How banks helped Venezuela’s ‘boligarchs’ extract billions
22 Sep 2020

By Sasha Chavkin and Patricia Marcano, ICIJ, 21 September 2020

ICIJ — On a rusty gas stove in Selena Ramirez’s apartment, a small flame was glowing.

Ramirez, 69, shares the apartment with her daughter and 11-year-old grandson. It is on the ground floor of a government housing complex in San Francisco de Yare, a city in Venezuela about 40 miles south of Caracas. The building’s outer walls are stenciled with the watchful eyes of the late Venezuelan president Hugo Chávez.

Ramirez keeps her stove’s back burner lit for hours when she does her household chores.

“I leave it on because matches are very expensive,” Ramirez said. “We can’t go buying them all the time.”

Venezuela is suffering one of the world’s gravest humanitarian crises. Inflation is out of control and the country’s oil industry, which once fueled the economy, is in shambles. One in three Venezuelans is not getting enough to eat, and about 5 million Venezuelans, more than one in six, have fled the country.

Wealthy businessmen with close ties to the governments of Chávez and his successor, Nicolás Maduro, have fueled the disaster. These tycoons are known as “boligarchs,” an ironic reference to South American independence hero Simon Bolívar, who Chávez invoked as the inspiration for his political movement. Their wealth derives in large part from government contracts, often to provide services for the poor.

A cache of secret bank reports, obtained by BuzzFeed News and shared with the International Consortium of Investigative Journalists, shows how boligarchs moved vast sums of dollars in public money out of Venezuela, including money intended for housing and other basic services, even as the country’s economy was collapsing. The cache, known as the FinCEN Files, includes more than 2,100 suspicious activity reports filed by banks to a U.S. Treasury Department agency known as the Financial Crimes Enforcement Network.

Alejandro Ceballos Jiménez, a construction mogul with cozy government connections, secretly routed at least $116 million from public housing contracts to recipients including offshore companies and bank accounts belonging to family members, the documents show. The contracts were for the construction of Ramirez’s housing complex, part of a grand plan to construct millions of affordable homes for ordinary Venezuelans.

Ceballos owns a mansion in the Venezuelan capital of Caracas and an eight-bedroom home in the suburbs of Miami, near a racetrack where his horses compete weekly for tens of thousands of dollars in prizes.

Ceballos is one of at least seven Venezuelan tycoons whose financial dealings with the Chávez and Maduro administrations are revealed in the FinCEN Files documents. These businessmen, known for their love of Rolexes and racehorses, mostly live outside Venezuela, favoring Florida, Madrid and the Dominican resort of Punta Cana.

The documents also reveal the pivotal role played by banks in Europe and the United States in facilitating the flow of money from Venezuela, despite blatant red flags signalling financial improprieties. Smaller lenders, which include the Swiss banks CBH Compagnie Bancaire Helvétique and the Julius Baer Group helped wealthy Venezuelans spirit cash out of the country, setting up offshore accounts that hid the origins of their money, the records and other documents show.

Banco Espirito Santo, headquartered in Portugal before it was broken up by regulators, moved more than a hundred million dollars out of Venezuela for the Ceballos family before U.S. and Portuguese authorities began investigating it for laundering money. Venezuela’s national oil company and an anti-poverty program called the Misión Che Guevara were among the state agencies that paid Ceballos companies huge sums, routed through a shell company in London.

Major global banks also played a part. JPMorgan Chase, based in New York, and Standard Chartered, headquartered in London, processed questionable transactions while serving as correspondent banks, an intermediary role in which multinational banks plug smaller lenders into the global financial system.

Overall, banks reported more than $4.8 billion between 2009 and 2017 in suspicious transactions with links to Venezuela, an ICIJ analysis found. Nearly 70% of that amount involved public money and had a Venezuelan government entity, such as the Ministry of Finance or the state oil company, as a party.

“That is what people don’t connect,” said Zair Mundaray, who served as a top anti-corruption prosecutor in Venezuela until he was exiled in 2017, and now advises opposition leader Juan Guaidó. “All the things that Venezuelans don’t have are from the money that went abroad.”

