By Gabriele Steinhauser and Nicholas Bariyo
ENTEBBE, Uganda -- The government of Venezuelan President
Nicolás Maduro is selling off his country's gold reserves. Some of
it has passed through a secretive operation in East Africa, a
gambit that evades U.S. sanctions.
On two early-March flights, at least 7.4 tons of gold with a
market value over $300 million moved from Venezuela to a refinery
in Uganda, say officials in Venezuela and Uganda, a foreign
diplomat and Venezuelan opposition lawmakers, who have concluded
Mr. Maduro's government exported the ingots.
The gold arrived on a Russian charter jetliner in two shipments
at the international airport in Entebbe, says Ugandan
national-police spokesman Fred Enanga. The accompanying paperwork
identified the ingots, some with stamped labels partially scratched
off, as Venezuelan central-bank property, says a senior Ugandan
police officer who saw the bars and documents. Flight records show
the trips originated in Caracas, Venezuela.
The shipments expose one link in a global underground economy
many suspect is helping Mr. Maduro cling to power by bypassing the
U.S.-dominated international finance system. Washington has
recognized opposition leader Juan G as Venezuela's legitimate
president, slapped financial and other sanctions on Venezuelan
officials and institutions, and threatened penalties for others
doing business with the regime.
The standoff between the two leaders is reverberating beyond
Venezuela, with some 50 countries joining the U.S. in backing Mr.
Guaidó while others side with Mr. Maduro. What was once Latin
America's richest economy is starving, its oil sales have dwindled
and citizens are suffering through dayslong power outages and
shortages of basic goods.
Gold sales, U.S. and other officials say, are one of the
government's final financial lifelines.
The gold that arrived in Entebbe passed through African Gold
Refinery Ltd., or AGR, in a compound about 500 yards from the old
runway before being exported to the Middle East, Ugandan police
say.
The refinery started operations in 2015. Some of the gold it
processed was allegedly smuggled from conflict-torn eastern Congo
and other African nations, according to officials with Ugandan
police, the country's Financial Intelligence Authority and regional
smugglers.
Gold from AGR has made its way into supply chains at U.S.
companies including General Motors Co., General Electric Co. and
Starbucks Corp., the firms' filings for 2018 with the Securities
and Exchange Commission show, despite U.S. measures to discourage
use of so-called conflict minerals from Congo.
GM prohibits suppliers from using forced or involuntary labor or
engage in corrupt business practices, a spokesman says. GE declined
to comment. Starbucks didn't respond to requests for comment.
AGR General Manager Cherry Anne Dacdac says the company hasn't
processed smuggled or conflict gold and declines to comment on the
March shipments. She says all AGR's business is legal and that in a
March 26 management meeting it agreed it won't accept transactions
related to Venezuela.
AGR has processed and exported more than 38 tons of gold since
it started operations, Ms. Dacdac says. The scale of its operation
helped drive gold in 2018 to overtake coffee as the leading export
from Uganda, which mines little of it.
The refinery appears to act with support from Ugandan President
Yoweri Museveni, court and other documents reviewed by the Journal
suggest. A spokesman for Mr. Museveni says the president "backs the
plant just as he does all other investors" in his quest to
transform Uganda's economy.
The Maduro government's prior gold sales have been an open point
of contention. Between late 2017 and Feb. 1, 2019, the central bank
sold at least 73.3 tons of gold, with a market value of around $3
billion, to companies in the United Arab Emirates and Turkey, the
National Assembly's finance commission announced in February.
The White House on Nov. 1 announced sanctions intended to stop
Venezuelan gold sales. Since then, several dozen more tons have
been removed from the central bank and secretly exported, say
opposition lawmakers and a person familiar with the bank's
reserves. The bank for weeks was left without power and water.
"It's a fire sale," says one of the lawmakers, Ángel Alvarado,
who is on the finance commission. "The regime is scraping the
barrel, selling off anything of value to keep itself afloat."
A U.S. Treasury Department official says: "Treasury is committed
to holding accountable those operating corruptly in Venezuela's
gold sector."
