The credibility of Transparency International, a global “non-partisan” organisation which “promotes transparency in elections, in public administration, in procurement and in business”, is on the line. Their latest report on Venezuela, which was produced after months of research, is factually inaccurate in almost every respect. TI say that they “stand by their report” and stand by the person who compiled the data, an anti-Chávez activist who backed the 2002 military coup against democracy.
The full report, dated April 28 2008 and titled Promoting Revenue Transparency examined the published accounts of oil companies in 42 different countries, and ranked them according to whether they were of high, medium or low transparency. Venezuela’s state-owned oil firm PDVSA was given the lowest possible ranking. Transparency International say that “comprehensive corporate reporting diminishes the opportunities for corrupt officials to extort funds”.
PDVSA was directly accused of failing to disclose basic financial information such as their revenues and how much royalties they paid, and of not producing properly audited accounts. The international corporate media considers TI to be a reliable source, despite the fact that almost all their funding comes from western governments and big business. The British government is one of the major donors, contributing £1 million in 2007. Other donors include the US government, Shell and Exxon Mobil. Unsurprisingly, TI’s damning report was seized upon by rightwing newspapers and websites and used as another stick with which to beat Venezuela’s socialist president, Hugo Chávez.
When Dan Burnett, a New York-based blogger who runs the popular Oil Wars website, read the TI report, he almost choked on his cornflakes. Burnett had been analysing PDVSA’s accounts for several years, and regularly writes about the financial information that TI claims does not exist.
I checked the PDVSA website. Burnett was right to be astonished. On page 127 of their financial statement it says that revenue for 2007 was $96.242bn, and that they paid $21.9bn in royalties. On page 148, PDVSA’s auditors state that the accounts were prepared in accordance with international accounting standards. Further research showed that PDVSA’s financial statements are also published in hard copy, and are widely reported in the domestic media, both in newspapers and on television.
I was perplexed. How could Transparency International, which claims that its report was subject to a rigorous “quality control regime” and had been checked for accuracy by “industry experts”, have got it so wrong? I called them and asked.
A spokesperson explained that their report was published two weeks before PDVSA submitted their 2007 accounts on May 12 2008. This explanation implied that TI are unfamiliar with basic financial reporting procedures. Before company accounts can be submitted, the data has to be collated, analysed and audited. It is normal for this process to take several weeks or months. For example, Transparency International’s own audited financial report for 2007 is not yet publicly available on their website.
However, TI’s explanation for their inaccurate report on PDVSA contained a much more serious problem. It was wrong. The March 29 edition of El Universal, a major opposition newspaper, featured a report on PDVSA’s financial statement, together with a photograph of PDVSA’s president, Rafael Ramirez, holding up a copy of the 2007 report and accounts. The information that TI claimed was being withheld by PDVSA, was published four weeks before they made their allegations. Armed with this additional information, I attempted to contact TI’s press spokesperson again for a comment. My calls were not returned.
Despite Transparency International’s less than transparent behaviour, was it still possible that there was an innocent explanation for the errors in their report? I began to wonder whether their spokesperson had got the dates confused and was actually talking about a previous set of accounts.
I checked the historical records which are freely available on the PDVSA website. Their audited 2006 accounts were published on September 8 2007, a full seven months before TI published its report accusing PDVSA of non-disclosure. The 2006 accounts also contained the information that TI claimed was not disclosed. The 2005 accounts were also available, as were all the annual accounts going back to 2000.
In the past, there have been problems with PDVSA’s accounts, and in particular with late submission. In late 2002, just months after the failed coup attempt, PDVSA oil executives went on strike in an attempt to bring down the Chávez government. It became clear that the strike would not succeed, but PDVSA’s operational equipment was sabotaged, causing millions of dollars of damage. A massive amount of data was destroyed, including the files containing PDVSA’s financial information and accounts. PDVSA was forced to rebuild its financial infrastructure from scratch, and for several years this caused delays in producing accounts. However, TI’s accusation is that PDVSA does not disclose information, not that previous accounts were submitted late. This accusation, which forms the basis of TI’s report, is demonstrably wrong.
Transparency International denies that they pursue an anti-Chavez agenda. “We are not a political organisation”, their spokesperson told me. Despite this denial, TI’s Venezuela bureau is staffed by opponents of the Venezuelan government. The directors include Robert Bottome, the publisher of Veneconomia, a strident opposition journal, and Aurelio Concheso of the Centre for the Dissemination of Economic Knowledge, a conservative thinktank funded by the US government. Concheso was previously a director of the employers’ organisation, Fedecamaras. The president of Fedecamaras, Pedro Carmona, led the failed 2002 coup and was briefly installed as Venezuela’s dictator.
The data in TI’s report was gathered by Mercedes de Freitas, the head of their Caracas bureau and a longtime opponent of President Chávez. De Freitas’ previous job was running a US government funded opposition “civil society” group. The Nation reported on her response to the 2002 military coup: “… on the night of April 12 — after Carmona suspended the assembly — Mercedes de Freitas, a director of the Fundacion Momento de la Gente, a legislative monitoring project subsidized by NED [National Endowment for Democracy, a US government agency], emailed the endowment defending the military and Carmona, claiming the takeover was not a military coup.”
In July 2006, Freitas issued a press release on behalf of Transparency International, which argued against the passing of a draft bill that proposed making it illegal for Venezuelan “civil society” organisations to receive funding from foreign governments, including from the US government. “If it becomes law, civil society would be subject to considerable restrictions, with government allowed to interfere in their objectives, activities and funding sources” the press release asserted.
Documents released under the US freedom of information act show that the Bush administration gives $5m a year to organisations opposed to the Chávez government.
Transparency International has a choice. They can continue to defend their indefensible report and refuse to answer legitimate questions about their activities in Venezuela. Or they can come clean and provide full disclosure. As TI’s own report diplomatically puts it: “Disclosure improves a company’s image, making it less vulnerable to unsubstantiated attacks on its reputation.”