A scheme featuring Venezuelan businessmen Joseph Benoudiz Benoudiz and Pablo Emilio Cárdenas Zambrano, including US corporations owned by them, was born in 2007. This is not the first time that both of them have been spotted in a case of fraud against the Venezuelan State. In 2016, Benoudiz fessed up about resorting to bribery to win contracts.
Two Venezuelan businessmen that cashed in on thick public takeover bids in Venezuela under the government of late President Hugo Chávez were not satisfied with the inflated dividends arising from their deals. In addition, by means of sophisticated fraud schemes, they succeeded in over-invoicing dozens of millions of US dollars.
One of them has sought shelter in a well-off area of Miami, under the cover of “businessman.” Meanwhile, from a distance of 1,600 miles, he moans before his acquaintances the collapse of Venezuela, the former South American oil super power.
The plot featuring Joseph Benoudiz Benoudiz and Pablo Emilio Cárdenas Zambrano began in 2007, when the cobweb of corruption wrapping Venezuela in the past two decades started to be woven with markups and surcharges in multiple agreements inside the oil business and public housing.
The companies run by these two Venezuelans for their alleged malfeasance, ATN Industries, Inc. of Miami and Jiafang Steel Pipes Americas, Inc. of Texas, and Consorcio Pentamat, C.A. in Venezuela, made use of US banks to triangulate funds, pay markups and receive the proceeds from their obscure operations, as evidenced from court records, bank extracts and dozens of commercial documents analyzed by the Investigation Project of Journalist Themes (ITEMP) for 17 months.
The court records accessed by ITEMP revealed that in a civil trial in 2016, Benoudiz admitted to have paid markups to certain persons having relationships inside Venezuela’s oil business in order to obtain proprietary information on contracts, in contravention of federal anti-fraud laws.
Since at least 2015, US federal authorities have followed up the activities carried out by Benoudiz and Cárdenas for their alleged connection with a much-talked-about case of corruption in Petróleos de Venezuela (PDVSA), the former jewel of the economy of the Caribbean country, plundered by bureaucrats and corrupts in the past decade, according to the court records reviewed by ITEMP.
Cross-country race
According to a press article released in 2017, Benoudiz and his partner Cárdenas, through Consorcio Pentamat, took benefit from agreements executed with PDVSA for the sale of dedicated pipes for oil and gas drilling, as representatives of Liaoning Northern Steel Pipe Co., Ltd., a major Chinese steel company.
It could be a standard deal except for the conduct of Benoudiz’s firm as a subsidiary of the Chinese manufacturer, including over-invoicing and surcharges on the cost of sale to get an extra amount of millions of dollars from PDVSA.
The case was under investigation by the Audit Committee of the Venezuelan National Assembly, with a majority of the opposition to Nicolás Maduro’s regime after the parliamentarian election in 2015. The Audit Committee inquired into irregularities around the oil company, the deposit of US dollars that oxygenated the so-called Bolivarian Revolution under Chávez.
The findings of the Audit Committee in October 2016 confirmed irregularities in the sale of those pipes by Benoudiz and Cárdenas, including a potential surcharge. Nevertheless, the Office of the Prosecutor General, controlled by the government, did not commence any criminal investigation.
By then, beginning in December 2006, the Office of the Prosecutor General was led by Luisa Ortega Díaz, a fiduciary official linked to Chávez’s political process until August 2017. Then, after voicing criticism of Nicolás Maduro’s government, Ortega was driven into exile in Colombia.
The former Prosecutor General claimed to have no knowledge of the case file against Benoudiz and Cárdenas, nor had she even heard their names, one of Ortega Díaz’s spokespersons told ITEMP.
Congressman Freddy Superlano, of opposition Voluntad Popular (People’s Will) party, disclosed that the entire information related to Benoudiz-Cárdenas’ case would be furnished to the ad hoc Attorney General, appointed by the Interim President of Venezuela, Juan Guaidó, recognized as such by over 56 countries, including the United States.
“I am forwarding to the Attorney General this information in order to undertake legal actions in the United States,” Superlano told ITEMP. The congressman chaired the National Assembly Audit Committee until November 2019, when he stepped down to facilitate an investigation into his incumbency on charges of corruption.
Modus operandi
Lack of transparency at the Office of the Comptroller General and the Office of the Prosecutor General concerning any investigation into government corruption came to surface the afternoon of June 4, 2015. Then, “a source” that worked for Cárdenas for many years filed at the Anti-Corruption Division of the Office of the Prosecutor General a yellow enveloped stuffed with papers.
The materials contained an in-depth report, backed by more than one hundred pages of documentary evidence, where Benoudiz and Cárdenas were accused of swindling, in form of double invoicing, at least US$ 18.2 million cleared by the National Foreign Exchange Administration Commission (CADIVI), a government agency in charge of exchange control in Venezuela since its implementation in 2003.
