What Is a Company Formation Agent?
Hidden assets, money laundering, tax dodging, and the firms that help make it all possible. Here’s how formation agents can facilitate abuse of the global financial system.
As head of Venezuela’s military, General Vladimir Padrino López is a steadfast socialist, ready to defend his beleaguered country’s self-professed revolutionary government.
But in his private life, his family has built up a web of companies and real estate in Venezuela and the U.S. worth millions of dollars.
They include firms like Trámites Consulares, Inc., which was registered in Texas in 2010. That was eight years before Washington imposed sanctions on Padrino, 56, who was also indicted on March 26 for allegedly taking bribes to allow aircraft to transport cocaine into the U.S.
Situated at 717 Shotgun Road, in a bland business park in the city of Sunrise, Florida, north of Miami, Trámites Consulares caters to the largest community of Venezuelans in the U.S. Its services include assistance in obtaining a Venezuelan passport — a document increasingly in demand and difficult to obtain in a country where a devastating economic collapse has forced more than 4.6 million people to flee since 2016.
Getting a Venezuelan passport is expensive and time-consuming. In 2016, according to unofficial figures from the opposition, Venezuela received 1.8 million applications and issued only 300,000.
Yet Trámites Consulares offers passport extensions and translation services, and even targets people seeking political asylum in America. The company held an event last year to help educate would-be applicants on how to claim refuge from persecution meted out by the very government that Padrino serves.
“Information is power and you cannot miss this opportunity. Free entrance,” says an ad for an “educational forum” for potential asylum seekers posted on its Facebook page.
The apparent contradiction between Padrino’s self-proclaimed socialist ideology and his family’s many business interests is no surprise to Luis Ramón Castellanos, a retired lieutenant colonel who graduated from Venezuela’s military academy in the same cohort as the general in 1984 and was discharged in 2007.
“I never saw him as a communist, as someone willing to share his wealth. He liked living well, he loved America, he liked to drink whiskey,” said Castellanos in a phone interview from his home in Arlington, Virginia.
Padrino also has his own history in the U.S. In 1995, he studied psychological operations at the School of the Americas in Fort Benning, Georgia, which the U.S. established in 1946 as a training ground for friendly Latin American military personnel. He stayed in the country for two years after graduating from the course, according to a report from Voice of America.
Like other companies and assets linked to Padrino, Trámites Consulares is not registered in his name. Instead, the firm’s director is his cousin Ludmila Padrino Valderrama. She is also a partner at what was likely one of the Padrino family’s most lucrative concerns, Prinmaplast, C.A., a paint company that shares its Venezuela address with Trámites Consulares.
The web of businesses that Padrino’s family members have built includes 24 companies in the U.S. and Venezuela and at least 14 properties in the U.S. Purchase records for 13 of these properties give a combined total of just over $3 million. Based on current valuations, the 14 properties together are worth almost $4.5 million.
These business interests in the U.S. present a challenge to those enforcing sanctions.
“A corrupt official, after being sanctioned by the U.S. government, nevertheless continued to own property and run businesses in the U.S. through family members,” said Gary Kalman, a founding member of FACT Coalition, a U.S. group that advocates for financial accountability and corporate transparency.
He said Padrino’s case is a “textbook example” of why the U.S. needs better transparency and know-your customer rules, which are key to effective enforcement of anti-corruption laws. He pointed out that there are no legal requirements in the U.S. for companies other than banks to carry out rigorous due diligence on their clients.
“What is surprising to many is that Padrino López didn’t need to hide any of his business dealings in some island nation tax haven, because the U.S. provides all the secrecy that illicit actors want and need,” Kalman said.
It remains to be seen whether the March 26 indictment against Padrino will bring more scrutiny to his family members and their businesses and properties in the U.S. Padrino is accused of allowing aircraft registered in the U.S. to smuggle cocaine into that country via Venezuelan air space.
“Over the last decade, corrupt Venezuelan government officials have systematically looted Venezuela of billions of dollars,” said U.S. Attorney Ariana Fajardo Orshan in a statement announcing the cocaine-smuggling charges against Padrino and other officials, including Venezuelan President Nicolás Maduro.
“Far too often, these corrupt officials and their co-conspirators have used South Florida banks and real estate to conceal and perpetuate their illegal activity,” Fajardo said.
OCCRP’s investigation has found that Padrino is one of many high-ranking military officers to capitalize on their positions.
Venezuela’s military has been building its political and economic influence since former President Hugo Chávez instituted a “civil-military” alliance in 1999. Officers have been appointed to political posts, have been handed control over major state enterprises, and have used dozens of private companies to profit from their positions.
OCCRP has found 35 generals from the Venezuelan army who have created 41 private companies in the country since 2004. Together, they have won over 220 state contracts, even though Venezuelan law forbids public officials from doing business with the government through their own companies.
