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.

11 March 2018

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.

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.

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.

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.

For traders, the winning run to the business is nonstop.

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, 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.

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.

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.

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