Spokesmen for Venezuela's central bank and Information Ministry
didn't respond to requests for comment. The Maduro government has
said little publicly about its gold sales and routinely dismisses
sanctions and accusations of wrongdoing as part of an international
campaign to besmirch Caracas.
Mr. Goetz's gold
AGR was founded in 2014 by Alain Goetz, 54, a Belgian
businessman who has worked more than three decades in the African
gold trade.
Gold is almost impossible to trace to its origin once refined.
The United Nations says gold is the primary mineral financing
militias and parts of the military in eastern Congo, funding a
conflict that has killed millions.
Even before the Venezuelan shipments, AGR had drawn the scrutiny
of Ugandan authorities for processing gold allegedly smuggled from
conflict zones in Congo, as well as from South Sudan and Zimbabwe,
much of which later leaves the country as Ugandan gold, according
to Ugandan police, the country's Financial Intelligence Authority,
regional smugglers and Congolese mining officials.
Sydney Asubo, executive director of the Financial Intelligence
Authority, Uganda's government body in charge of combating money
laundering, says the agency reported the smuggling activities to
authorities and requested prosecution. No charges have been filed,
he says, pending the conclusion of an investigation of AGR by
Uganda's Inspectorate of Government over suspicions of tax evasion,
smuggling and money laundering. Ali Munira, a spokeswoman for the
Inspectorate, which is charged with investigating corruption and
other abuses, confirms there is an investigation but declined to
comment on details.
Mr. Goetz and AGR's Ms. Dacdac say they have complied with
Ugandan and other laws. Mr. Goetz denies there are probes. Ms.
Dacdac says she isn't aware of any investigations by the Financial
Intelligence Authority or Inspectorate.
America's 2010 Dodd-Frank Act included provisions to discourage
companies from using raw materials that finance the Congolese
conflict by tracing what they buy. The act doesn't make buying
these materials illegal. AGR appeared in supply chains of 237
publicly traded U.S. companies in their filings for 2018.
Mr. Goetz says he has sold AGR and retains control of Goetz Gold
LLC, a Dubai trading company. Goetz Gold still handles the gold
coming from AGR, he says. AGR's Ms. Dacdac didn't respond to
requests to comment on whether Goetz Gold handles the company's
gold. Uganda's company registry shows Mr. Goetz's AGR shares were
transferred in February 2018 to Seychelles-based AGR International
Ltd. Ms. Dacdac says that company is owned by individuals and
companies originating from the Middle East.
Secretive shipment
On March 2, the red-tailed body of a Boeing 777 owned by a
Russian charter company, Nordwind Airlines, touched down at Entebbe
at 6:35 a.m. after taking off more than 13 hours earlier from
Caracas, plane-tracking website Flightradar24 shows. Nordwind
didn't respond to requests for comment.
Police and private security gathered on the tarmac to receive
the cargo from the jetliner, which carried no passengers, says a
person who witnessed its arrival.
Airport handlers removed heavy parcels wrapped in brown
cardboard, which didn't pass through the airport's regular customs
procedures, says Mr. Enanga, the Ugandan police spokesman. Less
than an hour after landing, the packages under a private-security
escort reached the AGR compound just across the airport access
road, he says.
Inside the cardboard were 3.8 tons of Venezuelan gold. Another
3.6 tons on the same airliner from Caracas arrived at the refinery
two days later, Mr. Enanga says. By the time the police's minerals
unit, tipped off over the unusually large consignments, raided AGR
on March 7, the first lot was gone, exported to the Middle East
with its final destination listed as Turkey, he says.
The senior Ugandan police officer and Mr. Goetz say the gold was
sent to Goetz Gold in Dubai. AGR's Ms. Dacdac didn't respond to
requests for comment on whether the company exported the gold to
Goetz Gold. Mr. Goetz says Goetz Gold didn't send it to Turkey.
Ugandan police seized the other 3.6 tons, ingots stamped with
labels identifying them as Venezuelan central-bank property, says
the senior officer who saw them. Some labels appeared scratched, as
if someone had tried to disguise their origin, the officer says.