Analysts say their favored roles in Venezuela’s economy explain, at least in part, why the military has not challenged or undermined the government as the country has spiraled into endemic corruption and extreme poverty.
“There are three types of ‘mili-entrepreneurs’ in Venezuela,” said Javier Corrales, a Latin America expert and chair of political science at Amherst College in the U.S., referring to military officers who have been able to exploit their positions as ‘Chavistas’ — people who are loyal to the socialist vision of former President Hugo Chávez.
Corrales grouped them into three categories: Those running state companies; serving and retired officers who run private companies that contract or do business with the state; and officers involved in illegal businesses.
“None of these groups find a transition to a non-Chavista regime to their liking,” Corrales said.
In an industrial zone in the city of Charallave, a 45-minute drive from Caracas, the Prinmaplast paint factory sits abandoned. From a narrow road overgrown by bushes, the large one-story building, surrounded by concrete walls topped with spools of razor wire, is visible through a metal gate.
“It’s been closed for one or two years,” said a shirtless security guard. “It belongs to a lady who lives in the United States.”
The guard said he did not know the name of the owner. But a company registry in Venezuela lists Padrino’s wife, Yarazedt Betancourt, as the director of Prinmaplast, while the general’s cousin, Ludmila Padrino, who lives in Katy, Texas, owns a small share in the company.
(All members of the Padrino family named in this article were contacted for comment, but did not respond. In a video released last year, several of Padrino’s family members distanced themselves from the general, questioning the choices he has made and the legacy he will leave behind.)
Betancourt also served as a director for two other companies, Jemyl Corporation and Desmoines Finance. Those companies hold shares in Prinmaplast and are linked to Jesús María Padrino Renaud, Ludmila Padrino’s father.
The National Contractors Registry, which lists companies that work with the Venezuelan state, names Betancourt as the director of Prinmaplast in an undated document. In 2004, Prinmaplast was able to start buying U.S. dollars at preferential rates in order to import raw materials for making paint, pigments, and other products.
The decision was part of a scheme the Venezuelan government put in place from 2003 to 2019 to help industries deemed important to the national interest. As the Venezuelan bolivar plunged, selected companies could buy U.S. dollars at low rates to import materials. But the scheme quickly became riddled with corruption, with beneficiaries exchanging those dollars on the black market at a huge mark-up.
In an open letter on Facebook written in 2015, Ludmila Padrino explained that Betancourt was added to Prinmaplast’s board of directors in 2003 in order to help the company obtain these so-called preferential dollars, since nobody else on the board was eligible to do so.
Prinmaplast may not have illegally exchanged its cheap U.S. dollars. It is possible that all the money could have legally been used to purchase and import materials. Highly restrictive reporting conditions in Venezuela make it impossible to determine if the profits of the paint company were legitimate or not, or if they were funnelled into other interests.
But many businessmen used the scheme, which did little to halt capital flight from Venezuela or to stop the bolivar sliding into hyper-inflation, for their own unscrupulous ends. Importers were able to vastly inflate the stated cost of goods, or even provide fake documentation for products that were never brought into the country. They would then pocket the extra dollars or sell them on the black market.
In 2016, two former ministers in the Chávez administration called for a probe into the currency exchange system, which they said could have been used to embezzle some $300 billion. The investigation apparently never took place, and the total amount lost through the system is unknown. Lawsuits in countries including the U.S., however, have turned up evidence that some Venezuelan officials embezzled altogether billions of dollars.
In November 2018, a Florida court convicted former National Treasurer Alejandro Andrade for his role in a currency exchange and money laundering scheme. He admitted to receiving bribes in exchange for selecting a group of entrepreneurs to conduct currency exchange transactions at favorable rates.
Andrade was sentenced to 10 years in jail and, as part of a plea bargain, agreed to forfeit $1 billion, and hand over all assets involved in the corrupt scheme, including real estate, vehicles, horses, watches, aircraft, and bank accounts.
In a separate case, a U.S. indictment against Francisco Convit — one of eight people accused of laundering $1.2 billion embezzled from the state oil company, Petróleos de Venezuela, S.A. (PDVSA) — sheds light on how lucrative it was to exploit the currency exchange system.
“In 2014, the Venezuelan government fixed exchange rate was approximately six Bolivars to one U.S. dollar,” the indictment reads. “By contrast, the true economic exchange rate was approximately 60 Bolivars to one U.S. dollar.”
The huge difference between the official and unofficial rates meant that a company that legally accessed $1 million that year could turn it into $10 million by selling the dollars on the black market and using the bolivars gained to buy dollars again at the official rate. The profit margin on this illicit exchange would be $9 million minus whatever the company spent on the imports, if it spent anything at all.
Records show that Prinmaplast received almost $4 million between 2004 and 2012. There is no evidence that the people who controlled the company illegally exploited the exchange system.
