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Jesús Villanueva — The PDVSA Auditor who Wanted to Hide his Wealth

Until 2010, he was the auditor general of PDVSA. A year before retirement, he wanted to have a power of attorney to manage a company registered in Panama, through an operation that involved Switzerland and Luxembourg, all under a scheme designed by Mossack Fonseca, a Panamanian law firm specialized in creating international structures to cover the wealth of those who can pay for their services.

29/03/2016

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They practically cried their eyes out suggesting not taking him as a client. "Did you read thoroughly the links below? He is on the board of directors of Pedevesa (PDVSA) with the brother of President Hugo Chávez, Asdrúbal (...) The possibility of a scandal is too high (...) Also, I do not agree at all with what they are doing to the Venezuelan people with this company," said in May 2009 an alarmed Ramón Fonseca, founding partner of Mossack Fonseca, a company created in Panama in 1975 to advise investors in the formation of arrangements of international companies to evade taxes in their countries of origin or launder money.

In reality, Asdrúbal Chávez is a cousin of the deceased Venezuelan head of state, but that is one small detail. The important thing is that one year and two months later, in July 2010, Jesús Manuel Villanueva Rojas, then Auditor General of Petróleos de Venezuela (PDVSA), did obtain the power of attorney to manage a Panamanian firm that would be used in the mobilization of funds deposited in a Swiss bank account. That goal was achieved thanks to a figurehead.

In July 2010, after the power of attorney granted to him for the management of company Blue Sea Enterprises was revoked, Villanueva Rojas, a member of Rafael Ramírez’s management in the Venezuelan state oil company, did not desist. Through his Advisor in Luxembourg, he got his daughter Anny Josefina Villanueva Silva to be authorized to manage the overseas company.

This story emerges from a series of internal emails from the international company known as the International Consortium of Investigative Journalists (ICIJ). The rest of the story herein presented was prepared from the analysis of these writings and interviews to witnesses who confirmed the information found.

Decomposed Food

In July 2010, at the same time that the daughter was approved as a figurehead, in Pdvsa, the retirement of Villanueva Rojas was being prepared, who distinguished himself from the rest of his co-workers by his good taste in clothing and polite manners, especially with female co-workers. This man, who joined the oil industry in 1982, was blamed for leaking an internal audit report submitted on April 7, 2009 to the president of the state oil company, Rafael Ramírez, which demonstrated the irregularities committed in the purchase of food for President Hugo Chávez's social program, called Pdval, according to what journalist Mery Mogollón wrote in August 2010 in Contexto magazine. "That report was a card up his sleeve to put pressure on those who he believed had turned their backs on him by demoting him from the board of directors of the industry," says a former co-worker of Villanueva. Another former employee of the industry remembers that before Villanuevas’ retirement, the finger was pointed at him for dubious handling in payments of invoices to suppliers and in the administration of Pdvsa trust funds.

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Villanueva was blamed for leaking an internal audit report that showed the irregularities committed in the purchase of food for the social program of President Hugo Chávez.

However, the Pdval case report would be his end. According to this document, PDVSA used until mid-2008 over 2 billion dollars to buy one million tons of food. The report prepared by Villanueva Rojas’ team revealed that only 25% of what was purchased arrived in the country, and only 15% of that total was distributed. In addition, it reported at least 180 million dollars in surcharges for not considering the best offers, acquiring damaged products and sometimes a surcharge of nearly 100%. On the other hand, six out of the 10 contracted suppliers were intermediaries. All this happened in the context of a food shortage emergency.

The disclosure of that document issued in 2009 by the team of Villanueva—who did not hesitate to introduce himself as the executive who had the control of all Pdvsa's credit and debit accounts—was known in mid-2010, when the finding of nearly 100 thousand tons of decomposed food that the state oil company had bought from companies in China, USA, Brazil and Argentina, was a scandal that led to the arrest of three company officials in charge of trading these goods.

