Sixth Circuit says: "Expropiese!"; Updated as probably, not quite

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There is a long, tortous story behind a series of bonds colloquially known as the “Bandagro bonds.”

I don’t know the details very well, but the outline is the following: billions of dollars of Venezuelan bonds were bought by investors in the US; the Venezuelan government had long held that the bonds were forged, and the buyers were conned; Chavez Prosecutor General Marisol Plaza (pictured right) brilliantly wrote a legal brief saying they were legit; Chavez fired Marisol Plaza and got his new Prosecutor General to say they were not legit; US investors filed a lawsuit in federal court, a federal judge ruled in their favor, and now the Sixth Circuit Court of Appeals has unanimously upheld that ruling.

The bottom line for Chavez? Well, if nothing else happens, Venezuela needs to pay $8 billion, or else see their US assets taken over. The New York Post is already suggesting gobbling up Citgos all over the US.

This is worth keeping an eye on, but from the looks of it, Chavez is in deep doo-doo on this one.

(Hat tip: La ceiba)

Update: Setty gives me a veritable spanking for citing the NY Post, says the issue is not that serious yet. And much as I try, I can’t find the so-called unanimous decision cited by the New York Post on the Court of Appeals website. I guess that’s the last time I’m citing the NY Post. Lesson learned.

1 COMMENT

  1. These bonds are most likely fakes. The Venezuelan government’s bungling has given them legitimacy, and now it might cost them.

    I once talked to one of the characters who’d invested in some of these bonds. He sounded like a flake and I don’t think he believed in the bonds, either. But he justified it as a way to get Hugo Chavez.

    The amorality of money.

  2. Ah, the late-capitalist United States Government is seeking to undermine the Venezuelan nation. Why am I not surprised. The elites in Washington have been bitterly opposed to socialism and nationalism in Latin America for over a hundred years, and this time is no different.

    The only thing that surprises me is that when Venezuela is being bullied, cheated, robbed and abused by the fat cats in Washington, the Caracas Chronicles actually appears to side with Washington rather than with their own country. Haven’t you folks any pride in your nation?

    • LOVE your country passionately, TRUST your politicians as far as you can throw a piano. Think of this: All would be, current and past dictators have had a conspiracy theory they used to get power and then not let it go, mere coincidence! I doubt it.

    • If we do not follow own laws, why do you expect others to respect it?

      Over the weeekend CH tried to take over 47 farms, after farmers put their foot down , CH backtracked and said: well 16 are ok, we will not mess with you! What a load of BS! they come charging like a raging bull and do not know if the farms are actually what they say they are? That’s what happens when you do not follow your own laws.

      But on a more “financial” case, let’s look at who is really responsible for issuing the bonds, shall we? Your president sure loves them, as a cheap fix to avoid having to share the petrodollars with anyone else. The bonds provide the income the country needs for its people, but at the expense of having to repay dearly later…(make a case for that chavista!)

      Now to the point, did you forget that the TSJ ordered the suspension of the trial for the 3 losers who actually got arrested over the PDVAL containers? Who now responds for that billion bolivar disaster?
      That is one ruling, among many, that people in other countries look at and say, hey that banana republic is being run by a nutcase! better get our money before it all goes to hell…

      Of course we all hate that ruling, because of a forgery we are now losing billions but who started the Bond circus? the 4th republic? noooo, the forgery is the people your president put in power to handle matters that are way beyond their experience or educacion (Such as minister Internet/Mozilla of late fame) so it is not surprising that they act, not in the interest of the country but of themselves, as thieves and charlatans do, so if you still have any dignity left you would ask, who in Venezuela has been charged and arrested over this? (relax I know I will not be waiting to hear a real answer from you or your government)

      and looking at the future, so you know where to place your indignation next time, do not forget what your finance minister said about getting dollars for SITME for the next year….Yep more bonds, this time from PDVSA and FONDEN!!!! because as you know the government itself has maxed out again and now needs still more debt….

      As a tipical chavista, it is always someone else’s fault! enough said!

    • Everyone:

      Please do not feed the troll.