Benoudiz and Cárdenas’ major company in Venezuela, through which the fraud had been consummated, received a total amount of US$ 51 million from CADIVI in 2004-2012. Noteworthy, the writ of complaint establishes that the sum of money was ill-gotten.
The charges against the businessmen were processed at the 67th Public Prosecutor’s Office with National Authority under case file Nº MP-268713-2015. The writ of complaint pointed to a presumed fraud for double collection in a steel pipe project from the Ministry of the Environment by a company property of Benoudiz and Cárdenas in 2007.
In 2015, Ana Isabel González headed the Anti-Corruption Division of the Office of the Prosecutor General, a controversial public prosecutor, best known for her dealing with corruption cases, many of them politically related, which called into question her reliability as independent authority.
Nowadays, Hernández acts as the Director of International Affairs at the Office of the Prosecutor General. The official did not respond to the request for input with regard to this investigation.
The case and the existence of the materials included in the docket were first reported on Venezuelan news website Caraota Digital on November 27, 2017. The contents are no more posted. However, references to the investigation can be found on the internet.
The website provided some details about the scheme through which the two businessmen reportedly defrauded the Venezuelan States in a modus operandi replicated some years later against PDVSA, as found by ITEMP during a review of some claims against Benoudiz and Cárdenas.
ITEMP examined the evidence and the particulars of the plot in 2007, after gaining access to around two hundred papers, depositions and witness attestations. It was found that the old partners entered into a longstanding partnership in Venezuela that was useful to silence and shield their doubtful activities.
The companies used for the reported operations, as well as the bank accounts receiving the millionaire deposits, are domiciled and operating in the United States. Hence, any irregularity as to the country jurisdiction could be a violation of the Foreign Corrupt Practices Act (FCPA).
“The triangular scheme under analysis based on evidence shows that a company incorporated in Texas, using a US financial institution, processed payments and distributed proceeds. For this reason, we are witnessing a violation of the FPCA,” explained Álvaro Ruiz Ostos, an attorney of Boston University, expert in international corrupt practices.
Ruiz Ostos got access to the court materials, including evidential elements of the case, from ITEMP in order to assess its impact under US laws.
The theft of Venezuelan public assets is estimated at US$ 60 billion, by means of multiple operations with Petróleos de Venezuela, in addition to the procurement of equipment to ameliorate the electricity crisis in 2012, opposition spokespersons claimed.
Benoudiz and Cárdenas’s case is just a brick in the huge tower of scandals erected around the Venezuelan state oil company.
Some more than blood compadres
In 2007, ATN Industries, Inc., a corporation based in Miami in the business of sale of industrial equipment to Latin American customers, was awarded a contract by the Venezuelan State through the Ministry of the Environment to supply pipes with certain specifications for adduction of Winka aqueduct, a project designed for the utilization of Tres Ríos reservoir, located in the oil state of Zulia, eastern Venezuela.
In 2007, Yubirí Ortega de Carrizales, the wife of former Vice-President and former Ministry of Defense Ramón Carrizales, was the Minister of the Environment. The official resigned in January 2010. Nowadays, she is the First Lady of the state of Apure, southeastern Venezuela. The Office of the Apure State Government did not reply the e-mails asking for an interview with the ex-minister.
ITEMP could not ascertain whether the contract had been awarded directly or through public takeover bid for lack of public records of the Ministry of the Environment.
The contract awarded to the company amounted to US$ 130 million, including a payment in advance tantamount to 60%, or US$ 70 million. The remainder was scheduled to be paid upon presentment of the invoice and assessment of the project.
Winka aqueduct was completed in November 2010, three years after the startup of the works, astonishing feat in the middle of the out-of-proportion white elephants in Venezuela, a report of Transparency International noted.
According to a press release at that time, the project encompassed 70.5 kilometers of pipeline, from Tres Ríos reservoir through Wüimpala drinking water treatment plant.
“Adduction pipes of 2,600 and 2,800 millimeters in diameter were laid, in addition to filling in spillways walls at Tres Ríos reservoir and streamlining of the drainage of the dam hydraulic filters, among other works,” Vice-Minister of Water Cristóbal Francisco Ortiz announced on November 18, 2010, after the completion of the work.
The coated steel pipes used for the dam were properly hole-punched by the Chinese manufacturer Liaoning Northern Steel Pipe Co., Ltd. Therefore, each of them has a unique certified serial number.
The original addressee of the shipments was the Venezuelan Ministry of the Environment in order to facilitate customs clearance and even the payment through the Central Bank or the Ministry of Finances. However, all of a sudden, a shift occurred.
