Venezuela arrests ex-oil bosses for graft in widening purge

CARACAS (Reuters) - Venezuelan authorities on Thursday arrested two once-powerful officials who had run the oil ministry and state energy company PDVSA as part of a deepening industry purge also seen as a power play by leftist President Nicolas Maduro.

FILE PHOTO: (L-R) Venezuela's President Nicolas Maduro, Venezuela's Oil Minister Nelson Martinez, and Eulogio del Pino, president of Venezuelan state oil company PDVSA, attend the swear in ceremony of the new board of directors of Venezuelan state oil company PDVSA in Caracas, Venezuela January 31, 2017. REUTERS/Marco Bello/File Photo

In the highest-profile arrests to date, engineer Eulogio Del Pino and chemist Nelson Martinez were detained early on Thursday on accusations of graft and seeking to sabotage the nation’s ailing energy industry, prosecutor Tarek Saab said in a televised speech.

He accused Del Pino of participating in a $500 million corruption and sabotage scheme at the Petrozamora joint venture with Russia's Gazprombank GZPRI.MM and said Martinez had allowed a poor refinancing deal for Venezuela's Citgo Petroleum Corp, a U.S.-based refiner that he used to lead, to go ahead without government approval.

“We’re talking about the dismantling of a cartel of organized crime that had taken over PDVSA,” Saab said as state television flashed a video of armed military intelligence agents knocking on doors and images of the two men being handcuffed and arrested.

Maduro has promised a vast anti-corruption purge to cleanse the oil industry of “mafias.” Some 65 executives have been detained so far, panicking PDVSA workers, depriving Venezuela’s oil industry of much of its top brass, and stalling decision-making in the company overseeing the world’s biggest crude reserves, insiders say.

The opposition dismisses the probe as a power struggle within Maduro’s inner circle, noting that the industry has been under tight control of the ruling Socialist Party since early in the late President Hugo Chavez’s 14-year rule.

They say authorities ridiculed and dismissed a report last year by the opposition-run Congress, which concluded that some $11 billion went missing at PDVSA over a decade when Del Pino and Martinez were both influential officials.

Insiders instead say the probe is politically motivated, likening it to a recent crackdown on graft in Saudi Arabia that has strengthened the power of Crown Prince Mohammed bin Salman.

PDVSA and Venezuela’s Information and Oil ministries did not immediately respond to requests for comment. Reuters was unable to contact Del Pino or Martinez.

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In a video recorded before his arrest that he published on his Twitter account on Thursday afternoon, Del Pino defended himself and said he was the “victim” of an “unjustified attack,” but did not elaborate on who was to blame for his arrest.

“We know there are irregularities, and I am the first who, through internal control mechanisms ... (made us) denounce and push ahead with investigations,” said a tired-looking Del Pino, speaking under a large tree.


The arrests of Del Pino and Martinez have brought more attention to Rafael Ramirez, who was Venezuela’s all-powerful oil czar for a decade and under whom both men ascended.

Maduro fired Ramirez, who was thought to have presidential ambitions, from his job as representative to the United Nations on Tuesday and summoned him back to Caracas from New York, according to people with knowledge of the situation.

Those people say a protracted rivalry between the two men has deepened in recent weeks, especially after Ramirez wrote online opinion articles criticizing PDVSA’s production slump and Maduro’s handling of the economy.

Saab did not mention Ramirez by name, although both Maduro and top officials have recently repeatedly referred to his governance as oil boss as a time when “mafias” were formed and executives came to think of themselves as the owners of Venezuela’s reserves.

Ramirez’s next moves were not immediately clear. He did not respond to a request for comment on Thursday.

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Authorities appear to be seeking information on Ramirez from Del Pino and Martinez as splits widen in the Socialist Party, which is no longer controlled by the charismatic Chavez, according to one source with knowledge of the detentions.

Del Pino, wearing a Venezuelan national soccer team shirt, was picked up at his Caracas home, according to the source and a photo flashed on state television.


Oil industry sources say Maduro is using the graft probe to sideline political rivals and consolidate his grip on a sector that, despite falling investment and output, brings in more than 90 percent of the cash-strapped country’s export income.

The unpopular leftist appears to be seeking to shore up his position ahead of a presidential vote in 2018, when he is poised to seek re-election despite an economic crisis that has sparked food shortages and the world’s highest inflation.

After surviving major political protests and pushing through a controversial pro-government legislative superbody, Maduro is feeling empowered, according to government insiders and opposition politicians.

To ensure he maintains support, military and political sources say that Maduro, who unlike Chavez does not hail from the army, has handed it more power.

Del Pino and Martinez had been removed from their posts on Sunday and replaced by a major general, giving the already powerful military further clout. The demotion followed the arrest in Caracas last week of six Citgo executives, five of whom are also U.S. citizens, as part of the graft probe, leaving the refiner deprived of much of its top brass.

The men’s sidelining also deprives the Venezuelan oil sector of two of its most experienced executives, who were also adamant that the country must keep paying its onerous debt and avoid a debilitating default at all costs.

Del Pino did not respond to a Whatsapp message, although his profile picture had changed to one of his children from a photo of him at a PDVSA event with red-shirted workers.

Additional reporting by Brian Ellsworth, Andreina Aponte, Eyanir Chinea and Corina Pons in Caracas and Marianna Parraga in Houston; Writing by Alexandra Ulmer; Editing by Andrew Cawthorne and Jonathan Oatis