Food sometimes arrives to the Community - Money Always arrives to Tax Havens

The Venezuelan government has resorted to a myriad of trading intermediaries to provide imported merchandise for the Claps, its star food aid program. With massive purchases in international markets, it poorly satisfies the hunger of popular sectors while safely feeding the financial flows that end in bank accounts in Hong Kong or Switzerland.
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The
business of the Local Supply and Production Committees (Claps) has at least two
sides. The head, visible to everyone —thousands of citizens waiting for the
long-awaited box that the Government distributes with food at subsidized prices;
and the tail, —the eagerness of intermediaries who bill millions of dollars for
that merchandise. For some, access to the boxes and the range of products in
them seems a matter of chance and consent by officials, while others, the
traders, have their fortune guaranteed since the boxes are shipped in containers
from ports abroad. The route of prosperity is not for traders in Venezuela only,
but for certain tax havens as well.
The
reward is so profitable that since the middle of last year, when the state plan
created in 2016 took shape, despite the framework of what might the biggest
economic crisis in the history of Venezuela, an endless number of suppliers that
only the Venezuelan authorities seem to know wanted to be part of the business.
Just a couple of names have been made public, namely Postar
Intertrade Limited
and Group
Grand Limited,
but they are certainly not the only ones.
For
example, Million Rise Industries Limited is one of the unknown suppliers of the
program. It is, like Group Grand Limited—infamous
since the dismissed public prosecutor general of Venezuela, Luisa Ortega Díaz,
linked it with Maduro last August ,
registered in Hong Kong, the most important tax haven in Asia and the fourth
jurisdiction in the Financial Secrecy Index prepared by the Tax Justice Network.
The Venezuelan government resorted to that company to buy sugar and mayonnaise
from Brazil or white rice from Uruguay in what seems to be an odd intermediation
since Venezuelan state companies directly negotiated for years with companies
from both countries.
For
Million Rise Industries Limited, the gateway to the business was a contract with
the Venezuelan Foreign Trade Corporation (Corpovex), a sort of state holding
that centralizes public imports, chaired by the Major General of Aviation,
Giuseppe Yoffreda Yorio. Thanks to contract CPVX-CJ-CONT-0072-2017, in last
year’s September, the Hong Kong-registered company billed in a week at least
668.10 metric tons of Uruguayan white rice, dispatched from Montevideo by
Damboriarena Escosteguy, as well as 125 tons of sugar and 72 tons of Brazilian
mayonnaise, shipped from the port of Santos by Tenda Atacado Ltda, a supermarket
chain.
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Just
to pay for the rice and mayonnaise to Million Rise Industries Limited, Corpovex
disbursements totaled $ 1.3 million in a seemingly incomprehensible
triangulation. The invoices make the route of the money and the payment
conditions clear. The Venezuelan state-own company had to transfer the money to
an account in DBS Bank of Hong Kong, with the Deutsche Bank of Frankfurt as an
intermediary. A quarter of the amount had to be "prepaid", another 65% "against
shipping documents", and the remaining tenth "against delivery and receipt
certificate."
The
figure of 1.3 million dollars seems small if compared to the frequent amounts in
these transactions. But it would be just a small slice of the whole pie if —as
disclosed on Twitter by Well Thoughts Consultants, a consulting company ran by
Army Major General Hebert García Plaza, former Minister of Food and Water and
Air Transportation in the early years of Maduro's administration— Million Rise
was assigned the provision of five million Clap
boxes.

Hebert García Plaza
Contact in Hong Kong
What
is striking about this assignment to Million Rise is that it is described on its
website as a textile company. "Million Rise was founded in 1990. We invested in
a factory in the city of Ningbo in China, and developed the Home Textiles
collection. All our products have the best quality and the most competitive
price. We can help you create a luxurious and comfortable home," offers the site
with a catalog of items to decorate rooms, kitchens, bathrooms, or baby
blankets, among others.
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Although
there is a company with the same name in Panama, both the address and the
contact telephone number on the invoices issued to Corpovex are in Hong Kong and
are the same that appear on the website. The company did not answer the
interview request for this report.
