Banco Confederado: Another Bolivarian Duck?

You got a dead skunk in the middle of the road,
Stinkin’ to high, high Heaven!
Loudon Wainwright

Why has Telefonica’s Venezuelan subsidiary – Movistar – deposited close to $500 million in Banco Confederado since 5 August 2009? The total could be significantly higher. Movistar has the equivalent of about $2 bn in unrepatriated profits deposited in Venezuelan banks. However, the almost $500 million amount cited here has been confirmed.

Why is any unit of Telefonica, one of Europe’s premier multinational telecommunications giants, depositing even one dollar into a Venezuelan bank which was basically insolvent as of 31 December 2008, according to the bank’s externally audited financial statement?

Why is Movistar reportedly acquiring a shipping company in a deal structured through Banco Confederado?

Could it be that this odd, secret deal between Movistar (Telefonica) and Banco Confederado is a case of trans-Atlantic Ibero-American corruption?

Or perhaps it’s a Bolivarian extortion scam. It’s no secret that the Chavez regime is trying to leverage its ownership of CANTV and Movilnet to squeeze other telecom operators out of the Venezuelan market, including Movistar. Recently, Grima Wormtongue (aka JVR) has been hinting in his opinion columns that Movistar is toast in Bolivarian Venezuela.

Here’s a plausible scenario:

Moratinos to Unnamed Minister: “Spain is a good and trustworthy ally of Bolivarian Venezuela. But we are concerned about Spanish investments in Venezuela. After all, Banco de Venezuela was nationalized, and now it’s rumored insistently that Movistar could be nationalized. What can we do to ease these concerns and strengthen our friendship?”

Unnamed Minister to Moratinos (and Telefonica/Movistar top management): “We would like to see Spanish companies in Venezuela do more business with small banking groups which have developed during the Chavez presidency, like Banco Confederado, for example. We also would like to see more Spanish investment in new sectors like shipping, for example. A strong statement that press freedom in Venezuela isn’t threatened also would be appreciated by President Chavez.”

Banco Confederado is nominally owned by Ricardo Fernandez Barrueco, but he fronts as the principal shareholder for someone who, within the bank, is known as “the cop.”

We’re told by regime sources that Banpro’s real controlling shareholder is Public Works and Housing Minister Diosdado Cabello.

Fernandez Barrueco also is the nominal majority shareholder of Banco Bolivar and Banpro, but again we’re told that Cabello is the real controlling stakeholder in these three banks (and also all of Fernandez Barrueco’s banking, insurance and other financial assets in Venezuela).

The senior regime sources add that Cabello is also the secret controlling stakeholder of the banks, insurance companies and other financial firms in Venezuela nominally owned by Pedro Torres Ciliberto and Arne Chacon Escamilla, the brother of current Science and Technology (and former Conatel/Telcom) Minister Jesse Chacon Escamilla.

Grima Wormtongue is another important (but not controlling) secret stakeholder in this Bolivarian financial group. But we digress, slightly.

Banco Confederado’s audited financial report confirms its close relationship with the government of President Hugo Chavez. The bank earned $ 664,244 (BsF 1,428,126) in second semester 2008, compared with over $10.9 million (BsF 23,515,733) during the first half of the year. The plunge in Banco Confederado’s second half earnings coincides with the steep decline in oil revenues which forced the regime to drawn down its deposits at banks like Confederado.

However, as of April 2009, public sector deposits at Banco Confederado were 47.99% of the bank’s total deposits, surpassed in the country’s financial system only by Banco del Tesoro (77.97%), Banco Activo (66.14%) and Banco Industrial de Venezuela (61.24%). The same month, Banco Confederado’s deposits were equivalent to 0.91% of the Venezuelan banking system’s total deposits.

Another hint of a stressed bank: As of April 2009 the national banking system’s average financial margin – the difference between interest charged on loans and interest paid on deposits (spread) – was 6.46%. However, Banco Confederado’s financial margin was 3.92%, Banpro’s was 2.50%, and Bolivar Banco 5.76%

Banco Confederado’s externally audited financial statement as of 31 December 2008 says the bank’s total equity is $91.1 million. This includes paid-in capital of $23.2 million, and “patrimonial contributions” (fresh capital) totaling $49.28 million which Sudeban has declined repeatedly to approve since December 2007 for reasons which are not fully clear in the audited report. The bank’s reported equity also includes capital reserves of $12 million, and the rest is retained earnings, etc.

The footnotes to the audited financials are very interesting. Clearly, Banco Confederado’s owners and Sudeban are at odds over several issues, all of which confirm that Banco Confederado is of dubious solvency and stability.

