Merida, July 19, 2018 (venezuelanalysis.com) – Eight people have been arrested in relation to a massive US $49 million embezzlement scam allegedly run by a private firm owned by Spanish citizens before it was expropriated in 2010, according to Venezuela’s Attorney General Tarek William Saab.
The Garcia Armas Corporation (GAISA), which is presided by Canary Island-born and ex-Spanish Consul Manuel Garcia Armas, was a food importing powerhouse before a Hugo Chavez 2010 presidential decree incorporated it into the public food network.
Following the expropriation, workers made public numerous accusations of embezzlement against the Garcia Armas administration. However, the then-Attorney General Luisa Ortega Diaz, who is herself fleeing the Venezuelan judicial system on accusations of corruption, failed to act.
Yesterday’s announcement forms part of an ongoing anti-corruption drive by the new attorney general, which has claimed numerous scalps of all political colours. Saab has frequently accused Ortega Diaz of “burying” corruption cases during her tenure.
“We have had enough of businessmen committing crimes like this,” declared Saab in a press conference Wednesday. He also assured that his office “assumes the anticorruption struggle as the fundamental base of a line of legal action against impunity.”
The bust has targeted numerous Venezuelan GAISA subsidiaries, as well as two Chile-based GAISA firms, for allegedly falsifying import/export invoices in the pre-expropriation period, the attorney general explained.
According to his office, GAISA falsified invoices in order to qualify for foreign currency which the Venezuelan state heavily subsidised through its CADIVI and (later) CENCOEX programs.
Although the attorney general’s office has not disclosed the final destination of the embezzled state-administered currency, the fruit and other foodstuffs the companies claimed to be importing never arrived.
Currently, Venezuela’s subsidised foreign currency rate rests at 120,000 Bolivars (BsF) for US $1, whilst dollars in cash can sell for more than 3,500,000 BsF on the streets. This allows for a lucrative – if illegal – 2,800 percent profit margin for those with access to this subsidy, which is often those well connected to government authorities.
Corruption in the handling of state-subsidised foreign currency by both public and private sector firms is a common grievance felt by ordinary citizens. Scams, like the one GAISA is accused of, not only deviate vital public resources, but also exasperate shop floor shortages. The Garcia Armas bust is sure to offer certain contentment to numerous Venezuelans.
Amongst the firms accused are the GAISA subsidiaries Alimentos Frisa and Frigorifico Ordaz (FRIOSA), both based in Puerto Ordaz (south-east Venezuela) and Chile-based Benipaula SA and MCM SA.
The operation has led to the arrests of three citizens in Chile, two of whom are company accountants. Each has been condemned to five years in prison and fined US $30,000.
A Caracas courthouse has also issued arrest warrants for numerous GAISA board members, including Sebastian, Serafín, Pedro and Domingo García Armas, Karina Gruber, Manuel and Margaret García Piñero, and Domingo García Cámara.
Problematic and illegal practices seem to have not ended with the corporation’s expropriation. Workers have repeatedly complained about poor administration and even robbery in the firms after 2010. Productivity has reportedly dropped considerably.
A 2013 report from the Socialist Inspectors of the Presidency of the Republic concluded “at the time of the intervention in the firm, it had an operational capacity of 80%, currently the fridges are empty and there is no register of sales.”
According to employee Cristian Gonzalez, in 2014 workers called on President Maduro to “send someone trustworthy so that we can give them all of the evidence of robbery and fraud [by government-appointed directors].” “Twenty tonnes of food arrive and five tonnes disappear,” he said.
Claims of falling production and corruption in expropriated firms fuels an intense debate in Venezuela over the success of the policy which has expanded the public sector under recent governments. Right-wing sectors argue that the Garcia Armas case proves that the private sector works more effectively if left alone, whilst workers tend to criticise the post-expropriation administrative inadequacies rather than the policy of expropriating itself.