A billion of that amount corresponded to Oswaldo Cisneros, the Venezuelan businessman who owns Digitel, who, sitting in front of Maduro, made clear in that afternoon his incursion into the oil world. The presidential assignment was not minor. Cisneros and his share should contribute to triple oil production from wells in Monagas within 5 years.

But Cisneros was not alone there. On the path that led him to the partnership of his company Delta Finance with Pdvsa to promote the creation of the Petrodelta joint venture (of the Orinoco Belt), he was accompanied by Francisco D'Agostino and Alessandro Bazzoni. The former associated with the scandal of the electrical purchases of Derwick Associates with the government of Hugo Chávez, and the later, an unknown Italian businessman.

The signing of the agreement was a surprise to observers of the oil business due to the unexpected incursion of the telecommunications magnate, ignoring the two other entrepreneurs. The case portrays the avid determination of new players, even from other areas, to financially assist Pdvsa and, thus, being part of its businesses by taking the places that traditional partners leave in the country, exhausted from dealing with a declining company and in the midst of a postwar economy. 

Neither D'Agostino nor Bazzoni have historical records of professional services in the Venezuelan oil industry. However, their personal information appear in company records in Barbados and Malta, according to documents obtained in a leak from law firm Appleby reported by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalism, better known as Paradise Papers.

Asked about his oil investments, D'Agostino, who is a member of Daycohost and a member of the board of directors of Banco Occidental de Descuento, as well as the brother-in-law of opposition politician Henry Ramos Allup, claimed that his oil business, Element Capital, was excluded from the PDVSA contracting system and, therefore, does not maintain business with the state company. 

Bazzoni confirmed that he is a minority partner of Petrodelta and adviser to company Elemento LTD, which "could only market four PDVSA vessels from February to April 2017". He added that his current relationship with D'Agostino is a social relationship only. Both denied having business with Derwick Associates, accused in multiple investigative journalism works for having defrauded the Venezuelan State with the sale of power plants with surcharge.

Broken Mirror

It is the area of capital consolidation for oil businesses where Bazzoni and D'Agostino are obvious. In 2015, one year before the announcement in Miraflores, Cisneros, D'Agostino and Bazzoni were already in the belt as part of Petrodelta, as directors of Harvest (PDVSA’s original partner in the joint venture), of which they had bought a part and for which they designed a financing plan with the aim of repositioning the Argentine company in Venezuela.

This participation in the business had its cost. It entailed that company CT Energy Holding, controlled at that time by the three partners, according to documents of the Security Exchange Commission (SEC), bought financial notes to Harvest for about 60 million dollars. Then, the total transfer of Harvest (which already wanted to leave the country) was materialized by the Venezuelans who then became direct partners of PDVSA. 

On PDVSA’s side, the path was paved. Harvest had years trying to get rid of his society with the state company, which blocked its attempts demanding more capitalization. "Harvest is an example of a partner that does not have the capacity (financially speaking) to invest in the oil business. They only want the dividend, not to invest," Eulogio Del Pino, then president of PDVSA, told to Reuters.

When CT Energy arrived, PDVSA -eager for fresh money- unblocked the path for the company. The businessman of Italian origin tried for several years to enter the oil business in Venezuela and Harvest's eagerness to leave the country was his opportunity. But Bazzoni raised suspicions among PDVSA officials due to his unknown career, according to a former employee of the state oil company. Also, he did not get the financing, until he associated with Cisneros, said the source. 

From Barbados to New York

Documents from the Barbados company register reveal a series of offshore companies with names similar to CT Energy Holding, which finally formed with PDVSA the Petrodelta joint venture. Bazzoni and D'Agostino participate in all the companies as shareholders, directors or company controllers. In many cases, only the "last name" of the company changes: CT Energía Holding, CT Derivatives Corporation and CT Energía Oil and Gas LTD. Some, like CT Energy Holding SRL, have headquarters in Las Mercedes, in the Daycohost building, the company owned by the D'Agostino family.