      Trolls are nourished by your outrage and anger. In reality, they don’t merit such strong feelings. Think of them as Down’s Syndrome children (except with a nasty disposition): A genetic aberration. Someone we should try not to stare at lest we hurt their feelings, but in our hearts we feel pity and think, “There, but for the grace of God…”

  3. Red Blooded Chavista,

    If I were you, I would be completely disappointed, and not on this blog or the U.S. government. I would be pissed off with the Venezuelan government, the Solicitor General’s office, and anyone involved for the poor handling of this affair from the beginning. I have been monitoring this issue from the start (have you? Inform yourself before writing vitriol!)

    I consider myself a proud tricolor-blooded Venezuelan, and I am genuinely pissed off. Citgo does not belong to Chavez or his Revolution – it belongs to the Venezuelan people, myself included. If we lose it, I will not see it as an act of pure political revenge. I will see it as a result of our government’s own foolishness. Y nadie puede excusar su propia torpeza. But of course, you won’t see that way. Since you are a red-blooded Chavista, you will probably think that the real patria is Chavez and vice-versa. Sorry for not sharing your ideology and/0r your personality cult.

    • I’m just quoting the NY Post story. It says something about $6 billion plus interest.

      Can anyone verify the amount by reading the actual sentence from the Court of Appeals? It’s probably available somewhere.

    • Actually, the original plaintiff was for US$. 1.5 billion, but apparently there are up to US$ 8 billion of those toxic bonds here and there.
      Juan, on the Veneconomia Report, maybe you should go to the original source> AB

  4. This whole story would be about just another sordid swindle by petty con men if it were not for the amount of money involved.

    A few questions for some eager young investigative journalist to pursue:

    1) We know that the bonds purchased were valued at $6 billion. What price were they actually purchased for? These bonds were supposedly close to maturing, so the purchase price should have been close to face value. If not, why such a disparity?

    2) Where is Marisol Plaza now? Has her “life style” been remarkably altered since this event? What about the people around her? We know she signed the report, but who actually drafted it? Where is that person? What is that person’s current financial status vs. before?

    3) Why would someone solicit confirmation of the validity of Venezuelan Bonds from the Attorney General’s office? Wouldn’t that be the purview of the Central Bank, or the Ministry of Finance?

    Comments:

    1) The comment in the NYT about “gobbling up Citgos all over the US” is rubbish. The vast majority of these are independently owned franchises. I don’t think that they can seize the refineries and other physical plant of Citgo without taking the whole company, which is not currently making a profit and probably has more debt than assets. What they can do is seize every tanker of oil that lands in U.S. ports.

    2) If I were to be allowed to speculate, I would guess that some group of investors bought these bonds very cheaply (pennies on the dollar) knowing they were fake, but paid Marisol Plaza, someone in her office, or some group in her office to verify their legitimacy. The original intention of the investment consortium was to bring this law suit. Furthermore, this person or group is (or was) actively sabotaging the defense of the Venezuelan government based on the promises of further payoffs with the proceeds of a win. The goal is to force an out of court settlement.

    3) To further engage in pure wild-ass speculation: It wouldn’t shock me to discover that the consortium of investors are actually Venezuelans, in or close to the government, who had access to all the insider information and the capital to initiate and pull off the scam.

    • No, these Promissory Notes were bought in Feb 1982 by a group of investors lead by Mr. Alfredo Aagaard Gutierrez as first issued by Bandagro when Mr. Waldemar Cordero Vale was interventor of the Bank. Mr Aagaard bought US$ 1,6 Billions fro US$ 200 MM, 12,4% moreless of the face value with maturity of 10 years. Mr. Aagaard´s Group (IVG) sold US$ 1,495 Billions to TRIAD Finanziera FFC for US$ 239 MM five years later in June 1987. TRIAD then, presented them to be paid at maturity and Venezuela issued an extension on its maturity til 1999, when again TRIAD presented them, but Venezuela said they were fake.

      2) TRIAD asked the Presidential Secretary in 2002 and the General Assambly in 2003 for a Administrative Proceeding as Venezuelan Law requires for these cases, the result was the AG under its Organic Law, Article 56 decided TRIAD´s Claim was legitimate and Venezuela had to honored it. But, Venezuela never did, so TRIAD needed to sell some Notes to pay its debts and it did, these companies asked for payment and Venezuela denied it, so they filed suit. Simple as that.