Based on the contract documents and the writ of complaint filed with the Office of the Prosecutor General, reviewed by ITEMP, “changes were made of the consignee, the customs agent and the shipper. The latter one issues the final invoice for customs clearance of the pipes and it is also responsible for hiring the maritime freight.”
The changes in the commercial chain were decisive as the entire operation of export and invoicing was handed over to Benoudiz and Cárdenas’ companies and partners. Eventually, they ended up providing the key materials to commit the alleged acts of corruption, ITEMP found.
Rather than the Ministry of the Environment, Consorcio Pentamat, C.A. became the addressee.
Tecno Agentes Aduanales Venezuela acted as the customs agent, whereas the shipper turned out to be Threepwood Investment, Inc., a Panamanian company incorporated in 2007, the same year of the agreement, also linked to Cárdenas, as appears from the records of Import Genius & Panjiva Inc., that track global trade.
State records in Miami list a company also named Threepwood Investment, Inc., incorporated on November 25, 2019, with a registered address associated with Pablo Cárdenas, as per data of Company Credit Report.
The businessmen’s way of dealing with the contract and import of Chinese pipelines for the Ministry of the Environment allowed them to use same documents and create double invoicing, for the collection of foreign currency through CADIVI on account of same materials provided for the building of the aqueduct, according to the writ of complaint filed with the Office of the Prosecutor General and Venezuela’s commercial records.
As argued in the writ of complaint, Cárdenas requested one of his employees to prepare a bill of lading for each invoice related to the contract entered into by and between US company ATN Industries, Inc. and the Venezuelan Ministry of the Environment.
The bill of lading is a standard international legal document containing the list of a shipment of goods. The document is useful to prove the receipt and delivery of the commodities hauled by a carrier. The relevant aspects of the cargo are specified in the document to confirm the shipped materials, Venezuelan economist Gabriel Páez explained in a notice.
Under CADIVI regulations, the bill of lading, the invoices and the corporate tax documents were required to apply for an authorization for foreign currency clearance.
However, such an administrative step did not apply to ATN Industries, Inc. and the Venezuelan government, according to the documents signed by the two parties. The payments by the Ministry of the Environment were made through the Central Bank of Venezuela or the Ministry of Finance.
A fax from the Ministry of Finance to ATN Industries, Inc. in April 2009, examined by ITEMP, points to some payments processed by the Ministry of Finance on behalf of the company through the Central Bank of Venezuela, “which are likely to belong to the contract of the Ministry of the Environment,” highlights an exhibit forwarded to the Office of the Prosecutor General in form of back-up document of the complaint.
Nevertheless, there is no possibility of deciphering the noted amounts from the copies of the materials. The Central Bank of Venezuela does not keep for public use the reports of foreign currency clearance, a spokesperson of the Central Bank of Venezuela said.
Consorcio Pentamat, C.A., the shareholders of which (Benoudiz and Cárdenas) are the legal representatives of ATN Industries, Inc. in Venezuela, finally made the application for foreign currency before CADIVI, with same documents as those signed between the Ministry of the Environment and ATN Industries, Inc., the case file revealed.
In order to secure the deal and get the foreign currency “accordingly,” the businessmen resorted to a Panamanian shipper, Threepwood Investment, Inc. In February-April 2009, that company issued 24 proforma invoices for CADIVI to Consorcio Pentamat, “with same records of shipment of the pipes submitted for the contract with the Ministry of the Environment in 2007,” the writ of complaint spells out.
The invoices, with their respective serial numbers, provide a description of the product, including an amount of around US$ 800,000 for each of them, for a lump sum payable of US$ 18.2 million.
According to the Chinese pipeline manufacturer and by international rule, each cylinder should be properly hole-punched with a unique serial number. Therefore, the same record of the 2007 agreement may not be used for double payment in 2009.
Threepwood Investment, Inc. was incorporated in Panama, on February 15, 2007, same year of the execution of the agreement in Venezuela with ATN Industries, Inc.
Threepwood records display connections between the company and Pablo Emilio Cárdenas, from Panama to Miami with same registered addresses, contact data and personal relationships.
Over two dozen proforma invoices issued in 2009 by the shipper depict on the heading the office address in Panama, but with a Miami cell phone number linked to Cárdenas, ITEMP noticed.
Threepwood Investment, Inc. is represented in Panama by Dudley & Asociados. The law firm did not respond to two letters sent by ITEMP enclosing a questionnaire in relation to the company and the subject matter.
The existence of Threepwood Investment, Inc. as a logistic service company (shipper) is peculiar and helps understand how the reported fraud was schemed.
In Venezuela, a company recorded with same name had Mr. Vicente Bolinches as Operations Manager in 2006-2016. Therefore, he was featured in the company during the preparation of the documents required to apply for the foreign currency.
The former manager did not answer to a letter sent by ITEM, asking for his version of the case.
