Photo: Leonardo Fernández Viloria – Reuters
A group of Spaniards drove up a private road on the dry plateau west of Madrid. The four entrepreneurs, hungry for cash for their promising startup, were headed to meet a wealthy young Venezuelan, owner of the hilltop castle ahead.
By Reuters – Angus Berwick
Jun 23, 2021
The meeting, according to three people familiar with that July 2016 day, yielded a 50 million euro investment that would transform Hawkers, a small online retailer of sunglasses, into an international brand. It would also help their host, Alejandro Betancourt, 36 years old at the time, deploy earnings from past deals in Venezuela into holdings that have made him a celebrity startup investor in Spain.
That earlier chapter in Betancourt’s career has drawn scrutiny.
U.S. and European authorities have investigated transactions related to some $2 billion in state power plant contracts his company won in Venezuela, projects that energy experts and political opponents of the government say were overpriced and not fulfilled. The existence of those investigations has been reported previously by Reuters and other media.
But previously undisclosed bank, court, and corporate records related to the probes provide new insight into how Betancourt used the wealth he earned back home to remake himself abroad, even as intended beneficiaries of those power projects endure frequent and lengthy blackouts.
Before Venezuela’s economy imploded last decade, well-connected dealmakers earned billions of dollars on government contracts and moved the money abroad. The migration of that capital has worsened the country’s economic woes, opponents of the leftwing government say, while enabling well-heeled emigres to live lavishly.
Betancourt, opposition leaders say, is a prime example.
After winning the power plant projects, the documents reviewed by Reuters show, Betancourt began making bank deposits, investing in companies and purchasing property in at least 10 countries across Europe and the Americas. He has invested more than $300 million abroad over the past decade, in ventures such as Hawkers and on homes in Paris, New York, Florida and Spain.
In New York, federal prosecutors have been examining whether Betancourt’s company, Derwick Associates Corp, laundered funds or paid bribes related to the power concessions, two people familiar with that investigation told Reuters.
In a separate federal probe in Florida, according to two people familiar with that case, Betancourt is a “target” of an investigation involving a former private wealth manager who pleaded guilty in 2018 to conspiracy to commit money laundering. The case involves a plan to launder more than $1 billion by former Venezuelan energy officials and associates, including a colleague of Betancourt’s and co-director of his company who was indicted by federal prosecutors.
In Andorra, an investigation into alleged kickbacks paid to Venezuelan officials through banks in the European principality also reviewed transactions by a company owned by Betancourt, documents from that probe show.
In a 2018 indictment of 28 people, including a former Betancourt contractor, prosecutors called payments by that contractor to a Venezuelan government official “bribes.” Among those indicted, some Andorran banking officials are now on trial; other suspects, including the Betancourt contractor and the former official he allegedly paid, are awaiting trial, though no date has been set.
Betancourt wasn’t indicted in Andorra. He hasn’t been charged in either of the two U.S. cases. It’s possible no indictments will follow those inquiries.
Betancourt declined to be interviewed for this article.
In a letter to Reuters, his attorney, Thomas Clare, described as “categorically false” any suggestion Betancourt or his company “engaged in corrupt activities, such as bribery, bid-rigging, kickbacks, or other illegal behavior.”
Clare denied Derwick failed to complete the power projects, saying the company “completed all contracts to the satisfaction of the Venezuelan government” and that any problems since were the result of mismanagement by various state agencies that operate the plants. As for Betancourt’s role in financing Hawkers, he said, “my client’s investment in Hawkers is legitimate,” “driven by business opportunities.”
Spokespeople for Play Hawkers SL, as the company is officially known, and its founder, Alex Moreno, declined to comment about their relationship with Betancourt.
In Venezuela, Betancourt told Spanish newspaper ABC, his power projects created a “ring of electrical armor” to strengthen his home country’s power supply. Many Venezuelan energy experts say the projects left millions in the dark. Chronic blackouts darken regions where Derwick’s 12 plants were meant to operate. Their total output is now running at about 10% of projected levels, government data show.
Near Caujarito, a hamlet of cinderblock homes south of Caracas, Venezuela’s capital, sit two power plants awarded to Derwick in 2009. Known as “La Raisa,” the complex was supposed to supply electricity for over 200,000 families, according to Derwick’s website.
