By Angus Berwick
MADRID, June 23 (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.
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.
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.
The plants, the report said, required repairs and modifications from the outset.
“The execution of the projects,” the commission wrote, “led to contingencies that should have been dealt with in phases of design, concept, and basic engineering.”
“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 Ramirez, 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.
Neither Betancourt nor Derwick were targets of the probe, according to a review of the case files.
The payments cited in the indictment involved Villalobos, the contractor Derwick hired to lobby energy officials in Venezuela.
Bank records show that in late 2011, Minenven Corp, a Barbadian company registered by Betancourt, made three transfers totalling 5 million euros to an account Villalobos owned at the Banca Privada d’Andorra.
The bank was later taken over by Andorra’s government as part of a money-laundering crackdown.
After Minenven made the payments, bank records show, Villalobos made transfers totalling 2.6 million euros to an account held at the same bank by Javier Alvarado.
Until the previous year, Alvarado had been head of Corporacion Electrica Nacional SA, Venezuela’s state power firm. Alvarado at the time of the bank transfers led an agency that managed electricity concessions.
Both men were indicted and are awaiting trial.
Andorran prosecutors called Villalobos an “intermediary in the payment of bribes.” Alvarado, they wrote, “was a key player in the adjudication of contracts.”
The indictment didn’t claim Villalobos’ payment to Alvarado was ordered by or on behalf of Betancourt.
Clare, Betancourt’s attorney, said “neither Derwick nor my client ever asked, directed, or encouraged Mr. Villalobos to commit any bribery.”
In a telephone interview, Reuters asked Alvarado about the approximately 45 million euros in payments that Andorran investigators said were deposited by various companies into his account.
Alvarado said the deposits, including those by Villalobos, were legitimate payments for advising companies and that he wasn’t the sole official in charge of awarding contracts.
Around Venezuela, construction of the Derwick plants was sluggish and problematic, project documents show.
Equipment broke down, including a crane that in one instance crashed into a turbine meant to power a plant needed for a state-run steelmaker. Deliveries came late, designs had to be redone and funding for local contractors disappeared, according to the documents.
“The work is progressing very slowly,” a ProEnergy site manager wrote in one report.
Betancourt’s attorney said any delays or initial malfunctions were a result of the speedy rollout process and rapid turnarounds expected by the government.
“Problems with equipment are normal in a project of this size, scope, technical sophistication and fast-track delivery execution,” he wrote. The incident in which a crane damaged a turbine, he added, was the fault of a contractor employed by the steelmaker.
“LOOKING FOR OPPORTUNITIES”
Soon, Betancourt distanced himself from Venezuela and the power projects.
With deep pockets, and a European passport because of family ties in Italy, he moved to Spain.
In July 2012, ¡Hola!, a celebrity magazine, published a spread about his lavish wedding at a Madrid monastery. That year, according to property records, he paid 24 million euros for El Alamin, the castle where he made a new home and later welcomed the Hawkers team.
Court and property documents also show real estate purchases in Paris and Florida by that year.
Betancourt presented himself as a suitor for struggling European startups. “I’m in Spain looking for opportunities,” he told one magazine. Before long, he invested millions in an online payment platform, a job-search site and a banking business, records show.
As the Andorran probe got underway, trouble brewed in the United States, too.
In late 2013, Daniel Rosenau, a ProEnergy salesman in Missouri, grew curious about his employer’s work with Derwick after hearing from colleagues about the big transactions.
Rosenau said he looked at the paperwork and was surprised by how few changes, besides steep price hikes, were made between ProEnergy drafts and Derwick’s proposals.
Normally, he said, energy companies go back and forth on drafts repeatedly. “It was disgustingly lazy,” he told Reuters.
Clare, Betancourt’s lawyer, said the similarities were deliberate.
“It is intentional that proposals from ProEnergy to Derwick look like what Derwick provided to the customer,” he wrote. The documents should be “identical,” he added, “so the scope of supply and responsibilities do not change.”
Rosenau, who no longer works for ProEnergy, gave file copies to prosecutors.
Investigators at the U.S. Attorney’s Office for the Southern District of New York launched a money laundering and bribery investigation that remains underway, according to two people familiar with the probe.
Betancourt and Derwick are subjects of the investigation, these people said.
It’s unclear whether ProEnergy, which declined to comment on legal matters, is also a subject. A Justice Department spokesman declined to comment.
In December 2014, the Justice Department asked Switzerland for information on Derwick accounts held there, according to a Swiss court ruling approving the request.
Derwick by then had transferred at least $58 million to Swiss accounts, the ruling said.
Betancourt pressed on in Europe.
Through earlier investments, he learned about Hawkers, then three years old. The founders had created buzz with hip, affordable sunglasses.
They used Facebook to target customers and negotiated endorsements with celebrities like Uruguayan soccer star Luis Suarez. By 2015, annual sales had reached 22 million euros.
But they needed financing.
Betancourt, his hair gelled back, told the Hawkers team at El Alamin of his love for Spain, according to the three people familiar with the meeting.
When his guests asked about his past in Venezuela, Betancourt said little.
The founders planned to ask for 35 million euros. But Betancourt, the people said, offered 50 million euros for a 20% stake. They agreed. To celebrate, they rode all-terrain vehicles around the 1,400-hectare estate.
