Use of a Private U.S. Corporate Structure to Disguise a Government Program

Part 1: How United States Intervention Against Venezuela Works

Part 2 of 3

C. Venezuela: Some Examples of the Current U.S. Intervention Against the Bolivarian Revolution

In Venezuela the administration of George W. Bush is intervening in the political process with a combination of activities very similar to those the U.S. carried out in Nicaragua in the 1980s, but without a terrorist war on the scale of the Contras, and—at least until mid-2005—without an economic embargo.  These activities, with a 2005 budget approaching $10 million, masquerade as “civic education,” “support for the electoral process,” and “strengthening the democratic system.”  In reality, all these programs, carried out almost silently, support the opposition against President Chávez and his coalition.

The action agencies of this “open support for democracy in Venezuela” are the State Department, the U.S. Agency for International Development (AID), and the National Endowment for Democracy (NED) with its four associated foundations.  The largest amount of money, some $7 million in 2005, is channeled by AID’s Office of Transition Initiatives (OTI) through a private contractor, Development Alternatives Inc. (DAI), a consulting firm based in Bethesda, Maryland, next to Washington D.C.  Additionally the CIA, as always, has its role in supplying secret funds and providing clandestine support.

The web page of DAI describes the company, established in 1970, as having 250 employees at its headquarters and about 1500 others working in international projects.  It has carried out development projects in 150 countries, mostly in the Third World, “to build fair and effective government, strengthen local capacity to manage natural resources and agriculture production, fuel the economic engines that power growth from micro-finance to enterprise development, and leverage the impact of private investment in emerging markets.  Clients include the U.S. Agency for International Development, the World Bank, bilateral development agencies, global corporations, and host country governments.”  Its projects deal with agriculture and natural resource management, banking and financial services, crisis mitigation and recuperation, democracy and governance, solutions for global businesses and mitigation of the effects of AIDS.  DAI, as we shall be see further on, is an ideal corporate structure for inserting CIA officers and agents under commercial cover in foreign countries.

In Washington there is no doubt a high level committee that directs the operations with a name like the Venezuelan Inter-Agency Working Group.  The representative of the Department of State would normally chair the committee, and its other members represent AID/OTI, the Pentagon, CIA, NED, and other interested agencies.  Among its various responsibilities, this committee sets the budgets and decides what mechanisms will be used to channel the funds.  The committee also has to evaluate the effectiveness of the operations and keep appropriate committees of Congress informed.

The Department of State closely controls the interventionist program in Venezuela through the U.S. Embassy in Caracas where AID/OTI has an office.  The CIA, as a matter of course, also has an office in the Embassy under diplomatic cover.  Just as in Washington, there will be a coordinating committee in the Embassy chaired by the Ambassador or the Deputy Chief of Mission and whose members will include the chief of the political section, OIT representatives, the CIA station chief, a representative of the military attachés and perhaps others.

Also in Caracas, but apart from the Embassy and having legal status as private foreign entities, there are offices of two of the foundations associated with NED.  The International Republican Institute has its office in Altamira, Second Avenue, between Eighth and Ninth Transversals, Quinta Retana, ground floor; and the National Democratic Institute (NDI) is at Avenue Francisco de Miranda, Edificio Torre La Primera, 14th floor, Office 14B, Campo Alegre. Additionally Development Alternatives Inc. (DAI), the consulting firm, has its office on Guaicaipuro Street, Hener Tower, 2nd floor, office 2-B, El Rosal.  Each of these three operations centers has U.S.-citizen personnel selected in Washington plus Venezuelan employees whose employment must receive prior approval in Washington.

The activities of these action agencies in Caracas—IRI, NDI and DAI—take the form of individual project contracts with activities, cost, dates of beginning and end, and some, as in the OTI-DAI contract, with options for extensions. IRI and NDI project descriptions are submitted by their Washington offices to the Department of State, AID/OTI, or NED for approval and financing under a contract. The funds are then distributed to the Caracas offices that pass the money to Venezuelan beneficiary organizations under sub-contracts, each of which requires approval by the headquarters of the agency where the funds originated.

The three action agencies with offices in Caracas also have to submit to their Washington headquarters the résumés of leaders of proposed beneficiary organizations, undoubtedly so that the CIA may do a background security check on them, internally and with other security agencies, as part of the approval process. Additionally, each contract requires that the executing agency in Caracas submit progress reports every three or six months plus special reports on important issues.  On the whole, this system of projects, approvals, contracts, and subcontracts are a concrete, sophisticated mechanism totally controlled by the U.S. government.  The evidence is contained in the hundreds of official documents, including contracts, obtained since 2003 through the Freedom of Information Act.  A great quantity of documents is published at http://www.venezuelafoia.info.  These documents reveal that NED has been directly financing at least 17 Venezuelan non-governmental organizations apart from its financing of many others through its four associated foundations.