Padrino officially receives less than $8 a month in net pay as Venezuela’s Minister of Defense, according to a pay slip obtained by OCCRP. Social media postings, however, hint at a lifestyle far beyond these limited means. A website that tries to identify the watches worn by Venezuela’s elite estimates his timepiece is worth over $12,000, while a video of his son’s birthday party posted on Facebook shows a lavish affair at a trendy club in Madrid that was reported on by several media outlets.
In late 2013, Maduro appointed Padrino to a commission to investigate the currency exchange regime under Chávez. More than six years later, the commission’s findings have still not been made public and irregularities in the currency control system have continued under Maduro.
The growth of Prinmaplast followed Padrino’s trajectory as he rose to the upper echelons of the military and political establishment.
In 2002, two years before Prinmaplast is known to have accessed preferential dollars for its imports, some factions of the military attempted a coup to force Chávez from power. At the time, Padrino was in command of Infantry Battalion 311, which is considered one of the most powerful sections of the army. Padrino did not join the coup, which collapsed, allowing Chávez to retake office within two days.
Following the Venezuelan general strike of 2002-2003, “he aligned himself openly with Chávez and with the revolution and that also led him to become someone who was projecting himself as a leader of the armed forces,” said Castellanos, the retired officer who graduated from Venezuela’s military academy with Padrino.
Chávez rewarded Padrino for his loyalty.
He was given the prestigious command of Fort Tiuna in Caracas, the headquarters of the Bolivarian armed forces and the Ministry of Defense. He was then put in charge of the 93rd Caribbean Brigade, which is based in Chávez’s home state of Barinas.
“It was a vote of confidence by Hugo Chávez. He was a disciplined officer, academically competent, but he had never left Caracas,” said Cliver Alcalá, a retired major general who graduated from the military academy a year before Padrino. (Alcalá was indicted last month by the U.S. alongside Padrino, Maduro, and 13 other current and former officials for alleged narco-terrorism. One day after the indictment, on March 27, he surrendered to U.S. authorities in Colombia and was flown to New York.)
“He had no experience on the border, nor in units in rural areas, and you must have experience and know the entire spectrum of the armed forces,” Alcalá said. “It was only when he became a colonel that he was sent to Barinas.”
Padrino’s star continued to rise. In 2007 he attained the rank of brigadier general and in 2012 he was appointed second commander and Chief of the General Staff of the armed forces. In October 2014, Maduro appointed Padrino as Minister of Defense.
He had the backing of President Chávez and forged a relationship with Nicolás Maduro, who was in charge when Chávez later fell ill, said Alcalá.
All the while, the business empire of Padrino’s family kept expanding.
Since 2009, 19 companies have been registered in the U.S. in the names of either Padrino’s uncle, Jesús María Padrino Renaud, or Renaud’s wife and their children. They and Padrino’s wife have links to at least five companies in Venezuela. They are also linked to 13 properties in Florida, and one in Texas.
Through three companies in the Miami area — Brisana LLC, Urtaris Realty Group and Majalud LLC — the family bought 10 properties, together worth over $2.2 million.
Five of the U.S. companies owned by members of Padrino’s family are estimated to collectively generate annual revenues of a little over $700,000, according to New York-based national business information database Buzzfile. There was no information on how much the other companies made.
Prinmaplast, the largest company associated with Padrino, is now defunct. The currency exchange system officially ended in 2019 as growing numbers of Venezuelans resorted to using the dollar in the face of the bolívar’s total collapse.
Padrino continues to play a high-profile role in the country’s government and economy. In February, Maduro appointed him to a presidential commission charged with restructuring the oil industry — a key sector that has been eviscerated by corruption and poor management, helping plunge the country into economic disaster.
For Venezuelans, the impact has been severe. As of 2018, some 85 percent were living in extreme poverty, up from 10 percent in 2014, according to the International Monetary Fund. One in three Venezuelans don’t have enough to eat, according to survey results published by the United Nations World Food Programme in February.
Sanctions imposed by the U.S. have exacerbated the crisis, leading to hunger, increased disease, and deaths, and contributing to millions of Venezuelans fleeing the country, according to research by the Center for Economic and Policy Research, a Washington DC-based think tank.
By investing — and living — in the U.S., some members of Padrino’s family have avoided the dire fate of most Venezuelans. The general’s uncle, Padrino Renaud, has a house in Florida’s Broward County which he bought for $635,000. One of his daughters, the former beauty queen Ludmila Padrino Valderrama, owns a home in Houston, Texas, valued at over $500,000.
His other daughter, Janet Padrino, has seven companies in the U.S. and is co-owner of one in Venezuela. She also owns a house worth more than $500,000 in a Miami suburb — not far from where Trámites Consulares tries to drum up business from Venezuelan asylum-seekers.