Mexico prosecutors find fraud in Venezuela food aid program

MEXICO CITY (AP) — Prosecutors said Thursday that people linked to the Venezuelan government and Mexican companies conspired to overcharge Venezuela for basic food aid packages.

Known as “CLAP” packages, the food is supposedly subsidized by Venezuela’s socialist administration to provide a bare level of subsistence to many families facing hunger amid the country’s hyperinflation and economic breakdown.

But Mexican prosecutors said an investigation found that the Venezuelan officials and Mexican businessmen bought poor quality items in bulk and exported them to Venezuela at more than double their real price.

Mexico’s top organized crime prosecutor, Israel Lira, said the suspects have agreed to pay $3 million in reparations to the U.N. refugee agency, to be used for its Latin America operations. The agency is focused overwhelmingly now on helping Colombia resettle hundreds of thousands of Venezuelans fleeing the humanitarian crisis.

Lira said prosecutors located 1,300 shipping containers with 1.8 million packages, but allowed them to continue on to Venezuela to avoid affecting recipients.

It is not the first such scandal.

U.S. Treasury Department officials previously compiled a list of suspected shell companies that they believe senior Venezuelan officials have used around the globe to siphon off millions of dollars from food import contracts.

Financial forensic investigators from the U.S. and three conservative Latin American allies — Mexico, Panama and Colombia — traced transactions by companies believed to be controlled by a government-connected businessman.

Venezuelan President Nicolas Maduro began distributing the subsidized food as his nation fell deeper into political and economic turmoil. The CLAP program — a Spanish acronym for Local Committees for Supply and Production — has become a tenuous lifeline for millions of Venezuelans suffering due to barren supermarket shelves and an annual inflation rate estimated by the International Monetary Fund to soon reach 1 million percent.

Critics say Maduro has essentially weaponized food, distributing the boxes primarily to government workers and supporters. The boxes contain items like cooking oil, flour, rice and canned tuna.

Much of the food comes from Mexico, and there have been complaints about its quality. A study found that the powdered milk distributed in CLAP boxes regularly contained a third of government-mandated protein levels and twice the level of recommended carbohydrates.

On May 17, three days before Maduro was re-elected, Colombia announced the seizure of 15 shipping containers filled with more than 25,000 CLAP boxes containing beetle-infested rice and other spoiled food.

A story published by The Associated Press in 2016 revealed how senior Venezuelan officials and members of the military were enriching themselves by diverting money from food contracts.

Alex Saab, from the Caribbean city of Barranquilla, has been identified by U.S. officials as a major focus of the investigation. Mexican prosecutors identified one of its suspects only as “Alex.” They are barred by Mexican law from releasing his surname.

Saab gained some prominence in 2011 after signing an agreement to build social housing for the Venezuelan government on behalf of a Colombia-based construction company.

Investigators have said Saab entered the food business through a Hong Kong-based company, Group Grand Ltd., which they said bears the hallmarks of a shell company, including no known track record in the food business, a rudimentary website that is now inaccessible and an address in Caracas shared with Saab’s construction company.

Group Grand has been awarded contracts to provide at least 11.5 million CLAP boxes, according to a Venezuelan Food Ministry spreadsheet.

Earlier this year, Saab’s Miami-based lawyer, Richard Diaz, rejected allegations of any wrongdoing, saying Saab has been subjected to undue scrutiny and harsh media coverage because of false testimony leveled against him. He said if the U.S. had cause to believe the allegations were possibly true, his client would have been charged long ago.

The U.S. Treasury estimates at least 70 percent of the CLAP program is being gutted by corruption, citing evidence of overbilling.

Among the transactions that have raised red flags is a September 2017 invoice presented to Venezuela’s food ministry by Group Grand for $41 million worth of powdered milk at a price of $6,950 per metric ton, or more than double the market price at the time. A copy of the invoice was provided to the AP.