The
company registry of Hong Kong reveals that Million Rise Industries Limited was
created on October 3, 1995 and not in 1990, as stated on the website. The
documents of the company include the names of Cheung Kwok Chuen Joseph and Ho
Kin Din Danny, who also appear as directors of another company in Hong Kong
called Mass Joy Industries Limited, another supplier of the Clap business based
on the list that Well Thought Consultants published on its Twitter account.
These two people seem to act as "front men," a common practice in tax havens to
hide the identity of the actual
beneficiaries.
But
there is more. Kwok Cheung is the director of a company with the same name as
the company in Hong Kong, recently created on January 19, 2018 in Miami,
Florida. In the incorporation papers, the address of the North American Million
Rise is the same of the one on the invoices issued by the Hong Kong Million Rise
to Corpovex and the one published on the company's
website.
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The
beneficiaries of Million Rise Industries opening a company in Miami can be
interpreted as a sign that the supply for Claps is on the right track and tends
to become a permanent relationship between supplier and customer. Figures
revealed by the Minister of Urban Agriculture and Chief of the Claps, Freddy
Bernal, indicate that last year, the Government traded 91 million Clap combos.
Approximately 86 million boxes were imported, mostly from Mexico and through
intermediaries. This figure shows a business that last year alone could
represent 2,500 to 3,500 million dollars, if taking into account that traders
charge 30 to 40 dollars per box.
Although
the magnitude of the business is clear, the performance of the program seems
increasingly shady. The quality of the products is questioned after a
chemical analysis
to eight Mexican brands of milk powder by the Institute of Food Science and
Technology of UCV (Universidad Central de Venezuela), at the request of
Armando.info, showed that the manufacturing companies give false nutritional
information on the labels and that the product is actually a high-carb and
low-protein mixture. The results of the 2017 National Survey of Living
Conditions (Encovi), recently presented at Universidad Católica Andrés Bello
(Ucab) in Caracas, also question the efficiency of the government plan by
revealing that the box distribution is "discretionary" and "just over half of
the beneficiary households do not receive it periodically, a percentage that
increases to 69% in small towns and villages." For traders, however, the winning
run to the business is nonstop.
From Miami to Switzerland
Another
intermediary is J & B International Trading LLC. Although its headquarters
are registered in Miami, Florida, the payments received from Corpovex are
directed to a tax haven, just like Million Rise does.
This
company signed contract CPVX-CJ-CONT-0091-2017 with the Venezuelan state-owned
company for the supply of Clap boxes and, on October 10, 2017 alone, it issued
at least two invoices for nearly $ 1.7 million for the shipment of 52,858 "food
combo boxes" i.e. $ 31.57 per kit. The invoices show that the money had to be
transferred to an account in LGT Bank in Switzerland, the country at the top of
the Tax Justice Network’s Financial Secrecy Index, and that the intermediary
bank was LGT Bank in Liechtenstein, another jurisdiction that stands out for its
financial secrecy.
The
list that Well Thought Consultants disclosed in the social media attributes a
contract for one million boxes to this company, which would mean almost $ 32
million dollars at the price of $ 31.57 per box. The international trade
database ImportGenius
gives some clues about the business volume of J & B International Trading.
Just between last year’s August and September, the company made at least five
shipments from the port of Veracruz, Mexico, with tons of food purchased from
Integradora de Productores del Estado de Mexico. It is another Mexican supplier
that joins the list of companies like El Sardinero or Deshidratados Alimenticios
e Industriales (DAI), used by other intermediaries since late
2016.
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According
to the company registry of the state of Florida, J & B International Trading
was created in 2008 and has the Venezuelans José Antonio Achram Lugo and Brigitt
Tonelly Achram Lugo as directors. The Venezuelan Institute of Social Security
(IVSS) indicates that José Achram worked until October 2015 for Inversiones Jaba
2426, while Brigitt worked until December 31, 2017 at Universidad Nueva Esparta
(UNE), a private institution. The company has an office in Edificio Gerencial de
Las Mercedes, a luxurious complex in the commercial and financial district of
the same name, southeast of Caracas. "Right now we are not interested in giving
any interview. Thank you very much," was the answer from that office to the
request made for this report.
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No
authority has explained the nature of the negotiations, nor the reason why it
has resorted to intermediaries to buy the food that Venezuelan demands at a time
when up to 8.2 million of its people eat two or fewer meals a day, according to
Encovi 2017. The Government, like the traders, prefers to move
quietly.