Hawkers announced the investment in October 2016.
El Mundo, a Madrid daily, called Betancourt “the Venezuelan sunglasses king.” He told the paper he preferred not to discuss Venezuelan politics, but that “you can be successful” there “if you truly work hard.”
Betancourt, now chairman of Hawkers’ board, named a deputy to the executive ranks.
He appointed a brother and a sister to finance and marketing positions, company reports show. He also suggested changes to the business.
Two people familiar with the discussions said he pushed Hawkers to open retail shops. Costs ballooned, causing a 10 million euro loss in 2017, financial statements show.
In a report, Deloitte, Hawkers’ auditor, questioned the company’s “capacity to continue functioning.” Beatriz Martin Velazquez, the Deloitte partner who signed the report, declined to comment.
Betancourt also sought personal favors, two people familiar with his requests told Reuters.
He asked the founders to use their Internet skills to optimize Google results so only positive news about him appeared, these people said. Clare, Betancourt’s attorney, told Reuters: “For my client, Hawkers is an investment, not a career change, a ‘second act,’ or a chance to improve his Google search results.”
The relationship grew tense.
Betancourt, the people said, told Hawkers’ founders he would keep the business afloat in exchange for control of the company.
In late 2017, most of the founders relinquished their stakes. For an additional 20 million euros, Betancourt became majority owner.
Clare, the attorney, disputed this account of Hawkers’ recent history. The “assertion that my client forced Hawkers to change its business model or to expel its founders is wrong,” he wrote.
The following year, another U.S.
case began probing Betancourt’s activities, according to two people familiar with the investigation.
In July 2018, federal agents in Miami arrested Matthias Krull, who until May of that year had worked as a private wealth manager for Swiss bank Julius Baer Gruppe AG.
Krull, with seven others, was charged with conspiracy to commit money laundering by the U.S. Attorney for the Southern District of Florida.
One of those charged was Francisco Convit, who is a Betancourt associate and a director, according to corporate records, at both Derwick and Minenven, the Barbadian company.
A Justice Department spokesman declined to comment.
Krull and a Julius Baer spokesman also declined.
Convit is believed by people familiar with the investigation to be in Venezuela. His U.S. lawyer, Adam Kaufmann, declined to specify his client’s whereabouts. He told Reuters that Convit declined to comment.
The case, according to a criminal complaint filed by prosecutors, centered on a conspiracy to launder more than $1 billion by former Venezuelan energy officials and associates.
Krull pleaded guilty shortly after his arrest.
In testimony associated with his plea, according to a summary filed by prosecutors, Krull said Convit and an individual referred to as “Conspirator 2” had been his clients for several years. Two people familiar with the testimony identified “Conspirator 2” as Betancourt and said he is a target of the Miami investigation.
The criminal complaint alleged Convit had conspired to launder money, in part through Krull.
Prosecutors said Convit and “Conspirator 2” had received 227 million euros in laundered funds. Reuters couldn’t determine the alleged origin of those funds.
Betancourt’s attorney declined to comment on the assertion that Betancourt is a target of the Miami investigation or that he was referred to as an unnamed “conspirator.” “My client has committed no wrongdoing and is confident that an investigation will demonstrate that,” he wrote.
Four people familiar with the probe told Reuters it remains underway.
Along with “Conspirator 2,” prosecutors listed eight other unnamed conspirators, according to the complaint. One was later indicted on a charge of conspiracy to launder money.
Blackouts continue to roil Venezuela.
In Puerto Ordaz, along the Orinoco River, two Derwick plants were meant to help increase output for Siderurgica del Orinoco CA, a state-run steelmaker known as Sidor.
When Derwick won the contracts in 2010, Sidor said the plants would “reactivate” production lines and create jobs.
Sidor didn’t respond to a request for comment.
Only one of the plants was fully completed, according to a report by the government holding company that controls Sidor, and it was plagued with mechanical problems upon delivery.
The other, where the crane damaged one of the turbines during construction, is “totally abandoned,” the report added. In a separate report, the holding company said it paid Derwick over $300 million for work and equipment at both facilities.
Clare, Betancourt’s attorney, told Reuters that work halted at the unfinished plant because the government decided to use its turbines elsewhere.
In 2013, he said in a letter to the news agency, Derwick and the holding company negotiated a “closeout” agreement which recognized that Derwick had completed 53% of the work on the second plant before the government ordered the halt.
The closeout, Clare wrote, cost Derwick $46 million in work it would no longer complete.
“Derwick lost out on revenue,” he wrote.
Today, the functioning plant works at only a third of planned capacity, government data show. Sidor’s output is now 1% what it was when Derwick’s contracts were awarded, production statistics show.
“This was an absolute failure,” Yunis Hernandez, a Sidor union leader, said of the two plants.
Betancourt now lives in a London mansion valued at £30 million, according to public records and entries he made on a personal blog.
In November 2019, he wrote a new post: “How Alejandro Betancourt transformed a sunglasses company.”
(Additional reporting by Vivian Sequera in Caujarito, Maria Ramirez in Puerto Ordaz, Brenna Hughes Neghaiwi in Zurich, and Matt Spetalnick and Mark Hosenball in Washington. Editing by Paulo Prada and Tom Lasseter.)
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