Paperwork with the bars showed they were from the 1940s.
Mr. Goetz and AGR's Ms. Dacdac say police never raided the
refinery and never seized any gold. Ms. Dacdac says: "AGR presented
all the necessary documentations as proof that the particular
transactions have been declared and captured by the Uganda Revenue
Authority."
It wasn't the first time authorities identified Venezuelan gold
handled by Mr. Goetz. Last year, Venezuela's central bank was
selling gold to three trading firms in Turkey and the United Arab
Emirates, according to the February announcement by the Venezuelan
parliament's finance commission, including to Goetz Gold, which
bought 21.9 tons.
Mr. Goetz says some of that particular Venezuelan gold passed
through Goetz Gold but that it came from a company outside
Venezuela and didn't break U.S. sanctions because contracts were
signed before Nov. 1.
After U.S. sanctions, the central bank's buyers were drying up.
In late January, as another Nordwind 777 sat at Caracas airport,
Venezuelan opposition lawmaker José Guerra, a former economist at
the central bank, alleged in parliament that the plane was there to
fly out 20 tons of the bank's gold.
The U.S. publicly pressured the bank's buyers in Turkey and the
U.A.E. "My advice to bankers, brokers, traders, facilitators, and
other businesses," a tweet from national security adviser John
Bolton's account warned on Jan. 30: "Don't deal in gold, oil, or
other Venezuelan commodities being stolen from the Venezuelan
people by the Maduro mafia."
Two days later, Abu Dhabi-based Noor Capital, which had
previously bought 27.4 tons of Venezuelan gold, according to the
Venezuelan parliament's finance commission, announced it was
stopping such purchases. Flightradar24 shows the Boeing 777
returned to Moscow.
Noor Capital declined to comment beyond a Feb. 1 statement
confirming it had bought 3 tons of gold from Venezuela's central
bank on Jan. 21 and denying engaging in illegal actions.
Two months later in Uganda, as police say that the seized
Entebbe gold shipment sat in custody, relief came from President
Museveni. In a letter dated March 26, a copy of which the Journal
reviewed, Uganda's attorney general, William Byaruhanga, ordered
the police minerals-protection unit to release the gold and
withdraw officers from AGR.
Police complied, says Mr. Enanga, the police spokesman.
The order to release the gold, Mr. Byaruhanga wrote in the
letter, came from President Museveni, whom he said he had met the
day before at State House in Entebbe. "AGR is instructed
henceforth," the letter said, to "cease and desist from any further
importation of gold from Venezuela, until further notice," citing
U.S. sanctions.
Pressure on Uganda and AGR was rising from U.S. diplomats who
had gotten wind of the shipments, says a person familiar with the
pressure.
The spokesman for Mr. Museveni says the president directed the
attorney general to release the seized gold after investigators
cleared the imports. Mr. Byaruhanga didn't respond to requests for
comment. AGR's Ms. Dacdac says the company didn't seek Mr.
Museveni's intervention.
From there, the Venezuelan gold's trace fades. Some time in
March, two tons of gold were put up for sale in Turkey at a steep
discount to market prices, say people familiar with the matter. The
origin was listed as Uganda, but customs documents showed it came
from Venezuela's central-bank vault, one of them says.
Unable to find a buyer, a second attempt was made to sell the
gold at a steeper discount, one of the people says, adding that it
isn't clear if anyone bought it. Mr. Goetz says Goetz Gold didn't
offer the Venezuelan gold for sale in Turkey.
There is a twist in the Venezuelan gold's tale, says the person
familiar with the central bank's reserves: The bars almost
certainly came from America in the 1940s, the person says, in
payment to Venezuela for oil supplied during World War II.
--Kejal Vyas in Caracas, David Gauthier-Villars in Istanbul,
Robert Wall in London and Ian Talley in Washington contributed to
this article.
Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com
and Nicholas Bariyo at nicholas.bariyo@wsj.com
(END) Dow Jones Newswires
June 18, 2019 10:38 ET (14:38 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.