Numerous exchanges between Sudeban and the bank are cited in the footnotes, indicating that Sudeban is pushing the bank to clean up its balance sheet and increase its capitalization.

However, the bank is delaying, claiming that following Sudeban’s orders would have cost the bank over $113 million in losses in 2008, which is equivalent to over twice its paid-in capital and 124% of its total equity as of 31 December 2008.

The nub of the problem between Banco Confederado and Sudeban is some $377.2 million of structured notes which the bank listed on its balance sheet as of 30 June 2008 and 31 December 2007. The nature of the assets backing these structured notes is not explained in the audited financials report.

But Sudeban repeatedly instructed Banco Confederado during 2008 to remove the structured notes from its balance sheet. The bank’s management did not obey Sudeban’s directives, arguing that doing so would cause very substantial losses – i.e. wipe out the bank’s equity.

However, Banco Confederado sold part of its structured notes on 20 October 2008 to a company identified as Davos Internacional S.A. In a footnote to the audited report, it says structured notes with a nominal value of over $62.8 million (BsF 135,160,000) and an effective value of $57.9 million (BsF 124,593,630) were sold, incurring losses to the bank of $4.46 million (BsF 9,595,470).

In a second transaction booked on 5 November 2008, Banco Confederado sold Davos Internacional S.A. another portion of its structured notes with a nominal value of $62.8 million (BsF 135,160,000) and an effective value of $56.3 million (BsF 121,165,653), incurring losses to the bank of $6.24 million (BsF 13,417,663).

Banco Confederado presented Sudeban a proposal on 30 December 2008 to “disincorporate” its structured notes by swapping them for PdV 2027 bonds at 70% of the face value of the bonds.

Since this would generate losses for the bank which could not be estimated accurately, the bank’s owners – identified in various footnotes to the audited financial statement as Galopy Corporation International N.V. – requested a ten-year period in which to amortize the as yet unknown losses.

But Sudeban rejected this request, ordering instead that Banco Confederado must amortize any losses within one fiscal year. The bank was appealing this directive at the start of second quarter 2009.

Meanwhile, on 20 January 2009 an extraordinary shareholders meeting voted to raise Banco Confederado’s capital by $26 million to $138.1 million.

On 27 February 2009 the bank’s majority shareholder – Galopy Corporation International N.V. – transferred $65.1 million to Banco Confederado to cover the capital increase voted on 20 January, and also previous capital increases of $42.9 million, which was still $3.8 million short of the total capital increases voted since 2007 by the bank’s shareholders. Sudeban apparently had not approved these capital increases as of mid-2009.

Who holds Banco Confederado’s structured notes? Apparently, Davos International Bank, an offshore bank incorporated in Antigua & Barbuda.

What assets is Banco Confederado using to back these structured notes? The money of the depositors with accounts at Banco Confederado, Banpro and Bolivar Banco? Or, perhaps, other assets owned by the majority stakeholders of these banks (Fernandez Barrueco)?

We did some Googling, and found this:

Davos International Bank is a private bank, governed by Antigua and Barbuda law, and located at Woods Centre – Friars Hill Road – Suite 18-A, St. John’s, Antigua & Barbuda . T: 268-562-3951 . F: 268-562-3950. We specialize in corporate, commercial, and institutional banking as well as in portfolio management. Davos International Bank is a part of the Davos Group alliances. It has the agility of a modern institution, offering the personalized service and attention of a small bank, while guaranteeing their customers the security of much larger banks. We live in truly interesting times. Security and safety have become paramount concerns, and investment banking is no exception. In these times of rapid changes, people need to know that their money is safe and that they have access to their accounts 24 hours a day, 7 days a week. Davos International Bank is the key that allows you instant access to the world of banking while protecting your assets. Our technology is cutting-edge, and evolving with the times allowing our customers the access that has become necessary in these competitive times. But technology is only part of the equation at Davos: The core of our bank is its staff. Davos relies on a skilled staff of officers, rigorously and continuously trained to guarantee that they provide top-notch service and that they can meet the challenges of a constantly changing environment. Customer service is only as good as the people who provide it.”

We also Googled Davos Financial Group and found this:

“Present in Switzerland through the firm D’ Societe (member of ARIF Association Romande des intermédiares Financiers) and as first independent supplier of integral and structured financial services since our incorporation in 1994, we value optimum conditions as well as maximum transparency in each of the operations we perform. We rely on the support and security of the best financial institutions in Switzerland, Latin America and the Caribbean, as well as highly recognized European Custodian Banks, which allow us to offer an ample scope of products and solutions that adapt to your financial expectations.”