Others are in Malta and Barbados. England is another location for two joint ventures, Elemento Solutions Limited and Elemento Services Limited. The records indicate that the nature of the companies is the purchase and sale of oil. Cisneros does not appear in them but the partnership of D`Agostino and Bazzoni in CT Energy Holding sealed the financial agreement with Harvest in June 2015 and it entered as a member of PDVSA in Petrodelta in November 2016. 

In the meantime, several of Bazzoni's previous partners in oil financing businesses (Centauro, Chemoil, Saltpond and Imperial Energy Ventures) opened consultations in anti-fraud courts in Texas and New York, targeting Italian offshore companies due to diversion of funds, breach of contract and failure to comply with of jurisdiction agreements. One of them requires compensation for damages of up to 21 million dollars.

From Barbados, the fall of Bazzoni reached New York. On the Caribbean island, the entrepreneur had incorporated a company called Cinque Terre Financial Group, and a judge ordered liquidation thereof  in April 2016 for insolvency and debts. However, the liquidator of Barbados noted that although the liquidation process had begun, Bazzoni opened subsidiaries of the Cinque Terre (peculiarly with the name of CT Energía LTD), both on that island and in Malta.

For the moment, almost nothing is known about the productivity of the alliance between PDVSA and these partners. More than a year after sealing their commitment to boost production, it is a mystery if these unconventional allies who formed Petrodelta contributed to the Oil Sowing Plan.

In Ciudad Guayana, the industrial and commercial capital of the region, the "80-20" was an open secret. Engineers, technicians, administrators, trade unionists and lawyers working there knew that billing in bolivars had been dollarized through this mechanism that contravened the exchange control and the initial contract.

"Tocoma was, at least from 2009 to 2014, a big petty cash," said an engineer who worked on the dam. It was profitable for many. The initial cost of Tocoma was estimated at US$ 3.9 billion. Seven years later, in 2014, Venezuela had paid nearly US$ 10 billion, partly with loans from the Andean Development Corporation (CAF) and the Inter-American Development Bank (IDB). What happened?

Consulted sources indicate that its initial cost had been increased by rampant inflation, constant modifications required by Corpoelec and surcharges by contractors, but mainly because of a "comparative advantage" that Venezuela offered to foreign and national entrepreneurs in relation to the rest of the world, which blinded more than the gold of Guayana: the exchange control that gave rise to the secret audited by the audit of Corpoelec.

More than Engineering: Financial Prestidigitation

The Tocoma hydroelectric plant, the works of which started in 2007, scheduled to run from 2012, was mostly carried out by Odebrecht. Due to its size and cost, it was one of the largest hydroelectric infrastructure projects in the country and in Latin America, comparable in cost and magnitude to the expansion of the Panama Canal. A million and a half cubic meters (52,972,000.08 cubic feet) of concrete were emptied in the place.

Today, the block of concrete deteriorates day by day, and in the vaults intended for ten electricity generating turbines, bilge pumps work so that the waters of the lower Caroní River do not flood the few installed power systems through some cracks in its walls.

In parallel, it is known that the Prosecutor's Office silently investigates Odebrecht's irregularities in the country and the Government negotiates the project close with contractors. After being questioned by the National Assembly, neither the civil works contractor OIV consortium (made up of Brazil’s Odebrecht, Italy’s Impregio and Venezuela’s Vinccler), nor the electromechanical works contractor, Argentina’s Impsa (of the problematic group Pescarmona), explained why the works stopped. They did not answer a questionnaire sent to include answers in this report either.

From 2007 to 2012, Venezuela was in full oil boom. The original engineering plans for the work were modified by the government, which began to demand more expensive supplies, increase the payroll of workers without disregard (from 2,000 to 10,000), and force its "opening" by sections, due to political reasons. The new requirements increased year by year the cost of the work.

Corpoelec – due to non clarified reasons - started delaying payments to contractors, which were to be in bolivars and U.S. dollars under contract, depending on the component payable. Private companies faced the increase in prices in bolivars for salaries and products, and the beginning of a shortage of industrial inputs that had to be purchased in the country. "Neither cement nor rebars could be bought in the country," recalls a former construction engineer. "There were also no spare parts available," recalls another.