‘Los enchufados’

In a gated community outside Miami, Ceballos’ home dominates the corner of Jockey Circle and Steeplechase Drive. Horses nibble on lush green lawns of homes across the street.

About a half-hour drive from the property is the Gulfstream Park racetrack in Hallandale Beach, Florida. The racetrack is where horses from Ceballos’ racing stable compete each week for purses of up to $75,000. At its entrance a 110-foot tall Pegasus stands astride a vanquished dragon, the second tallest statue in the continental United States behind the Statue of Liberty.

For Ceballos, the thrill of winning a horse race is one of life’s great pleasures. “It is like giving a kiss to a beautiful woman,” he said in a 2016 interview published on his personal website.

Ceballos’ fortune comes from his family construction business, which has been operating in Venezuela for decades. The business was founded in 1978 by his mother, Maura Betty Jiménez de Ceballos, and many of its operations were consolidated in 2000 under its current flagship company, Inversiones Alfamaq. Grupo 7C, the parent company of the family’s businesses, takes its name from Maura and her six children — seven members of the Ceballos family.

Under the Chávez government, the Ceballos family won dozens of contracts to build schools, water treatment plants and other projects, including the renovation of a major sports arena, the Poliedro de Caracas.

“There isn’t a state in Venezuela that over these 37 years Alfamaq hasn’t worked in,” Alejandro Ceballos boasted in a 2016 interview.

Ceballos has been dogged by allegations of corruption. He was investigated by Venezuela’s opposition-controlled National Assembly for alleged participation in several schemes to steal public resources. In one instance, he was suspected of helping to divert $500 million from a state-owned aluminum and gold producer; in another, he allegedly collaborated in the improper sale of public lands in a tourism zone called “Acapulco Venezuela.”

The investigations, which Ceballos denounced on a company website as “unfounded accusations” promoted by “unwholesome interests,” were eventually dropped.

The Ceballos family maintained its close ties to the Venezuelan ruling elite during Maduro’s rule.

In 2016, Venezuela signed an agreement with Gold Reserve, a Canadian gold mining company. After an official ceremony attended by Maduro, a celebration was held at the Ceballos’ four-story mansion in the posh neighborhood of Alto Hatillo in Caracas, a former employee of the Ceballos family told ICIJ’s partners at Armando.info, a Venezuelan investigative news website.

Inversiones Alfamaq acquired a stake in Gold Reserve and provided “support services” to a precious metal mining operation in the southeastern state of Bolivar.

Among Venezuelans, government-allied moguls like Ceballos are also known as enchufados, or “plugged in.” Many consider them to be profiteers, exploiting a country that Transparency International ranked this year as one of the five most corrupt in the world.

Antonio Travieso, 55, a food vendor in the Chacao market in Caracas, said business ventures by the enchufados don’t offer any benefits to Venezuela or its people.

“It’s business that will bring easy money, money from cheating, with no concern about the consequences,” he told Armando.info.

Ceballos did not respond to ICIJ’s requests for an interview or answer detailed questions submitted in writing in August. In an email to an ICIJ reporter, he cited difficulties accessing documents due to Venezuela’s COVID-19 quarantine. He didn’t respond to later emails offering to extend the deadline for a response.

“In light of the following I confirm the impossibility of meeting your requests in the time specified, and I confirm the consideration that is due to journalists for their courage, valiance and ethics, provided that their work has respect for the truth as its true north,” Ceballos wrote.

‘Looting the wealth of a nation’

Much of the money that left Venezuela has vanished from public sight. FinCEN Files documents offer a rare view into where some of it went, and the banks that helped send it on its path.

The insight comes from the banks themselves.

A bank is required to send a suspicious activity report to FinCEN if it “knows, suspects, or has reason to suspect” that a transaction moving through the U.S. involves criminal money or has no apparent business purpose. These reports do not constitute criminal accusations, but they provide the financial system’s strongest line of defense against corrupt politicians, drug kingpins and ordinary criminals laundering ill-gotten gains. Lenders are supposed to actively seek out and report transactions that raise red flags for potential financial crime.

Read more at the International Consortium of Investigative Journalists

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