DJ Venezuela Pres Says Top Ally Resigns On Bank Scandal

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(This article was originally published Sunday.)

By Darcy Crowe
Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--One of President Hugo Chavez's top collaborators will resign from his post following the arrest of his brother as part of a brewing banking scandal.
Jesse Chacon, who currently serves as Science and Technology Minister, offered his resignation after his brother, Arne Chacon, turned himself in to the Venezuelan secret police on Saturday as part of a widening probe by prosecutors into the financial system.
Chavez moved Sunday to distance himself from the scandal and said that he had spoken directly with the government's top prosecutor, Luisa Ortega, and requested that she move quickly to punish the people responsible with the failed banks.
Chavez also said that he told the Venezuelan secret police to swiftly imprison Arne Chacon, the president of Banco Real and Baninvest, which were seized by the government Friday.
Jesse Chacon will resign from his post because of the scandal, Chavez said during his weekly televised program.
"I'm very sorry that he is the brother of a minister, but we're showing that no one here is untouchable," he said.
Chavez said that he called the Venezuela secret police and told them that Arne Chacon "is the first one that I want to have arrested."
Three executives from Banco Real CA, which was seized by the government Friday, are now behind bars, including Chacon, who headed the bank.
"How is it that Arne Chacon, who was born without anything, is now the president of a bank?," Chavez said. "Our radars are failing," he said.
"I spoke with Jesse yesterday (Saturday) and I know he understands," Chavez said. The president said that he only met once with Arne Chacon, a former lieutenant in the Navy.
The Chacon brothers helped Chavez stage a failed coup attempt in 1992 that led to their imprisonment but helped Chavez achieve national fame and allowed him to win the presidency seven years later.
In the past, Arne Chacon served in the tax collection agency and the office of the vice presidency and headed Banco Industrial de Venezuela, a troubled state-run bank.
The Chacon brothers were not reachable for comment. Before his recent problems, Arne appeared in the local press as the owner of racing horses, including a race horse named Il Divo.
He is now linked to the failure of Banco Real CA, which the government seized, along with Central Banco CA and Baninvest CA, bringing to seven the number of intervened banks in the past week.
The seven banks account for about 8% of deposits in the banking system. Government officials say they are being taken over to protect depositors from the banks' owners, who are being accused of using the banks for self-lending, among other charges.
On Sunday Moody's Investors Service downgraded the unsupported bank financial strength ratings of Banco Mercantil CA and Banco de Venezuela (Banvenez) to E+, from D-, which translates to a baseline credit assessment of B1.
Moody's also downgraded both banks' local currency deposit ratings to B1, from Mercantil's Ba3 and Banvenez's Ba2, and assigned a negative outlook on these ratings.
The two banks are among the biggest in the country. In a press release, the agency said the downgrade was in "response to the heightened degree of uncertainty for credit and business conditions that the Venezuelan banking system now faces."

Common Thieves

Writing in his Sunday news column, Chavez said the government has to show the public that the bankers were "common thieves" that would "empty your pockets and rob your house."
Chavez said that La Previsora, an insurance company linked to Baninvest, Central Banco and Banco Real, will come under government control and will be used to launch a state-run insurer. Chavez also said that once the problems are fixed at four of the intervened banks, they will be integrated into a state-run bank.
Planning Minister Jorge Giordani said Saturday that the government's intervention "stopped a financial tsunami." Many analysts say the interventions aren't a reflection of a larger banking crisis, since most of the financial system assets are held by a handful of big banks that are seen as sound.
Ricardo Fernandez, a powerful billionaire with close ties to the government, turned himself in Nov. 20 on charges that include the illegal use of depositors' money, after the government seized four banks controlled by him.
Chavez said Sunday that Fernandez had illegally purchased the banks using depositors money. "I'm not a judge but I have enough evidence to say that he's a criminal," Chavez said Sunday.

-By Darcy Crowe, Dow Jones Newswires; (58) 414 249 6821; darcy.crowe@dowjones.com

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(END) Dow Jones Newswires
December 07, 2009 07:39 ET (12:39 GMT)
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