Corruption in Venezuela: The Alex Saab Case – CSIS | Center for Strategic and International Studies

Photo: FEDERICO PARRA/AFP via Getty Images
Commentary by Moises Rendon and Claudia Fernandez
Published June 24, 2020
On June 12, authorities in Cape Verde arrested Alex Saab, a Colombian businessman who has been implicated in several corruption schemes involving the Maduro regime. U.S. prosecutors indicted Saab in 2019 after he allegedly helped Nicolás Maduro and other high-level Venezuelan officials launder hundreds of millions of dollars in corruption proceeds.
On June 19, the Future of Venezuela Initiative hosted a public webinar regarding the Saab case and, more broadly, the corruption networks that sustain the Maduro regime. That webinar can be viewed here.
In this piece, the authors recap the key points discussed at this event. If Saab is extradited to the United States, the extradition will be a slow and delicate process. In the meantime, the Saab case can illustrate how pervasive corruption has become in Venezuela while the country experiences an unprecedented humanitarian crisis. This case could also show the limitations of indictments within a foreign policy context.
Venezuela is a mafia state. Both corruption and organized crime are widespread throughout the government and have a major impact on internal political dynamics. The country ranks 173rd out of 180 in Transparency International’s Corruption Perception Index. Two of Maduro’s closest confidants—Tarreck El Aissami and Diosdado Cabello—have been implicated in a massive drug trafficking operation known as the Cartel of the Suns (Cartel de los Soles). That cartel involves at least 123 current and former senior regime officials who have held various posts in the executive branch, the armed forces, municipal governments, the judiciary, and the legislative branch.
In addition to drug trafficking, corruption is rampant in the government’s contracts and social programs. Saab, for example, was instrumental in creating the Local Committees for Supply and Production (Comité Local de Abastecimiento y Producción, CLAP), a politically driven subsidized food distribution program in Venezuela. Through a series of shell companies, Saab and others purchased poor quality food items in bulk from countries such as Mexico, Colombia, and Turkey and sold them to the Venezuelan government at inflated prices.
[Saab] was a key figure in the pillaging of the national reserves, profiting off the suffering of the people and increasingly criminalizing and providing those international networks for the Maduro regime.”
— Vanessa Neumann, Ad honorem Representative of the Venezuelan Interim Government to the United Kingdom & Ireland
Saab replicated this scheme in other industries, including oil and gold. In 2015, Trading Energy and Coal (Trenaco), a shell company linked to Saab, was awarded a $4.5 billion contract with state oil company, Petroleos de Venezuela, S.A. (PDVSA). Saab also helped the regime export gold of dubious origin to Turkey, Iran, and other countries. These activities have been lucrative for Maduro and other officials, catapulting Saab into a high-level, though secretive, position within the regime.
These schemes are the tip of the iceberg. Between 2004 and 2014, an estimated $11 billion in funds went missing from PDVSA, according to a 2016 investigation by the Venezuelan National Assembly. In the Southern District of Florida, former regime officials pleaded guilty to converting a $40 million loan to PDVSA into a $600 million windfall through a currency-exchange system only available to regime insiders. Similar corrupt operations can be found in other sectors, including construction and transportation. And yet those schemes do not account for drug trafficking profits or the sums flowing out of the Amazonas and Orinoco regions, where the regime facilitates criminal groups plundering the country’s mineral deposits.
When you add [estimated corruption proceeds], it’s something in the [range of] $6 or $7 billion a year. In 2019, Venezuela’s GDP was $70 billion. So we’re saying that 10 percent of Venezuela’s GDP, at a minimum, is going to state-sanctioned corruption.”
— Fernando Cutz, Former National Security Council Acting Senior Director for Western Hemisphere Affairs
In the short term, Saab’s arrest will likely lead to cash-flow issues for the regime. After all, Saab has long played a vital role in establishing and maintaining the illicit financial networks that facilitate corruption, and Maduro reportedly entrusted him with his personal wealth. If Saab came under U.S. custody, there would be an opportunity for U.S. authorities to receive detailed information about the illicit activities that sustain the regime. This could help better understand the regime’s criminal networks and improve sanction efforts. This arrest is not a silver bullet, however. Without a bilateral extradition treaty between Cape Verde and the United States, bringing Saab into custody will require careful diplomacy.
As discussed during the event, the Saab case highlights how indictments can have mixed results within foreign policy. On the one hand, indictments could complicate efforts to convince Maduro and his inner circle to leave power, as negotiation may seem futile to an official who is facing multiple charges and who, under the most lenient of circumstances, would still face a lengthy prison sentence. On the other hand, these indictments could give the international community and the Venezuelan opposition more leverage to restore the country’s democracy. By indicting corrupt officials, the United States is also signaling that justice will prevail. Such a message is crucial in Venezuela, where political leaders and civil society have long decried the rampant corruption that has sustained the Maduro regime.
The United States is a country known for the rule of law, and that gives us incredible power to deliver justice around the world. But using those tools entails huge risks if they are abused.”
—Joshua Goodman, Latin America Correspondent, Associated Press
Ultimately, however, indictments should not be used to prop up foreign policy objectives. Doing so could jeopardize the sanctity of the United States’ judicial system, which enjoys global legitimacy and extraterritorial jurisdiction. Saab was indicted because there was enough evidence against him to issue an indictment. That evidence was gathered for years by the Drug Enforcement Administration and other agencies, which worked with the Department of Justice to prosecute the case. As the case continues, that independence ought to be preserved.
Moises Rendon is director of the Future of Venezuela Initiative and a fellow with the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Claudia Fernandez is a research associate with the CSIS Future of Venezuela Initiative.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2020 by the Center for Strategic and International Studies. All rights reserved.
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