Davos Financial Group has offices in Geneva, Lisbon, Caracas, Saint Johns, Mexico City, Miami, and New York City.

Davos Financial Group’s website says it is supported by the likes of UBS, Goldman Sachs, HSBC and Wegelin & Co.

Davos Financial Group’s “executive director” and managing partner is David Osio. A financial source at a very respectable brokerage firm in Caracas says, “Osio has branches all over but apparently not much capital. He probably holds the $ for them (i.e. Banco Confederado.)”

This brings us back to the original questions raised in this and a previous post:

Why did Movistar (Telefonica) transfer at least $500 million (25% of its unrepatriated profits) to Banco Confederado from 5-7 August 2009, in a move which has Venezuelan bank treasurers abuzz with wonder and speculation?

Why is Movistar purchasing a shipping company? That’s the word among Venezuelan bank treasurers: a shipping company.

What kind of deal was negotiated between Telefonica and Banco Confederado while Spanish Foreign Minister Miguel Angel Moratinos was in Caracas just over a week ago?

Do Moratinos/Telefonica think that deals like this will protect their strategic and business interests in Bolivarian Venezuela?

Think again, homeys.

Updated about 11:30 p.m. Caracas time on 9 August 2009:

Galopy Corporation International N.V. was incorporated in Curacao on 25 May 2005, and one of its two principal directors is listed as Ricardo Fernandez Barrueco.

The other director of Galopy is listed as Trufima Management N.V., incorporated on 31 December 2001 in Curacao. Trufima’s two directors are listed as Wilhelmus Catharinus Odems and Willem Lourens de Bruijn.

Advertisements

About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
This entry was posted in Uncategorized. Bookmark the permalink.

4 Responses to Banco Confederado: Another Bolivarian Duck?

  1. clau says:

    Muy buen artículo. Fue realmente vergonzoso cuando Moratinos dijo que la libertad de expresión en Venezuela se veía bien. Ya me parecía que había gato encerrado detrás de esta declaración.
    Lamentablemente a ningún país extranjero le importa Venezuela ni los venezolanos, lo que les importa son sus intereses particulares (ej. España, Estados Unidos, Francia, Brasil, Argentina, la misma Colombia, entre otros). Gracias a ellos el régimen recibe miles de millones de dólares, que compensan las dádivas que les da a Cuba, Nicaragua, Bolivia, Ecuador, Honduras, Irán, etc.

    Like

  2. Go-sho says:

    Now what are the Movistar shareholders going to say about this? Do you know if the deal went through?

    Any transaction like this is surely going to attract attention from the “interventores” if they do their jobs… or maybe this is to cover it all up…

    Strange, to say the least, to see this guys taken down… Sudden loss of the Fairly Oddparents????? Would they go under too?

    Like

  3. kaatje276 says:

    I read your article about “Banco Confederado: Another Bolivarian Duck” and came across a very familiar name: That of Willem Lourens de Bruijn.

    We had our own little encounter with mr. De Bruijn, who was at the time I’m talking about director of a company named BJM Morewater in Curacao (oktober 2008).

    Our company, we are in the Netherlands, had invented a revolutionairy item called the ISSU. This was a smoking unit, in which smokers could smoke their own, original cigarette. All the smoke would be blown back in this little thing, and no more smoke would enter the area. Very revolutionairy, we have been developing this item for 4 years, and it was finally working, and then we met mr. Marko Sweelssen, supposedly representative of BJM Morewater NV, in Curacao.

    To make a long story short, he tricked us out of the product and its patents by promising a lot of money, which of course never was paid, and bought the patent with BJM Morewater, and its director at the time, indeed mr. Willem Lourens de Bruijn, signed this contract and we went literally down the drain.

    We have reason to believe the signature on the contract with which BJM Morewater NV bought the patent is false. It supposedly was sent to Curacao, signed there, and returned to the Netherland WITHIN 24 hours. Which is impossible as we see it.

    I tried to call the Chamber of Commerce in Curacao, but of course there are no deposited yearaccounts of this company, and it “died” in may 2009……………how convenient!

    I was just wondering if anyone could give me some more information of this Willem de Bruijn, and his scams…..we have finally found a lawyer in the Netherlands who will try to do something, but all in direction of Curacao ends up in thick smoke………………….
    Kindest regards,

    kaatje276 to be reached at karin@bonkas.nl

    Like

  4. Pingback: The Miami Herald v Derwick Associates | Infodio

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s