In 2010, in a meeting between OIV (led by Odebrecht) and Corpoelec, they discuss the effect of the constant changes to the contract and the demand for new materials and machinery. The consortium presents a claim to the government: "The initial prices fell short, the exchange control limits me, I charge peanuts in U.S. dollars and a lot in bolivars, I am spending more dollars than usual with your new demands." This is the line of argument of the contractors.

The solution came as a percentage: 80-20. The aim was to increase payment in dollars (cheap) and lower the component payable in bolivars. It worked like that from 2010 to 2014. Corpoelec converted the amount in U.S. dollars of OIV's bill into bolivars at the preferential exchange rate (4.30). Then it was added to the bill in bolivars. The total was broken down into two parts, 80% and 20%. The first amount was converted into dollars at a preferential rate, and the second was in bolivars. Thus, an invoice of Bs. 2.3 billion and US$ 18.8 million became one of Bs. 491 million bolivars and US$ 456.9 million. "Over 1,000 bills were like this," says an Odebrecht engineer.

This 80-20 system was entered into between the parties in Addendum 4A of the contract, according to consulted sources, during the management of the then Minister of Electric Power Alí Rodríguez Araque. A consultation by email to the current ambassador in Cuba was not answered to the date of publication of this article. "Addendum 4A exists and provides for it. The accounts in Tocoma do not match because of this," says an Odebrecht engineer.

PRESENTACIO´N TOCOMA A JUNTA INTERVENTORIA 11-03-14 R3 (SUPERVISORY BOARD TOCOMA PRESENTATION 03-11-14) by ArmandoInfo on Scribd

There was apprehension between the middle management and Corpoelec project engineers. "Everyone knew that that would allow more rip-off," recalls another engineer. "But the top said that it would be signed. Chavez was pressing on Corpoelec. There were elections and a lot of money. " The contracted staff feared for their work if the anti-Pareto law transcended.
On that scheme, OIV charged and Corpoelec paid price increases, bonuses on meeting work completion dates, and valuations. "More than a thousand bills were paid like this," restate one of the current workers. The pecuniary losses were calculated internally. "US$ 1 billion were paid in that way, a good part in commissions for the Tocoma project management," he added.

Engineers —some still active in Corpoelec, others already outside— do not stop showing their astonishment that Tocoma has cost almost twice the expansion of the Panama Canal (5.4 billion U.S. dollars), or almost four of the cost paid by the country in dollars for the construction of a similar hydroelectric plant, Caruachi, very close to Tocoma, on the bed of the Caroní River.

In the Tocoma equation, x was always equal to extra payments in U.S. dollars

From 2007 to 2014, Tocoma experienced peaks and drops in the work rhythm. Corpoelec ‘s desperate response in several occasions —for electoral reasons, as the 2012 presidential elections— was paying for "speed-ups" that would not allow the opening as scheduled anyway.

The management of the Minister of Electric Power Jesse Chacón ran into a standstill of the work in 2013. And in reviewing the causes, a commission of auditors from Corpoelec found the exchange scam in July of that year. Its members warned the board of directors about the irregularity, suggesting that it was linked to an exchange crime in the hands of Corpoelec’s Engineering Management of Proyectos de Expansión Generación Oriente (expansion and power generation Project).

For example, they identified two bills for 363 million and 226 million payable in bolivars for works carried out in the country. Thus, they found that these and other conversions were made "without taking into account the current exchange regulations and the opinion of the corresponding legal instances" and "without having prior authorization for such change". Even so, those bills were later restructured and paid mostly in U.S. dollars, an Odebrecht engineer said.

The procedure with the 80-20 system was a pattern, they say. "The Audit Committee highlights the recurrence by Edelca (the state electric power company of the Caroní river) and Corpoelec in agreeing payments in foreign currency with the OIV Tocoma Consortium considering that the works are estimated to be carried out in the national territory," for a total of US$ 635,991,233.19. Payments made in the country, should be paid in bolivars only, under the contract.

Memo Auditoria OIV (OIV Audit Memo) by ArmandoInfo on Scribd

Alarmed, the auditors went to the legal consultancy to analyze the case. In August 2013, consultant Alejandro Carrasco gave his opinion: "The Engineering Management of Proyectos de Expansión Generación Oriente has been misinterpreting the way of converting to payment in U.S. dollars 80% of the amount of the valuation of work executed in foreign currencies and 20% in Bolivars corresponding to the same valuation, which should be corrected ".

