November 22, 2002

The juiciest scandal nobody is writing about…

Ask people in Caracas what or where Las Cristinas is, and mostly you’ll get blank stares back. It’s a specialist concern, this Las Cristinas thing, with most Venezuelans totally unaware that one of the four or five biggest gold-mines on earth is right here in Southern Bolívar state. Much less have they heard about the titanic 16-year legal saga over control of the mine, or the incredible tales of corruption that emerge when you even scratch the surface on this story.

It really bothers me that the Caracas press doesn’t pay more attention to this issue. It’s kind of understandable, though: After 16 years full of legal battles that have seen just about every player in the saga sue just about every other player at one point or another, the story amounts to a dauntingly complicated, headache inducing web of emnities peppered with incomprehensible technical disputes. So most journalists don’t have the time/energy/concentration/legal know-how/geological know-how to get into it. It doesn’t help that global mining companies are largely perceived as a bunch of aggressively predatory outlaws – the fight between Minca and Crystallex Corporation over the mine was described to me once as “a fight between Al Capone and Don Corleone.” Yowza.

Still, the story itself is delicious, full of weird twist and turns, sworn-political enemies quietely slipping into bed with each other to share the spoils of the deal, every sort of outrageous financial trick and illegal maneuver, tape recordings of Venezuelan politicianss haggling over the price of their support over the phone, American PR firms hired by one partner of the joint-venture to fling mud at the other partner, and people becoming millionaires on the strength of their willingness to play dirtier than the other side. The fun thing is that the information isn’t even hard to get at: a couple of phone calls will produce copious evidence for just about everything in this paragraph.

The extremely stripped down version is that Crystallex Corporation – a small Canadian gold mining company that very much fits the Al Capone school of corporate strategizing – has for years been using an extremely dubious claim to hold legal rights over the mine to pump up their stock prize at the Toronto stock exchange. But while their claim to the mine had been seen as basically laughable by most people who follow the saga, it suddenly became much more serious a couple of months back when the Venezuelan government suddenly decided to unilaterally ended the contract it had signed with a company called Minca (which is actually a partnership between a larger Canadian mining company called Vannessa Ventures and Venezuela’s State-owned regional development corporation, CVG) without even going through the International Arbitration procedures demanded in the contract. Though the procedure to strip Minca of its concession was a juridical travesty, within a couple of months the government had mysteriously turned around and granted the contract to Crystallex, a company that still had open litigation against the government for this very same track of land.

Ever since, Minca has been suing and suing and suing just about everyone involved in the issue ever since, but Crystallex appears to have deep pockets and many friends in high places. A lot of people certainly perceive Minca’s crusade to get the mine back as slightly quixotic and pretty much doomed. Of course, it’s news to no one that Venezuelan government decisions are for sale, and Crystallex is certainly in the business of buying. The contract granted to them after the government inexplicably rescinded Minca’s contract was an incredible give away. Crystallex paid just $15 million for $172 million worth of mining equipment that Minca had built. It’s plainly obvious that Crystallex is too small a company, and too shady, to raise the hundreds of millions of dollars in project financing that it would take to actually develop the mine, so the government’s claim that they’re acting in the interest of getting the mine intor production as soon as possible are an evident sham. Moreover, the government granted that contract while Minca’s claims to the mine were still pending – with three separate suits awaiting judgement at the Supreme Tribunal. Don’t be surprised if you see the magistrates involved start driving shiny new $80,000 Mercs soon.

Still, given the pending arbitration, the $15 million price-tag is probably too much, not too little – it’s hard to see how any serious mining company would have paid any money at all for a mine contract so deeply mired in legal disputes. Still, it’s easy to see that Crystallex is far from interested in actually developing the mine – the game appears to be to use the favorable press-coverage from the new contract to pump up the company’s stock price in Toronto even higher, allowing the well-connected to cash-in bigtime on their Crystallex stock options. A lot of shady Canadians (and Venezuelans) are getting obscenely rich out of this whole thing…including, incredibly, one of President Chávez’s most hated political foes.

Certainly the weirdest part of the whole story, the part I’d love to develop into a nice juicy scandal, is that frikkin’ Enrique Tejera-Paris, the former AD diplomat whose house got raided by the Secret Police a couple of months back, the octogenarian accused by Chávez of leading a fascist conspiracy to topple his government, is knee-deep in the whole affair. As of a month ago, he was still on Crystallex’s board of frikkin’ directors. He apparently got $20 million worth of business for his law firm out of Crystallex, and eight million stock options. There’s a dark story going around that he (or his son, who has the same name) was sent to Bolívar state to physically tamper with the civil registry showing the mine’s ownership. And given the spike in Crystallex’s stock price after the government gave it the new contract, he’s probably pocketed millions of dollars more from the whole putrid deal since.

Which strikes me as a remarkable, almost unbelievable story. The man accussed by Chávez of the most egregious reactionary coupsterism turns out to be in bed with his government on a multi-million dollar corruption scandal! Why oh why is the fucking Caracas press not picking up on this? It drives me slightly batty. I have a sinking suspicion, though this I can’t prove, that Crystallex pays off well-connected newspaper editors here for favorable press coverage. It’s painfully obvious that they pay off at least one newsweekly – Quinto Día – which has been giving them outrageously favorable coverage for days. Rumor has it that Quinto Día actually approached Minca to say, pretty much, that their editorial line could change…for a price. My guess is that that’s part of the explanation, but there’s more to it. The press silence is probably the outcome of a series of interlocking issues: the story is too complicated and/or they see Minca as a lost cause and/or they have this kind of defeatist attitude that treats corruption as a kind of force of nature, unstoppable and therefore not worth fighting, and/or they’re on the take from Crystallex. One way or another, it’s a delicious, juicy scandal that no one’s really going after – I’d love to go after it myself, except nobody reads the damn magazine I write for – and this blog…well, it’s almost as much a “specialist interest” as the Las Cristinas saga is…

November 20, 2002


What a difference seven days make. A week ago, the political scene was dominated by talk of parliamentary procedures, after the government attempted a questionable move to rewrite the new Elections Law. Now, after the partial militarization of the city last week, the takeover of the Metropolitan Police on Saturday, the firebombing of Globovisión on Sunrday morning, the running street battles between opposition activists and National Guardsmen near Altamira on Monday and an opposition march that ended in a cloud of tear gas and confusion yesterday, such concerns look oddly parochial. The question exercising the nation now is rather more immediate: has the country been put, de facto, under a state of exception?