The activities directed and financed by the U.S. have been and are very diverse, but they all have as their objective the development and strengthening of the political opposition both in political parties and in NGOs such as the Venezuelan Workers Confederation (CTV). These include workshops, seminars and conferences, training courses to develop political parties, promotion of unity through party coalitions, campaigns to register voters and to assure that the greatest number vote, establishment of a parallel non-official list of voters, training of election observers to detect fraud, close monitoring of the National Electoral Council (CNE) to denounce irregularities, organizing parallel vote counts, rapid calculation of results (“quick counts”) for possible announcement before they are announced by the CNE. Apart from these specific objectives, the activities are designed to attract medium and long-term new volunteers to the electoral process but always in opposition to the Bolivarian Revolution.  The favored parties include Acción Democrática (social democrats), COPEI (christian democrats), Movimiento al Socialism, Projecto Venezuela and Primero Justicia.

Among the many beneficiaries of this intervention was the Coordinadora Democrática,[1] with representatives from business, labor and political parties, that fulfills a role quite similar to that of the Nicaraguan Coordinadora Democrática during the 1980s. Another beneficiary is the organization Súmate that emerged in 2003 at the end of the failed oil strike to begin the campaign for the recall referendum. This organization is very similar to Via Cívica in Nicaragua.  Finally, the consulting firm DAI functions just as the Delphi International Group functioned in Nicaragua, financing the anti-Chavez propaganda campaign called Venezuela: Initiative to Build Confidence (VICC). 

To understand how US political interference functions in Venezuela, it is well to examine five AID/OTI contracts with the three action agencies that have offices in Caracas: DAI, IRI and NDI.  The following pages analyze: 1) the OTI contract with DAI set up following the failed coup of April 2002; 2) two contracts with IRI to intervene in the recall referendum of August 2004 and possible elections afterwards; and 3) two contracts with NDI also to intervene in the referendum.  The value of these five contracts in the two years before the referendum was about US$12 million and the original texts are published in English at www.venezuelafoia.info under USAID Contracts.

1. OTI-DAI Contract to establish Venezuela: Initiative to Build Confidence (VICC)

OTI/AID began operations in Venezuela as a key player in the U.S. government’s program after the failed coup of April 2002.  Until then, political intervention had been mainly in the hands of NED and its four associated foundations with an annual cost of about $ 1 million.  To run operations on the ground, IRI had set up an office in Caracas in 2000 followed by NDI in 2001, offices that continue operating to this day.  These two institutes financed various organizations directed by those who signed the Carmona Decree during the coup that abolished democratic institutions, and they continued to support the coup plotters after it failed.  However, after the coup, there was an obvious decision taken in Washington to multiply its efforts in Venezuela with much more money, but now through OTI/AID and a contracted consulting firm, Development Alternatives Inc. This firm would act as a branch of OTI/AID under the guise of a private company.

In June 2002, OTI/AID started this new program in Venezuela by sending two officials to the U.S. embassy in Caracas to supervise the program.  The OTI web page indicates that this office is in charge of interventions in crisis areas where there is a transition from war to peace or transition from a non-democratic government to a democratic system.  Apparently, AID/OTI considers Venezuela to be a country “in transition towards democracy” despite the various free and fair elections since the first election of President Chávez in 1998.  The OTI budget in Venezuela for the first year was $2.2 million, more than double the annual budget that NED then had for Venezuela.

In August 2002, OTI contracted the consulting firm DAI to establish in Venezuela programs intended to “support democratic institutions and processes…to ease societal tensions and maintain democratic balance,” and in October of that year DAI opened its office in Caracas.

The budget was USD$5.2 million for the first year and almost USD$4.9 million for the second year of operations.  These were quantities much greater than the annual budgets for NED and its foundations, which were around $1-2 million.  For each year the DAI budget included $3.5 million for distribution in money or materials among the beneficiary Venezuelan organizations and the rest was for fixed costs, salaries, transport investments, communications, computers and other administrative costs plus DAI’s commission, the amount of which was censored in the contract released under FOIA. As it happened, this program continued during the optional second year, and the contract has been prolonged until September 2005.  In all probability, it will be extended again through the national elections in late 2006.

According to the contract, the reasons why OTI decided to establish a program in Venezuela were:

1) “Political tensions have increased dramatically” since April when “several protesters were killed outside the presidential palace” (no mention of the coup);

2) The U.S. has “a strong interest in ensuring that (democracy) endures in Venezuela;”

3) Venezuelan “institutions” need support to “restore democratic balance” and “ensure the protection of human rights and the free expression of ideas, including, at both at the national and local levels, by the media, civil society, political parties and the government institutions.”