In the document, Carrasco mentioned the limits contemplated by the Central Bank's law for the payment of projects in foreign currencies, according to the exchange agreements. The lawyer confirmed that he had studied the case and that the procedure was not in accordance with the initial contract.

Other courtesies for the contractors

In addition to the 80-20 system, the Auditors of Corpoelec found dozens of administrative irregularities, which they declared in several official reports, all revised for this report.

For example, Odebrecht, Impregilo and Vinccler obtained part of the contracts for additional (non-principal) work without bidding, in violation of the bidding law. They also received "overpayments", which affected Corpoelec's cash flow. They charged increases of up to 30% for claims without being approved by the appropriate authorities. They were paid, in some items, more than what was budgeted. They obtained month extensions for their work without submitting the mandatory supporting documentation.

For its part, Impsa, the Argentine contractor of the turbines, charged US$ 75 million from Corpoelec without having signed a contract. It also received US$ 60 million for equipment sent to the site; collected three million bolivars for labor costs that were not justified; assessed a tax at 3% instead of 34%; and it did not pay VAT. In addition, it signed a third contract without dating it, which is illegal. On one occasion it incurred in delays in the delivery of work, for which it had to pay 4.7 million U.S. dollars to Corpoelec in fines. There is no evidence that it has done it. In fact, only one and a half out of the 10 turbines that were paid are installed in Tocoma.

IDB and CAF were aware of these illegalities, sources say. Delegates attended the meetings of the board of the work periodically to verify progress against disbursements. However, they did not sign, as was appropriate, the modifications to the contracts and continued to finance the work, based on the audit. To the publication of this report, the requests for information sent by email to both institutions had not been answered.

The event shook the island because, in addition, the US government denied a visa to one of the owners of the bank for alleged activities related to terrorism, according to the Venezuelan journalist based in Miami, Casto Ocando.

For the second time in less than five years, brothers Leopoldo and Andrés Castillo Bozo faced the forced closure of a financial enterprise.

Aruba was the port of disembarkation of the owners of Grupo Banvalor — made up by Corporación Castillo Beltrán C.A., Seguros Banvalor C.A., Banvalor Banco Comercial C.A., and Banvalor Casa de Bolsa C.A. — just a month after having been summoned in February 2009 by the Venezuelan Public Prosecutor’s Office, to charge them with the crimes of simulation of stock exchange operations, fraudulent acquisition of foreign exchange and conspiracy.

The event occurred when after the sale of bonds of PDVSA and the Republic in dollars, the Castillos designed, between 2006 and 2007, a scheme to have more dollars awarded. They made purchase requests on behalf of 1,000 employees, while they were allegedly unaware. After the complaint of those affected, the authorities discovered operational irregularities in the bank and the insurance company, including, an unusual illiquidity inexplicable for a group managing insurance contracts as coveted and millionaires as those of the Ministry of Education and several state governments.

The opening of the BBA Bank of Aruba was publicized as the first performance of the group in international operations. Former Prime Minister of Aruba, Nelson Oduber, and the then deputy of the Podemos party, Juan José Molina attended the opening. However, the Panama Papers reveal that the Castillo Bozo brothers already had a secret business structure in the Virgin Islands, made up of three companies. And what was thought to be the first step of an expansion towards Caribbean markets was simply the continuation of an offshore undertaking carried out in the past.

No commercial or administrative activity is known of any of the companies in the Virgin Islands. They were registered between 2003 and 2005, more than 10 years ago, just at the time when entrepreneurs skillfully navigated through the new waters of Venezuelan politics, led by Alfredo Peña, Juan Barreto, Eduardo Manuitt, and Aristóbulo Istúriz.

To create the offshore platform (outside of the Venezuelan jurisdiction), the Castillos used the services of the Mossack Fonseca law firm in Panama. With that leverage and expertise, Solitaire Group Limited, Flamingo Group Holdings Corp., and Sandbox Invest became a commercial base that the brothers maintained active until at least 2012, according to the law firm's documents, always with the same headquarters on Francis Drake Street in Road Town, the capital of Tortola, one of the Virgin Islands. The last two companies have "mirrors" (related companies with similar name) in Miami (United States), with the same headquarters and with unknown business activity.

