contractor ProEnergy Services and Venezuelan contractor Derwick Associates adds to questions about how ProEnergy got deals to sell products made by General Electric, Pratt & Whitney and Rolls Royce to Venezuelan state industries starting in late 2009.
The documents, posted to the website Scribd Nov. 17 by a person using the name “Tomás Lander,” include a proposal dated June 2009 from ProEnergy to Venezuela offering power plants. At the time, Venezuela was suffering periodic blackouts because demand for electricity was growing, a drought was draining hydroelectric reservoirs and the 2008 commodities bust had left the country with limited cash to deal with the crisis.
I haven’t been able to confirm that the documents are genuine. I sent e-mails to Derwick Associates’ press line, ProEnergy CEO Jeff Cannon and ProEnergy chief counsel Scott Dieball, asking them to validate or refute the authenticity of the documents and requesting comment. I haven’t received any response. At a glance, nothing about the documents indicates that they are forgeries. As such, for the rest of this article I will treat them as genuine documents. If ProEnergy, Derwick or anyone else offers any commentary on the documents, I will update this post to reflect their response.
The documents don’t show what happened to that ProEnergy proposal. However, another document shows that two months later, ProEnergy and Derwick agreed to cooperate in seeking work in Venezuela. Their agreement forbids either company from revealing “any and all details regarding transactions between Derwick and ProEnergy, details regarding transactions between a party and third parties, and the payment of fees and commissions.”*
Sorry I never posted this last week. I was one of the few outlets to write about Moris Beracha being sued for his alleged profits from Francisco Illarramendi’s hedge-fund-gone bad. So I should note that the US government dropped its case against Beracha last week. Thanks to Latin American Herald Tribune for staying on top of this. Beracha insists in their article that he has lost $100 million to the whole mess, and is a victim, not a perpetrator.
Given that the main Illarramendi case is now up to 891 filings and some related cases, like Beracha’s, extending well past 100 filings each, I have long since stopped paying for and reading these documents. I hope someone someday can be arsed to do so. Have fun.
(Oh look, Odo & Nancy Habeck’s case was dropped back in 2013. I should really keep more on top of these things.)
There was a time when I took some pleasure in finding concealed admissions of weakness hidden within the rosy financial results of Venezuela’s state oil company. Today, I read them and I am just embarrassed. Writing about these numbers is like watching the end of bullfight. The once mighty beast is crippled, bleeding and it seems in bad taste to stare.
You can find plenty of articles about sales, production volumes, and “net income,” whatever that means for a company like this. Let me just point out a couple tables that show what’s going on: Continue reading →
that nobody mentions that the US already imposed sanctions on Venezuela’s state oil company, back in 2011. It has also imposed targeted sanctions against several members of the government for allegedly being drug kingpins, from this one in 2008 to one just last year.
Despite warnings that Hugo Chávez would use these sanctions as a means to attack the US in rhetoric and blame the US for Venezuela’s failings, Venezuela’s response was muted from the start, and has fallen so silent that these sanctions now go unmentioned by everyone: scholar David Smilde of WOLA and Tulane University, who argued today in the Washington Post against sanctions; US Asst Secretary of State Roberta Jacobson, who recently said that the US had been asked by the Venezuelan opposition not to impose sanctions on Venezuela; Sen. Marco Rubio, who is pushing specific sanctions against individuals in the Venezuelan government; and even Chavismo’s top English-language polemicist, Eva Golinger.
I think anyone arguing that Maduro will use US sanctions to bolster his position needs to explain why he hasn’t already done that. Here’s what I think: the Venezuelan people aren’t stupid. Even die-hard government supporters know there are some awfully corrupt people in their government. People from the political right might say corruption is a natural facet of central planning and socialism, those from the center might blame history or say Venezuela has always had its bad apples (mangoes?), and those on the left call the corrupt ones the “derecha endogena” and blame them for halting the revolution’s progress. Different diagnoses, but they can agree on the presence of corruption. They know that the country’s problems don’t come from a few US sanctions against unpopular individuals and light sanctions on PDVSA.
I don’t have an opinion on whether the US should impose sanctions on supposed human rights violators from Venezuela, but I wish those debating would recognize the status quo for what it is.
May 19 2014, Santa Cruz, Bolivia – The CEO of PDVSA in Bolivia, Darío Merchán, said the construction and assembly of the Planta Termoeléctrica del Sur, in Tarija, entered its final phase and its launch is forecasted for June… Termoeléctrica del Sur is a project of the joint venture Empresa Nacional de Electricidad Andina and required a $122 million investment, financed by the Bolivian Central Bank (BCB). …160 megawatts…inauguration in a matter of weeks…Energy consumption in the country is rising to 1,200 megawatts and supply is 1,400 megawatts, leaving a 200 MW reserve. Merchán emphasized that the Termoeléctrica del Sur will bring Bolivia closer to its goal of exporting electricity in the medium term.
Now all they need is a power line to the llanos, and Venezuela will be ready for El Niño.
While North American greens spend all their energy fighting against Keystone XL (and driving crude oil onto exploding freight trains) Venezuela is getting ready to commission this.
This is a 153-km, 42″ oil pipeline with a capacity of 750,000 barrels a day of high-sulfur, high-carbon, processing-intensive oil. It will one day take oil from Venezuela’s quiet, biodiverse Orinoco Belt to the largely pristine Caribbean coast. There the oil will be partially refined (upgraded) into higher-quality crude. Upgrading is the removal of petroleum coke and sulfur. Those unpleasant byproducts sit in great heaps near the sea until they are sold to industrial users around the world. Concrete-makers love Venezuelan petcoke because it is a high-energy fuel for their kilns, never mind that it’s very carbon-intense.
The Keystone XL, which has gotten people so up in arms, has 830,000 barrels a day of capacity, with its source oil being mined rather than drilled. That’s a big deal, no doubt. And you can’t easily compare one polluter to the other. Still, I think it’s fair to say that the Venezuelan pipeline is at least on the same order of magnitude as Keystone. And it’s being built with US dollars that come from US drivers. Continue reading →