Modus Operandi

Upon reviewing the emails of Mossack Fonseca about the former PDVSA auditor, the efforts of the law firm to facilitate the operations with the figureheads of Politically Exposed Persons (PEP) are evident. Those actions, which border on illegality, violate international controls against the laundering of money from activities like drug trafficking and corruption.

The first step in this story takes place in Luxembourg, the Grand Duchy surrounded by Belgium, Germany and France. On March 20, 2009, a Mossack Fonseca representative requested to include a list of 15 companies in the Panama registry. He even says that if one is not available, that is, if the name is already in use by another company, "simply add an additional word" to create a new name.

Among the 15 companies is Blue Sea Enterprises, registered in Panama on March 23, with a capital of 10 thousand US dollars. Its directors would then be Mossack Fonseca employees, who lend their name to the proceeding before the commercial registry.

But this shell company, which had no physical place of business, employees or merchandise in production or exhibition, is sold almost two months after, on May 5 of the same year. Although the leaked documents do not indicate who the buyer is and for what purpose he acquires it, on the same day, the directors of Mossack Fonseca are informed of the due diligence procedures carried out to determine whether Jesús Manuel Villanueva Rojas was a politically exposed person.

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Company Blue Sea Enterprises was registered in Panama on March 23, 2009, with a capital of 10 thousand dollars.

At the Luxembourg branch of Mossack Fonseca, they had already issued a power of attorney to manage the company, and waited for the result of the search. As the Venezuelan lawyer Alejandro Rebolledo explains, it is a formality with which banks and financial advisory companies comply to avoid money laundering crimes. On May 6, 2009, one day after the sale, an employee of the law firm explained in an email how they would proceed after agreeing the sale of the company, "The instructions to update the company's profile are sent with the power of attorney issued by the Luxembourg office. With this information, the officers investigate the agent and update the system if the person has no history that could affect us." Not in all cases an alert is receive, but it was received in the case of Villanueva Rojas.

Controversy

The leaked emails demonstrate the internal debate generated in Mossack Fonseca due to the position of Villanueva Rojas in PDVSA. Although the first search rules out that by May 2009 he would be still a director of the oil company, in a later analysis, in July of the same year, he is classified as a director, and they explain that Blue Sea Enterprises will be used as an investment vehicle. They also detail, according to the information received from Luxembourg, that the client's funds come from another Swiss bank and would be the proceeds from "savings accumulated by the client during his long professional activity".

However, a senior executive of the firm said on July 10, "In my opinion, it is very likely that a scandal arises at some point, particularly because they believe they are untouchable and are doing things their way." She said regarding the behavior of the officials in Venezuela.

So it was not Ramón Fonseca only, but Jurgen Mossack as well, the other founding partner of the law firm, who in two emails of one line each consecutively said, supporting his partner, "Right, we cannot have him as a client". And then added, "In addition, they and the bank (the financial entity that participated in the operation is never identified) are helping the communist cause."

After those last words the sentence was issued. On July 22, they reported that "The partners have decided not to grant Mr. Villanueva the power of attorney, given that he is a key person in Pdvsa as the current Director/Comptroller/Auditor of that entity (...) There is a high risk in doing business with this person, because he has direct access to the public treasury and the origin of his funds may be questioned at any given time, so the odds of a scandal are higher. The partners have also suggested contacting the bank (its client) directly and avoid that they too are affected by this situation."

From Luxembourg, Villanueva's advisor dismissed the arguments sent by the office. "My client for this company is a bank in Switzerland. They know about Mr. Villanueva and his background. However, they accepted him as a client, since they have used several reliable sources (not only World Check) to verify the origin of the funds deposited in the bank account, and they are absolutely certain that the money comes from clean business. "

Communications ceased until February 2010. Before, Villanueva's representative unsuccessfully requested them to reconsider the decision. On the first day of the second month of the year, the adviser sent an email from Luxembourg to Mossack Fonseca. This time, he asked to take up the case of company Blue Sea Enterprises and suggested that the daughter of Villanueva, Anny Josefina Villanueva Silva, could be the holder of the power of attorney.