Nearby residents, meant to receive power, say blackouts still regularly last days. Government data reviewed by Reuters show the plants’ turbines began to stall as early as September 2011 and that neither station is now operational. Clare, Betancourt’s attorney, said the turbines failed because the state electric company used inappropriate fuel.
Neighborhood pumps fail, forcing locals to bucket water from other locales. Anel Lugo, a doctor at Caujarito’s public clinic, said he sends patients needing urgent care elsewhere. Lorenzo Reyes, a 59-year-old street vendor, said he was hired to help build one of the plants, but construction was sporadic.
“If that plant were working, we would have electricity,” Reyes said.
In 2016, a commission of Venezuela’s National Assembly probed electricity shortages. Among other findings, its report in 2017 determined Derwick overbilled the government by a factor of three, particularly by inflating the cost of turbines. The report, which analyzed the $1.51 billion cost for eight of Derwick’s 12 projects, said fair market value should have been $551 million.
“This was money that the Venezuelan people lost,” said Jorge Millan, a leader of Venezuela’s political opposition and the assembly member who led the commission. He said the commission didn’t have enough information at the time to analyze all 12 Derwick plants.
Clare, Betancourt’s attorney, called the report “a political document” by opponents with “a clear political bias to attack and discredit the government’s efforts.”
He provided documents showing that several Venezuelan courts, other studies, and a 2017 investigation by the country’s attorney general found Derwick’s work to have been successfully completed and priced fairly. One of the studies was a 2014 report, commissioned by Derwick’s attorneys and prepared by consultants in the United States, that concluded the company fulfilled its contractual agreements with Venezuela’s government.
Derwick, Clare said in a letter to Reuters, performed warranty work and conducted repairs stipulated by contracts after delivery. If plants now operate below capacity, Clare said, the blame lies with agencies that assumed control once Derwick turned them over beginning in 2011.
The conflicting assessments in Venezuela are typical of the hyperpartisan reality in the country, where President Nicolas Maduro, and his predecessor, the late Hugo Chavez, secured allegiance from almost every state institution, including the courts. Rulings and sentences, opposition politicians and many international observers say, usually favor the administration.
“The Attorney General’s Office, the courts and the Ombudsperson usually do not conduct prompt, effective, thorough, independent, impartial and transparent investigations,” said Michelle Bachelet, the United Nations High Commissioner for Human Rights, in a 2019 report.
Betancourt’s attorney rejected any assertion that the Venezuelan court rulings, government investigations and studies defending Derwick’s work were partisan or prepared by anyone with a political agenda. Venezuela’s Information Ministry, responsible for government communications, and the Energy Ministry, which oversaw the power tenders, didn’t respond to requests for comment for this article.
Betancourt’s role in the electricity projects was in essence that of a dealmaker. With little experience building power plants, he hired ProEnergy Services LLC, a U.S. energy-industry contractor with offices in Latin America, Africa, and Asia, to draft proposals. Betancourt then submitted the proposals to Venezuela’s government with few or no changes, except for a markup in price.
Derwick paid ProEnergy at least $1 billion for the work, according to project documents. ProEnergy’s responsibilities included drafting proposals, procuring turbines and supervising plant construction. In an email, Scott Blair, the company’s general counsel, said: “ProEnergy is committed to doing business in full compliance with all applicable laws, and to cooperating fully with regulatory and legal inquiries.”
He declined to comment on Betancourt, ProEnergy’s work in Venezuela or any investigations into those contracts.
In promotional materials, Betancourt has all but erased mention of his Venezuela energy experience. Instead, there is today’s international tycoon. On LinkedIn, he describes himself as an investor eager to help “the leading companies in their industries, like Hawkers.”
“THE PLANTS SHOULD HAVE BEEN MADE OF GOLD”
Betancourt grew up in a well-off Caracas household, the son of a jewelry designer mother and a father who was a cardiologist and pianist. After high school, he earned a bachelor’s degree in economics and business at Suffolk University, in Boston, according to his LinkedIn profile.
Early in his career, Betancourt worked as an employee and consultant for a number of energy firms, according to an internal Derwick memo about Derwick’s history that was prepared by legal advisors in 2014. He also started BGB Energy, a company that sought investment opportunities for energy equipment manufacturers.