The AID/OTI contract with DAI, dated 30 August 2002, consists of 49 pages that detail the way in which DAI will have to work in Venezuela.  In the introduction, OTI describes itself as a rapid response force in the face of social, economic, and political crises as in Kosovo, the Philippines, Haiti, or Columbia.  It describes its programs as “fast, flexible, innovative, tangible, targeted, catalytic, and overtly political.”  It adds, “OTI is often engaged in the most sensitive political issues of the U.S. government’s priority and high profile countries.”  Its money comes from the U.S. International Disaster Assistance Fund, and its programs normally last one or two years at the end of which OTI generally passes the operations on to another AID department or they are closed down.  The contract makes it clear that OTI is the equivalent of an international political fire brigade that is used by the government to bring under control social and political upheavals that threaten U.S. interests – something similar to the military’s Special Forces.

The types of foreign organizations that OTI supports, according to the contract, are a list that until the 1980’s and the adoption of Project Democracy, would have been the CIA’s list for covert actions: local, regional and national governments; private, voluntary organizations; international organizations; indigenous groups; cooperatives, associations and student groups; informal groups; media, private sector and coalitions of these groups.  Its activities include the promotion of reconciliation; prevention and resolution of conflicts; promotion of independent media with training in journalism; legal reform; de-mobilization and re-integration of ex-combatants; promotion of national messages using television, radio and the press; reactivating key non-governmental organizations with initial funding; and promoting governance with electoral support and the development of a strong civil society.

Specifically in Venezuela, the contract requires DAI to work with “labor, business, political organizations, government, and civil society to strengthen democratic institutions and processes” as well as “media institutions through journalistic training.”  Furthermore, DAI is required to work with “NGOs that seek to promote dialogue on an inclusive social and political agenda for Venezuela and open avenues of dialogue currently closed due to the polarization of the population.”  The contract stipulates that the programs will be non-partisan and that no support will be given to organizations that seek to alter the political order by unconstitutional means. In fact all financing under this program has gone to the political opposition, including some who signed the Carmona Decree that abolished democratic institutions during the failed coup of April 2002.

According to the contract, an official at AID headquarters in Washington, called the Cognizant Technical Officer (CTO) supervises each OTI program, and his approval is necessary for every important decision.  The CTO, named in the contract as Russell Porter, works in close coordination with the Department of State and directs the activities of the OTI staff assigned to the embassy in Caracas who are designated OTI Field Representatives.  These officers supervise the day-to-day activities financed by OIT and executed by the IRI, NDI, and DAI offices in Caracas. 

According to the contract, DAI has full responsibility for executing the program, including administrative, logistics, acquisitions, and financial matters.  DAI is required to establish the office, buy office equipment and vehicles, recruit Venezuelan employees, establish communications and accounting systems, develop and maintain a database with all the details of their activities, develop a program to distribute funds via subcontracts and monitor their effectiveness and impact.  The system of disbursing funds requires that DAI propose funding for NGOs and other Venezuelan organizations to the Senior Field Representative of the OTI in the Embassy who can authorize payments up to $100,000.  Any proposal greater than that has to be approved by the CTO at AID/OTI’s Washington office.

The contract has several pages of details relating to the responsibilities of DAI U.S.-citizen personnel both before and after they arrive in Venezuela.  It underlines the speed with which DAI has to organize equipment and prepare itself to start the program, including preparation of a list of contacts in Venezuela such as NGOs, government offices, and international organizations.  It is also noteworthy that the contract demands that distribution of funds should begin as soon as possible after the team arrives in Caracas.  From these requirements it is obvious that before going to Caracas the DAI team must have had a good understanding of the previous NED activities and its four foundations so that they can to begin work immediately in coordination with the IRI and NDI offices in Caracas.

DAI furthermore is required to rent space for offices and obtain furnished accommodation for its personnel and any OTI personnel assigned to Caracas.  The selection of offices and residences has to comply with Embassy security requirements and to have prior written approval from the AID Regional Security Office.  The contract states that the office should be no lower the 3rd floor if it is in an office building.  It must have strong doors and iron bars on the windows if it is on a ground floor. It must be set back from the street, with secure, well-lit parking spaces and surrounded with walls or fences.  Additionally the contract established that DAI has to arrange necessary services such as landline telephones, fax, internet connection, portable radios, radios in the vehicles, cell phones, satellite telephones, GPS systems, and an in-house computer network.  It also requires that DAI prepare an evacuation plan for the U.S.-citizen personnel and OTI officials, and it mentions the possibility of firing personnel for security violations.  On the whole these detailed requirements bind DAI to quickly establish an operation of high security, self-sufficient, and capable of leaving Venezuela from one minute to the next.

