Bribes in Ferrominera Orinoco’s iron ore sales

From: Patrick Hodgins

To: CAÑAS L. JORGE L. / FMO 3142:
[email protected]

Sent: Wednesday, July 11, 2007, 6:11

Subject: RE: Iron request for China


First let me thank you for your
patients in this matter , the chinese have been very hard in their
negotiations, however we can revert with the following counter for
your perusal.

We accept as per your Offer below
and i thank you for your efforts in getting this far, we there for
counter with the following:

1) Quantity:

a) 2007 Contractual Year: Nine (9) shipments of 70,000 MT +/- 10%
MOLOO each (“Panamax” size vessels).

b) 2008 Contractual Year: Seven (7) shipments of 130,000 MT +/-
10% MOLOO each (“Cape” size vessels) or in Buyers options capes
to be split into panamax (14) 70,000MT +/- 10%moloo.

2) Quality:

a) Ferrominera Sinter Feed (FSF2007), as per the specifications
previously provided to you.

b) San Isidro Calibrated Lump Ore (SICLO-1), as per the
specifications previously provided to you.

3) Delivery Period:

a) 2007 Contractual Year: Nine (9) shipments, as per point 1a
above, from August 1st, 2007 until April 30th,

The above was replied by the following email:

Panamax Bulk AS

Fra: Freddy A Castellanos [[email protected]]

Sendt: 11. juli 2007 16:43

Til: Patrick Hodgins

Kopi: Panamax Bulk

Emne: Re: Iron request for China


Thank you for the blind copy. Now, Jorge will reply to you as per
the terms we have agreed but with the prices that will appear in the
contract between FMO and you (either Crown Venture of Juhua Group).
As per the discussions I have maintained with Jorge, FMO will have
following FOB prices in the contract:

FSF2007: US Cents 69.54/DMTU

SICLO-1: US Cents 86.55/DMTU

As also agreed, the difference between above prices and those
agreed between us (FSF2007: US Cents 75.00/DMTU and SICLO-1: US Cents
92.00/DMTU) together with the 1.5% (of the FOB value of shipments)
commission for buyer, which will be included in the sales contract to
be signed, will be for FMO’s people who got the material and will
approve the deal. I am sending on a separate message a draft of
contract to be signed between Crown Venture and me concerning this

Finally, I thank you for your efforts on successfully concluding
this negotiations.

Kind regards,

Freddy Castellanos

The above is quite self explanatory,
but to put it in context, actors must be identified.

As per his LinkedIn
page, Patrick Hodgins is
meant to be an Australian
shipping executive that has worked in the past for Rio Tinto, Freight
Investors Services, Fortescue Metals Group, and Nidera. At time of
Hodgins was with Australia’s Fortescue Metals Group.

Jorge Cañas (Vzla
ID no. 8.540.342) is quoted
as being Sales Manager (Gerente
de Comercializacion) of
Venezuela’s iron producer Ferrominera del Orinoco (FMO).

Freddy Castellanos (Vzla
ID no. 4.883.936) is a metallurgic
engineer, who worked for FMO until August
of 2003 [see here].

Venture claims to be a
“global trading company being registered and having offices in Hong
Kong, Singapore, Oslo and Caracas.” There’s
a Crown Venture Limited registered in Hong Kong (company number
1128011). It is a HKD 10,000
capital company (wholly
owned by Singapore’s Amoy
Trading PTE. Limited),
whose director is Cook
Island’s based CV Services Limited [see
Crown Venture also has a
record in Oslo (no. 995 957
086), where it appears as one
of a number of subsidiaries
of Hjalmar
Røed & Co AS, owned / operated by Morten Frode Riis, whose
other subsidiary Panamax
Bulk AS was
bankrupt. Unsurprisingly,
Panamax Bulk AS and Crown Venture are registered at the same address
in Oslo. There is no record
of Crown Venture in Venezuela’s registers.

Group, is China’s
Zhejiang province largest chemical industry.

In another communication, Fernando
, Astrup Fearnley
of Norway’s representative in Caracas is copied. Given
that both Panamax Bulk AS and Crown Venture are mere fronts of
intermediators, perhaps Astrup Fearnley’s Fernando Campbell was drawn in to
arrange the maritime side of things. Or
perhaps that was Morten Frode Riis’s part of the deal.

In any case, just
by observing the murky structure leading
to Singapore, Hong Kong, Miami,
Panama, Australia, Cook
Islands, Venezuela
and Oslo, one can infer where this is going. In subsequent
communications [see here
and here],
Castellanos instructs
Hodgins on what needs to be
done for the deal to be completed, as well as requests of Hodgins
payment of $2,309,978.92 worth of commissions to be divided among FMO
staff and himself.

Payment was to be made to BAC
Florida Bank,
Account Number: 937-959-820, ABA: 067009044, SWIFT:
To the name of: «Societe Partry, S.A.» [see

Castellanos sent
Hodgins, as representative of
Crown Venture Ltd, an invoice
from Societe Partry SA with a bogus address in Caracas [see here].
Partry is a company registered in Panama, whose
Ana Luisa Amengual, Mercedes McCarthy and Francisco Ramirez are
directors of hundreds of companies, and
all share the same
address in Miami, according to records [see here].

A couple of bank transfers (payment
of commissions) are evidenced
in the leaked documents:
one from HSBC Hong Kong, acc.
no. 168-313013-838, dated
01/07/2008, to Societe Partry’s account in BAC Florida Bank for
$426,939; another one dated
24 July 2009, from Crown Venture Limited’s account in Singapore’s
DBS Bank Limited, for $381,571.58.

Castellano’s leverage over FMO’s
commercial decisions is apparent when he writes to Hodgins:

As you see in FMO’s message, they
are also including the Letter of Authorization for your company to
promote and sell FMO’s iron ore in the Chinese market this year as
well as next year. This will support you in your discussions with
Beitai Group and other Chinese mills.

But Hodgins own position is also interesting, considering that at
the time he was meant to be working for Fortescue. Was he dealing on
the side, or was Fortescue involved in the paying of bribes to
Venezuelans in iron ore purchases?

As per Junhua’s, well Chinese companies’ corruption is rampant and very well known across the world. There is hardly a market corrupt Chinese
haven’t been able to crack by hook or crook.

And what to make of HSBC’s Hong Kong failure to notice Hodgins own
dodgy set up, and that of beneficiary of transfers, Societe Partry?
In one of the emails, it would appear that at least four transfers in
2008 (dated 01/07, 01/08, 27/08 and 09/10) were made to Castellanos
through HSBC (as
seen in case of Mexican narcos and many other scandals, HSBC’s forte
is not precisely strict observance to anti money laundering
regulations). In the same email, Metalloyd of London (Reuben
) is identified as having purchased around 447 metric tonnes of
FMO’s iron ore between January and July 2008.

I sent emails requesting comment to some of parties involved in this
corruption racket. No one has replied. Another case of rampant corruption involving high chavista authorities and foreign companies and individuals only too happy to engage in criminal activities to make a quick buck in Venezuela.

Tomado de Bribes in Ferrominera Orinoco’s iron ore sales