In 2007, according to the memo, which was reviewed by Reuters, Betancourt acquired Derwick, a company registered by a previous owner in Panama. Derwick was one of at least two dozen companies, corporate records show, that Betancourt and close associates set up or purchased in Panama, the United States, the Caribbean and Europe in the coming years.
At first, Derwick struggled, the memo said. Betancourt wooed investors and courted decision-makers in the industry. Progress was slow.
In 2009, drought caused power shortages. Chavez, at the height of his populist makeover of Venezuela, called for an “energy revolution.” On a televised power plant visit, he ordered Energy Ministry officials to fortify the feeble grid. “We’ll have to work three shifts,” he said, “every day, across the country.”
Betancourt saw opportunity.
In early 2010, he signed a “consulting and advisory” agreement with Nervis Villalobos, a former deputy energy minister known for industry connections. Under the contract, reviewed by Reuters, Villalobos would lobby contacts to help secure power deals. Villalobos had similar contracts with others, according to court documents and people familiar with the sector.
He would later be among the 28 people indicted in Andorra.
Reuters was unable to reach Villalobos. His attorney, Manuel Varela, declined to comment on Villalobos’ work with Betancourt or his indictment in Europe.
As Betancourt foresaw, Chavez ordered a slew of power plant tenders. Derwick turned to ProEnergy, the U.S. company, for designs, procurement proposals and construction plans. When ProEnergy submitted a draft, internal Derwick documents show, Betancourt hiked the price and submitted the proposal, at times on the same day, to Venezuela’s government.
One such case was the Picure plant north of Caracas. ProEnergy drafted an “engineering, procurement, and construction services” contract valued at $32.6 million. Derwick, in a summary of tenders it won that was reviewed by Reuters, wrote that it charged the state $79 million for the plant – 2.4 times the ProEnergy price.
“The plants should have been made of gold,” said Jose Aguilar, a Venezuelan power consultant who studied the projects. Other industry consultants who reviewed the ProEnergy drafts told Reuters such steep markups are unusual.
Betancourt’s lawyer said the increases reflect the risks Derwick assumed in a volatile Venezuela. In spearheading the power-plant contracts, Derwick was exposing itself to significant liability at a time when the country’s public finances were becoming increasingly unstable.
“Derwick served as a buffer between suppliers who had readily available equipment but did not want to take the risk of non-payment from the Venezuelan government,” he wrote.
Derwick quickly won a dozen thermoelectric power tenders. The plants, fueled by diesel and natural gas, would supply about an eighth of the new capacity Chavez planned, according to project and government documents.
Officials familiar with the tenders said many contracts, including Derwick’s, were approved in haste because of Chavez’s push for quick remedies. “The entire process was complicated,” Rafael Ramírez, Venezuela’s energy minister at the time, told Reuters. “With more calm, maybe this company wouldn’t have qualified.”
Suddenly, Betancourt was flush. Between August and October 2010, according to invoices reviewed by Reuters, Venezuela’s government deposited at least $140 million into a Derwick account at JPMorgan Chase & Co in New York. A JPMorgan Chase spokesman declined to comment.
Derwick received another $166 million from Venezuela’s government at a bank in Panama. The invoices all specified the payments were for power projects.
Reuters couldn’t determine how much Betancourt ultimately received of the roughly $2 billion Derwick was awarded in power contracts or where other deposits may have been made. Documentation provided by Clare, Derwick’s attorney, said the company earned a profit of $274 million on the power plants, but didn’t specify its total revenues. Venezuela’s government still owes Derwick $184 million, Clare said.
Betancourt set up office in a Caracas skyscraper and moved around the city in armored vehicles, according to Derwick documents and three people familiar with his activities. In November 2010, he paid almost $12 million for a Manhattan penthouse, according to New York property records.
He also made payments later detailed by prosecutors in Andorra.
The case there, according to prosecutors, followed a probe into over 2 billion euros in “illegal commissions” paid through Andorran banks by companies and individuals to numerous Venezuelan officials. The payments, they said, were in exchange for help winning government projects.
Read More: Reuters – Special Report: A power tycoon, while Venezuela goes dark, brightens his image abroad