This new constitutional euphemism for what used to be known as a “state of emergency” and its concomitant suspension of constitutional rights has been worrying opposition activists for months. There’s a good case to be made that, rather than making a formal – and legal – announcement, the government has decided to implement the State of Exception de facto. Certainly, much of what’s gone on in the last few days is incomprehensible in any other terms. The presence of troops, including army units, on the streets is clearly exceptional, as are the military checkpoints set up on the roads into the city. With day-to-day security in the city now openly in the hands of the military, much of the effect of a state of exception is simply already in place. And as the government displays greater and greater contempt for legal formalities, it becomes ever more plausible that a full state of exception could be implemented without ever having been declared.

As for the government takeover of the Metropolitan Police (known here as the PM), it’s not so much exceptional as just plain illegal, not to mention its being a gross provocation that has escalated political tensions in the capital to heights unseen since April. In appointing a Freddy Bernal loyalist with well-known ties to the Bolivarian Circles to head the PM, the government has made it clear it’s not so much interested in taking over the police as in dismantling it. There was never a chance that its rank-and-file officers would accept orders from the leader of the street gangs they’ve been fighting for nearly a year. So aware was Mr. Sánchez Delgado that the officers would not accept his authority that throughout his first 48 hours as police chief he didn’t even bother to call around to the various precincts – the government instead sent military units to guard them, with machine-gun turrets turned toward the police stations’ doors. Sánchez Delgado did eventually get around to visiting the various precincts – flanked by Freddy Bernal and a number of Bolivarian Circle activists.

What’s clear is that such reckless provocations have once again put opposition moderates (there no longer seems to be any such thing as “chavista moderates”) in an awkward position. Ultimately, a civilized “electoral outcome” is just not in the government’s interests. Recent polls show clearly that two out of three voters would ask for Chávez’ resignation, a proportion so large that the opposition now stands a good chance of exceeding the 3.7 million votes that would be needed to turn out the president in a formal revocatory referendum.

The government must prevent a vote – and raising political tensions as high as possible seems to be the route they’ve chosen to do so. Under such circumstances, opposition moderates’ calls for dialogue, negotiations, and ballot boxes look more and more out of step. Radical voices, from General Medina Gómez to Copei’s Sergio Omar Calderón, start to seem like a compendium of common sense. And while the Coordinadora Democrática has not left César Gaviria’s negotiating table, expectations for that exercise – which were low to begin with – are withering into nothingness.

The next move in this three-dimensional chess game is up to the Supreme Tribunal, which will have to rule on the constitutionality of the government’s takeover of the PM. Magistrate Hadded Moustafa Paolini has been assigned the task of drafting a ruling. He is said to be one of Proyecto Venezuela’s men on the Tribunal, making it seem likely he’ll side with the opposition. The question, then, will be whether his fellow magistrates back him and, if they do, whether President Chávez will heed the ruling. Failure to do so would represent the government’s clearest, starkest snub to the rule of law yet. But heeding the Tribunal would be a striking humiliation for a government that has staked so much on the PM powergrab. One way or another, the nation’s political future now hangs on this decision, and on the president’s reaction to it.

November 17, 2002

Shit + Fan = Right now

Well, I'd been forecasting it for weeks, but still I was a little shocked when it happened. The government has moved on the Metropolitan Police. It was obvious that they wouldn't tolerate a large, armed group in the capital to remain in the hands of the opposition for long. There are National Guard and army units all over town right now, and it's definitely the most tense the city has been since April. Most police commanders seem to be siding with Mayor Alfredo Peña and against the government at the moment, but the situation is incredibly volatile.

It's barely a big surprise how badly the government is bungling this one. Realizing that if they tried to appoint a chavista loyalist to head the PM they'd have no credibility at all, they at first tried to appoint a relatively independent new Chief of Police, Commissar Delgado. He went around all the different police stations yesterday, quickly realized that the move had no support at all, and resigned less than 12 hours into the job. So next up they appointed a chavista loyalist, named Gonzalo Sánchez, who is being identified by CNN as "the former right-hand man of Libertador Mayor Freddy Bernal." He appears to have strong ties to the Bolivarian Circles, and is obviously totally unacceptable to the opposition and most of the PM. Bernal, of course, is one of the most militant and dangerous supporters of the government, and is widely seen as the key organizer for the Caracas area Bolivarian Circles.

This entire move is plainly illegal, way, way, way out of line, and escalates tensions in the capital alarmingly. Anything could happen here. It’s clear that most PM field commanders are not going to recognize Sánchez, they’re still only recognizing Peña’s police chief, Henry Vivas, as their commander. It’s a very, very fluid situation, with many heavily armed men on either side, and it’s incredibly dangerous. There are army tanks parked outside every PM station.

The short-term result of this idiocy is to totally marginalize the moderates on each side. It's very hard for me to see how OAS brokered negotiations can go forward in this climate. It's just too serious a provocation on the part of the government.

Stay tuned.