      The problem is: Venezuela, to justify its deniel, issued another AG decision revoking the first, based 100% on a graphotecnical expertise based in the same time on another Promissory Notes totally differents from those being claimed by the investors, these Notes were nullified by the Ministry of Finance (Hacienda) in 1998 in Geneve by Dra. Martha Gomís head of the commission. In other words, the only evidence Venezuela has and presented in the Federal Court of Columbus, Ohio to demostrate the notes are fakes is totally not binding to this case (fradulent because presently, Martha Gomis is the Assistant to the AG Counsel Gustavo Alvarez in charge of this case and she knew the notes are not bthe same). This second decision is a total fraud, Why?. (This is known by the Ohio Federal Court, nevertheless, it was waiting for the decision on the jurisdiction. Now that the Court has Jurisdiction, it is time to decide on merits, what merits? if Venezuela AG second decision is a fraud, then, the first decision stands firm and needs to be obey. Remember, the investors bought the Notes based 100% on the first AG decision who ratified the same in 07/07/ 2004 publicly in a the prestigious newspaper TAL CUAL).

      A) It was never issue at the date is dated (12/08/2003). The second decison was presented 17 months after it supposely was dated, and miracously it was dated 7 months earlier (07/07/04) than the AG Plaza interview by the prestigiuos newspaper TAL CUAL, when she declared “Venezuela must pay as my legal decision has determined”
      B) It was maliciously issued when the AG took a graphotecnical expertise on different Promissory Notes already nullified by the same Ministry of Finance in 1998 to make the Court believes the actual notes being claimed are fakes.

      This is a FRAUD and they have kept saying it.

      Also remember, the signatory of these Notes is Waldemar Cordero Vale first cousin of José Vicente Rangel Vale who was Vice President of Venezuela when the fraudulent second decision was issue. The truth is: if Venezuela pays – and it will – Cordero Vale needs to say something to the venezuelan justice and the USA justice, this is trouble for everyone around him at the time the notes were sold by them, other BANDAGRO officials, political bodies, cousins. and now the AG lawyers…who are making tons of money out of a fraud committed by Venezuela to international investors and using its power to do it. Venezuela better watch out for the RICO ACT.

  5. US$6 billion in fake bonds? Highly unlikely. I work in the corporate finance industry. The institutions that have the financial capacity to acquire such an amount of bonds are not individual investors that can be easily fooled. The commentators that state “fake bonds”, illegal collusion between Prosecutor General Marisol Plaza and the investors and US government involvement are just more blind and ignorant Chavez supporters (is this redundant) at worst or Chavez enablers. And bogotabiketours, you just happen to know someone who is an investor? Please tell me what mega-billion US$ financial institution you spoke to! What a crock. Please retain your incoherent, inane lies for Chavez’ supporters. You are addressing democrats and we do not fall for the smoke-screen filled pablum that passes for truth amongst the “unintelligentsia” of Chavezuela.

  6. Per NY Post article billion in bonds were sold.
    “Skye’s 50 investors own about $1 billion of bonds, including interest — nearly 13 percent of the $8 billion now owed on the bonds.

    The rest is owned by a Swiss investment group registered in Panama, Venospa LLC, which earlier had joined Skye’s suit but was directed by the judge to file its claims separately.”

  7. Bandagro bonds are surely fake. They began surfacing in the 90’s and the Venezuelan Government under Caldera, warned people that they were fake, there is no record of them at the Central Bank, Bandagro disappeared twenty some years ago and the notes were mostly bearer bonds. I have never met anyone who had them since the origins and I have met with lots of people thinking of buying them.

    Then came Marisol Plaza and issued her opinion that they were good, she was rebuffed by Tobais Nobrega, then Minister of Finance, the General Prosecutor ruled Plaza’s opinion invalid, which was ratified by the Venezuelan Supreme Court, all these decisions were prompted by the Government. Thus, the investors told the US Court, here we have an opinion from the Government’s lawyer saying they are not fake, which is invalidate by the Prosecutor (?) and the Supreme Court as the request of the President, thus, we can not get a fair trial in Venezuela. They go to a US Court saying that they are not fakes and they have this valid opinion and the US Court says: Sure, they are good.

    Who is at fault?

    Well, Marisol Plaza would have never qualified for the position of Procurador except under Chavez, she was a lowly lawyer from Maracay who worked in Isaias Rodriguez’ office before becoming Procurador. I would not trust her with a legal “gestoria”, but I am sure these guys paid her well for it.

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