The most interesting aspect of this contract is the designation of the U.S. personnel for the DAI Caracas office (5 people) plus one coordinator based in Washington.  These 6 people, referred to as “Key Personnel”, are named in the contract by OTI, but only by last name and initial:J. McCarthy, Chief of Party; H. Méndez, L., Blank and G. Díaz, Program Development Officers; G. Fung, Financial Management Specialist; and J., Jutkowitz, Local Program Manager in Washington.  The contract does not state one word about who these people are nor where they come from for this urgent and quickly mounted operation.  Obviously each one had to have extensive knowledge about Venezuela, U.S. policy there, and fluency in Spanish in order to carry out their duties from the moment they arrived.  Under the contract OTI reserves the right to substitute any one of the six.  Thus DAI, a private consulting company, cannot choose the project personnel.  One cannot dismiss the possibility that these 6 people are CIA officers placed under commercial cover with DAI.  Furthermore, for each prospective Venezuelan employee, DAI has to submit his/her resume and other information for approval by the CTO before hiring.  It is obvious that with this contract OTI is simply renting DAI’s corporate structure for a wholly governmental operation, while attempting to disguise it as a private sector program.  And in fact all the OTI requirements in the contract are tasks that are to be carried out by personnel assigned by OTI, with DAI being only a commercial cover.

As for the possibility that this OTI and DAI activity is really a CIA operation, it is convenient to recall what I wrote in Inside the Company: CIA Diary (1975) about the use of commercial cover for CIA officials in foreign countries.  From its beginnings in 1947, the CIA placed officers overseas to manage operations under non-governmental cover in order to separate very sensitive activities from the officers working in embassies with diplomatic cover.  Through the years various U.S. international corporations cooperated by placing CIA officers in their overseas operations.  However, a CIA officer working in an embassy always had to back up the non-official cover officer in many ways, and this administrative task typically took up much, if not too much, time.

During the 1960s, an effort was made to establish small, self-sufficient groups of officers under commercial cover with direct communications with CIA headquarters in Langley, Virginia, outside Washington. The goal was to reduce the demands for so much time from the officers working in the embassies.  That was the case in Mexico City where a group of three CIA officers established an import business with the code name LILINK.  Even though the CIA officials inside the embassy directed this non-official cover office, there were secure communications that reduced the need for personal meetings and other support from the embassy.  The DAI office in Caracas fits perfectly in this pattern, both to give supposedly private and commercial cover to CIA officers and to try to disconnect embassy officers from such sensitive intervention in internal Venezuelan politics.

To sum up this contract, after the failed coup of April 2002, the government of the United States widened its program of intervention in the Venezuelan political process through the Agency for International Development (AID) with budgets much greater than those of the National Endowment for Democracy (NED) and its four associated foundations whose programs with the opposition nevertheless continued.  In August 2002 AID/OTI contracted the consulting firm Development Alternatives, Inc. (DAI) to develop various programs to support the political opposition with annual budgets of around $5 million.  DAI then established an office in Caracas, very possibly as a front for and with personnel from the CIA, while passing as an ordinary subsidiary of a U.S. transnational corporation.  In reality, it is a key office of the U.S. embassy disguised as a private company.

At least 67 projects up to end of 2004 have been financed by the DAI program called Venezuela: Initiative to Build Confidence.  The first projects started in the fall of 2002 were designed to support the lockout and sabotage of the oil industry from December 2002 to February 2003.  This support included financing the TV ad campaign in favor of the strike.  When the strike failed, DAI focused its projects on the referendum of August 2004, and among its main beneficiaries was Súmate, the main NGO that promoted the referendum against Chávez.  Parallel to these activities DAI has financed the development of the opposition’s political program against the Bolivarian Revolution known as Plan Consensus.  Some of the beneficiaries of this project were Queremos Elegir (We want to Choose) and Liderazgo y Vision (Leadership and Vision).  Now, since the victories of President Chávez in the referendum and in the local and state elections of October 2004, DAI is focusing on the national elections of 2005 and 2006.

At the end of 2004, OTI had active operations in 11 countries including Venezuela, Iraq, Afghanistan, Democratic Republic of the Congo, Sudan, Bolivia, and Haiti.  It is noteworthy that on the OTI web page that has a list of the countries where they have programs, all the countries have a link to pages that describe the programs, except Venezuela which does not have a link or a description of the program.  As for DAI, at the end of 2004 it had programs in dozens of countries in Africa, Asia, Eastern Europe, and Latin America. Apart from Venezuela, it had programs in Bolivia, Colombia, Brazil, Ecuador, El Salvador, Haiti, Honduras, Jamaica, and Mexico among others).  These OTI and DAI programs certainly merit review to see if they operate under the same conditions as in Venezuela, that is, as possible fronts and covers for the CIA.

Translated from Spanish by Maria Victor

Next:

Part 3: Analysis of Four USAID Contracts with with Republican and Democratic Party Foundations in Venezuela