Bolinches appears related to Pablo Cárdenas in at least half dozen companies registered in Florida, with same head offices in Doral, Miami, a bastion of the Venezuelan community.
On June 25, 2019, another company with same name, Threepwood Investment, Inc., was registered in Miami, with same address of Bolinches and Cárdenas in all documents, as evidenced from the corporate records in the state of Florida.
Brian Briz and Agnes Doyle, attorneys at law of Holland & Knight in Miami, legal counsels of Benoudiz in the United States, did not respond to the e-mails and telephone calls asking for their comments on this case.
ATN Industries, Inc. continues operating in the United States, as if what happened in Venezuela was a thing of the past.
In September 2019 – September 2020, the company completed 39 shipments to US port from South Korea, China and Brazil, according to Datamyme, a data base of the specifics of the US import trade.
Noise in a Texas court
On September 24, 2014, Joseph Benoudiz and some of his companies based in the United States – ATN Industries, Inc. of Miami, and Jiafang Steel Pipes Americas, Inc. of Texas – lodged a civil complaint against a former employee and nine agencies related to that subject on charges of swindle.
The lawsuit lingered on the Southern District of Texas for more than three years, until its resolution on November 27, 2017, as per court records. “It was a complex case, involving 230 civilians and hundreds of pieces of evidence, both on the side of the claimant and the side of the defendant, under case number 4:14-cv-02743,” the docket reads.
During the civil case, Benoudiz found himself on the witness stand to testify apropos the complaint lodged by him. However, a controversial matter related to his businesses and the government of Venezuela popped up in the room, in view of the corruption scandals disclosed in the South American nation.
Queried by the counsel for the prosecuting party during a deposition involving the businessman in August 2016, accessed by ITEMP, Benoudiz fessed up about bribing one or several persons accused in a corruption case of Petróleos de Venezuela in 2012, who worked together with him to obtain contracts.
Benoudiz referred to some individuals who used pseudonyms in that corruption scam, particularly a subject “to whom a kickback was paid and who sends to me the price (of products). It is Taurus Enterprise (the company property of that person). They sent me the invoices for the kickbacks. Yes. That is correct.”
Petróleos de Venezuela apparently paid over US$ 12 million on account of markups to a group of Venezuelan businessmen in 2012, and that raised the alarm of the very in-house audit department. The amount had been deposited in a bank account of a company different from the company stated in the invoices.
Known in PDVSA as “The tzars of Houston,” a group of Venezuelans, including Benoudiz and Cárdenas, presumably diverted to Curacao the proceeds of markups and kickbacks in connection with a twisted operation of up to US$ 54 million.
A certified translation of Benoudiz’s statements obtained by ITEMP shows his admission, perhaps unawares or pressurized by the attorneys during the trial, of having paid up to 10% out of the invoiced amount in exchange for access to key information inside PDVSA in order to secure the deal.
The subject, Benoudiz conceded, did not work for the Venezuelan government or any of PDVSA subsidiaries. However, he was taken by multiple individuals at the same time. “He helped me with many deals with PDVSA,” Benoudiz affirmed.
Pursuant to the Foreign Corrupt Practices Act (FCPA), US individuals and corporations are banned from bribing foreign officers.
In the course of time, the definition has been expanded to include individuals with links inside the US financial system, either or not physically located in the United States.
“This initiative targets the abuse of weak juridical systems sensitive to corruption, within which Venezuela is the perfect example,” as suggested by Ruiz Ostos, a specialist in high-risk jurisdictions and financial sanctions.
The expert in US laws analyzed for ITEMP for several weeks most of the evidential elements of the case against Benoudiz and Cárdenas to match their impact with reported cases.
On December 5, 2019, ITEMP sought a “Advisory Opinion” from the US Department of Justice on an action of compliance with the Foreign Corrupt Practices Act (FCPA), in relation to the two cases where Benoudiz and Cárdenas were accused. However, no official response had been received as of November 26, 2020.
Individuals or corporations may ask the US Department of Justice to determine if “a specified, prospective, non-hypothetical conduct” violates the FCPA.
Over the past few years, the US Department of Justice has taken long to answer to such requests. As late as August 14, 2020, it pronounced an Advisory Opinion on the FCPA after the request of a company. No Advisory Opinion had been issued since 2014, the National Law Review reported.
The line of doubtful money and its relationship with corruption and political interests is very thin. As the scandals such as this involving Benoudiz and Cárdenas arise in the universe of misappropriation that hit Venezuela, it is true that same characters resounded, but to a different tune and in a different place.
Meanwhile, the bunch of public servants that caused the economic collapse of Venezuela are fugitive, or arrested, or their whereabouts are unknown, or they are just in the same building where they connived, with their names barely noticed.