In the Name of the Father

Anny Josefina Villanueva Silva, according to the database of the Social Security of Venezuela, worked at Baker Química de Venezuela until 2008. Her life takes place between Cumaná, in the east of the country, and Caracas, the capital of Venezuela. When contacted by telephone for this report, she acknowledged being the daughter of the former Pdvsa director, but did not want to give information on her father's whereabouts or telephone number to locate him. "He is not here," she said before laughing and shut up when asked if the former Pdvsa auditor is in Houston with his second wife.

Villanueva Rojas is a public accountant graduated from Universidad Central de Venezuela, with a postgraduate degree in Hydrocarbon Economics from the same university, with international certifications as an internal auditor and fraud examiner, according to the profile written by journalist Mery Mogollón in August 2010.

Mogollón tells that the former director joined the oil industry in 1982, as an employee of Meneven, an extinct subsidiary of Pdvsa. Until 1999, "Villita," as his closest co-workers called him, was a middle manager with little growth projection, which changed with the arrival of Chavismo.

In 2002, he became, together with Rafael Ramírez - current Venezuela's ambassador to the UN -, a member of the board led by the late economist Gastón Parra Luzardo. This group of executives had to face the oil strike from December 2002 to February 2003, aimed to pressure President Hugo Chávez to change his relationship with the oil industry and respect the meritocracy. In this context, Villanueva Rojas was engaged in documenting the losses that later served to open criminal proceedings against executives of the state oil company, who were dismissed for joining the protest that caused losses of over 20 billion dollars.

Despite the changes in the industry, says Mogollón, the official stayed very close to Alí Rodríguez, president of Pdvsa (2002-2004), and then to Rafael Ramírez (2004-2014), although he did not stop criticizing, for example, the dispersion of resources in the social programs of Chavez, known as missions, which, in the opinion of Villanueva Rojas, could be considered as misappropriation of funds.

As general auditor of Pdvsa and president of the Audit Committee, he was responsible for signing the last balance sheet presented by the Venezuelan state company to the US Securities and Exchange Commission in 2006. The US authorities criticized his multiplicity of positions. "Based on the terms defined in the rules of Corporate Governance of the New York Stock Exchange, it is not considered independent," since - more informally explained -, as an auditor and manager, he was both payer and payee.

His current wife, Maritza Rojas de Villanueva, also held top positions in the administration of the oil industry, especially after 2003, when he was transferred to Citgo, a Venezuelan oil subsidiary based in Houston, USA. In 2011, she became Chief Treasurer of the company, as revealed by the letter of promotion of that time. That is why her husband frequently traveled to that city.

Villanueva Rojas left Pdvsa in 2010 and began to work in the Caracas office of Gazprom, where he worked until 2011. From then on, his place of residence is unknown and there is no more information about company Blue Sea Enterprises.

Her daughter says she does not remember the name of the company, but assures that no documents will be found to prove that she manages a Blue Sea Enterprises bank account. "If you do not have a document that says there is an account of that company in my name, you cannot say that I am the figurehead," she said when interviewed by phone, and then added, "Having that company in my father's name should not be a problem."

According to Peruvian lawyer Oscar Solano, specialist in asset recovery in the legal division and consultancy of the International Center for Asset Recovery (ICAR) of the Basel Institute, "the most reserved international definition of Politically Exposed Persons (PEP), aims to reach not only the one person having the political power - the public official - but all related persons, like his immediate family, friends, partners and companies.” In cases like these, says the expert, a sanction to the company that carries out the management, imposed by the controlling agency of his country, is appropriate. However, Fincen, the agency of the US Department of the Treasury that uncovered the money laundering through the Private Bank of Andorra that involved four former officials of the Venezuelan government could also participate.

In cooperation with Nayrobis Rodríguez from Cumaná



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