Having set up a space abroad, possibly allowed them to quickly flee the country and settle abroad, when the Venezuelan Prosecutor's Office knocked on their doors.

Falling and Running

The turning point to the Castillo Bozo brothers began in July 2007, when the Ministry of Education withdrew one of the most bulky policies, coveted by Venezuelan insurers.

The ministry had become the cornerstone of the financial group. "That insurance is one of the most lucrative in Latin America, because official deposits are received at a savings rate that insurers then place in a public market at a lending rate. The business is colossal," said economist Francisco Faraco. Specialists indicate that the amount of the policy was around 100 million dollars. The Castillo Bozos also had the policies of the government of Monagas, Miranda and Carabobo. At the best moment, Seguros Banvalor and Banvalor Bank had 4 million clients combined.

After that massive withdrawal, Seguros Banvalor did not recover. The employees of the entity filed a claim against the directors, the same as the subsidiary bank, Banvalor. Shortly after, in 2009, a financial mini-crisis exploded. "Those banks formed with Grupo Banvalor the operative platform of Alejadro Andrade, Treasurer of the Nation, in the purchase of Pdvsa bonds that were then traded in the black currency market, generating extremely high profits," added Faraco. The former treasurer, now in the United States of America, would have favored the group with direct awards of bonds and structured notes.

The withdrawal of the policy of the Ministry of Education and the subsequent allegations of identity theft of the employees seem to have been the necessary fuel for the group to move quickly from the country. A part of the new venture was made with stealth and the other with publicity. According to the Public Registry of Panama, from 2007 to 2010 (when Seguros Banvalor was intervened), the Castillo Bozos opened 13 companies, of which no business activity is known. One of them has a name similar to the other one in Delaware (USA), a state that receives large revenues through the registration of companies with tax facilities, and recognized worldwide as a tax haven. Two other operations received extensive publicity: the opening of Seguros BBA Corp. in Panama (2008) and the opening of BBA Bank of Aruba, registered as offshore with the Central Bank of the island and exclusively aimed at capturing dollars from Venezuelan customers (2009).

The 13 companies are Joycespace, Maida Enterprises, Beauty Corporation Inc., Kairos Asesores de Inversiones, Daltrey Properties Inc., Bowman Investment S.A., KYC Ltd S.A., MBH Ltd S.A., Hiven Consultants Inc., Twin Shine Corp, Dream Rock Corp, Teller Enterprises, and Mercury Star.

When Seguros Banvalor was intervened by the Venezuelan government in January 2010, neither Leopoldo nor Gabriel, the main directors, were in the country. Even with an Interpol alert on their backs, the network built since 2003 with the help of the Mossack Fonseca law firm gave them the security necessary to turn the page of the country and continue with the open face of the Caribbean expansion. From January 2010 to October 2013, Leopoldo and Gabriel Castillo Bozo opened 6 companies related to the insurance, banking and finance sector in Panama (Seguros BBA Corp. and Financiadora Inversolution), the Dominican Republic (Banco Atlántico and Atlántico CCA Valores) ,and even the United States of America (BBA Capital NYC).

Just after leaving the country, Leopoldo Castillo defended his career in an interview with the newspaper El Mundo Economía y Negocios. "The first thing I want to clarify is that the insurance company in Panama has nothing to do with the insurance company in Venezuela, and the bank in Aruba does not have anything to do with the bank in Venezuela," he said. He argued that the intervention of his entities was a political retaliation, implying that it was due to the fact that he provided collective insurance to opposition state governments, namely Miranda and Carabobo.

As to the criticism of policyholders who claimed reimbursement with more than a year past due, he said: "I manage a million and a half clients. Five or ten complaining is not significant to me. They must be specific cases where some documents are missing... I am not the Baby Jesus, nor do I intend to be. But I am a correct person. I do not steal anything from anyone." An interview request made by email to Leopoldo Castillo was accepted by an assistant in the Dominican Republic, but could not be done by the time of the publication. The possibility for have his statement is open.