Venezuela claim un­likely to con­vince US

Kuwait Times - - ANALYSIS -

Ale­gal strat­egy switch by Venezuela’s state-owned oil gi­ant PDVSA to por­tray it­self as a vic­tim in a mas­sive bribery scheme de­tected by the US govern­ment is un­likely to lead to com­pen­sa­tion and may even back­fire. In a case that shook the lo­cal oil in­dus­try, two prom­i­nent Venezue­lan oil busi­ness­men were ar­rested last year in the United States on charges of vi­o­lat­ing the For­eign Cor­rupt Prac­tices Act (FCPA). Roberto Rin­con and Abra­ham Shiera have both pleaded guilty to brib­ing PDVSA of­fi­cials in or­der to win juicy con­tracts and are to be sen­tenced in June. The case is part of a wider US Depart­ment of Jus­tice (DOJ) in­ves­ti­ga­tion into cor­rup­tion at PDVSA.

So­cial­ist-run Venezuela orig­i­nally slammed the probes as sab­o­tage by the U.S govern­ment, its ide­o­log­i­cal foe. But in a turn­around, PDVSA said in July it was ac­tu­ally a “vic­tim of fraud” and its pro­cure­ment arm Bariven last month asked a US court to or­der Rin­con and Shiera to com­pen­sate it for $600 mil­lion in losses. The strat­egy switch is likely to flop, how­ever, ac­cord­ing to le­gal ex­perts fa­mil­iar with the case.

Un­der the FCPA, money col­lected from fines and penal­ties goes to the US Trea­sury and ap­peals for com­pen­sa­tion are rare. Al­le­ga­tions of en­demic cor­rup­tion at PDVSA are likely to weigh, too, ex­perts be­lieve. While cash-strapped PDVSA might be mo­ti­vated by po­ten­tial com­pen­sa­tion or a de­sire to de­fend it­self, the mo­tion could back­fire as the com­pany is more likely to be con­sid­ered a co-con­spir­a­tor. The DoJ will prob­a­bly have to re­spond to PDVSA, po­ten­tially mak­ing new rev­e­la­tions about al­leged malfea­sance. “It’s pos­si­ble this will come back to haunt PDVSA,” said Mike Koehler, an FCPA ex­pert at South­ern Illi­nois Univer­sity school of law.

For­eign of­fi­cials who ac­cept bribes are not pros­e­cuted un­der the FCPA but they can be pros­e­cuted for mon­ey­laun­der­ing, as hap­pened to three mid-level ex-PDVSA em­ploy­ees in the case. “The great­est risk to the high­erups is that the pro­ceeds of the bribery can be traced to bank ac­counts and frozen,” said An­drew Spald­ing, an as­sis­tant pro­fes­sor of law at Univer­sity of Rich­mond. The DoJ is al­ready chas­ing the money: $51 mil­lion from Swiss bank ac­counts linked to Rin­con and Shiera was trans­ferred to the United States in Oc­to­ber.

Le­gal ex­perts say the men may also be of­fered re­duced sen­tences in ex­change for their co­op­er­a­tion in the DOJ’s broader PDVSA in­ves­ti­ga­tion. Venezuela’s In­for­ma­tion Min­istry, PDVSA, and the pair’s lawyers did not re­spond to re­quests for com­ment. The DoJ de­clined to com­ment.

Mag­nates of Mara­caibo

Two ex-em­ploy­ees of Rin­con and Shiera in­ter­viewed by Reuters said the busi­ness­men hired for­mer PDVSA em­ploy­ees to help se­cure kick­back-laden con­tracts for their dozens of com­pa­nies that sold ev­ery­thing from drilling equip­ment to pipes. They said the kick­backs in­cluded phones or tablets for sup­port staff and com­mis­sions of 3 to 10 per­cent for man­agers, and that Rin­con and Shiera di­rectly ne­go­ti­ated with higher-level ex­ec­u­tives. “At PDVSA, ev­ery­one wanted to work with Rin­con,” said one of the for­mer em­ploy­ees. Rin­con got his big break dur­ing a 2002-2003 oil strike against late leader Hugo Chavez when Rin­con’s main firm Trad­e­quip Ser­vices & Marine stayed open, win­ning the ap­proval of au­thor­i­ties. He cul­ti­vated those re­la­tion­ships, brought Shiera into the fold, and they be­gan split­ting over­priced con­tracts, the sources said.

The two had a rep­u­ta­tion for be­ing jovial, dress­ing in lux­ury brands, and trav­el­ing with body­guards, ac­cord­ing to ex-em­ploy­ees, a half-dozen in­dus­try sources, and ho­tel staff in the oil-rich city of Mara­caibo where they were orig­i­nally based. The men threw cor­po­rate par­ties at swanky ho­tels in Mara­caibo and the Caribbean is­land of Aruba, lur­ing top Latin mu­si­cians and serv­ing fine whiskeys, ac­cord­ing to a video of one event, for­mer em­ploy­ees and guests.

But Rin­con and Shiera are “the tip of the ice­berg,” ac­cord­ing to a for­mer high-level PDVSA pro­cure­ment of­fi­cer, who es­ti­mated some 250 other com­pa­nies re­ceive in­sider in­for­ma­tion or pay PDVSA em­ploy­ees for their help in win­ning con­tracts. Venezuela’s op­po­si­tion par­ties say PDVSA has been crip­pled by fi­nan­cial malfea­sance and blames cor­rup­tion for some of Venezuela’s deep eco­nomic re­ces­sion. Food short­ages and rag­ing in­fla­tion have left many fam­i­lies skip­ping meals.

A con­gres­sional probe in Oc­to­ber said $11 bil­lion was miss­ing from PDVSA, fac­tor­ing in this FCPA case. “A cor­rup­tion mess that’s this big and now they say no one knew about it? No­body be­lieves that,” said Elias Matta, an op­po­si­tion law­maker and vice-pres­i­dent of the en­ergy and oil com­mis­sion. — Reuters

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