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Venezuelan Case Recalls Russia's Khodorkovsky

  • Michael Hirshman

Russia's Vladimir Putin (right) with Venezuela's Hugo Chavez -- two leaders with similar views on the rule of law?

Russia's Vladimir Putin (right) with Venezuela's Hugo Chavez -- two leaders with similar views on the rule of law?

A leading business figure is arrested. Prosecutors allege fraud, but it is obvious that the case is about more than financial rule-breaking. The arrested businessman has close ties to opposition politicians. His prosecution is marked by judicial chicanery.

It could be the story of Russian tycoon Mikhail Khodorkovsky, whose prosecution drew widespread attention to the breakdown of the rule of law in Russia under President Vladimir Putin.

But the story in this case is that of Egilio Cedeno, a Venezuelan businessman with ties to activists opposed to President Hugo Chavez.

The prosecution of Cedeno in Venezuela, like the case against Khodorkovsky in Russia, shows a use of the courts to achieve political goals. As both Venezuela and Russia have centralized authority, their justice systems have increasingly become a tool of the government in power.

Someone closely familiar with both stories is Robert Amsterdam, a lawyer who has represented both Khodorkovsky and Cedeno. He sees a similar model in the way Russia and Venezuela have pursued the businessmen.

"What the Russians and Venezuelans are doing in common is they are using courts for illegal purposes," Amsterdam says. "That is a cynical way to deal with it, but that is actually what is going on."

Endless Legal Limbo

A year and a half after being taken into custody in 2003, Mikhail Khodorkovsky was found guilty. He was convicted on charges of fraud in the management of Russian petroleum giant Yukos.

Egilio Cedeno, 2 1/2 years after his arrest in 2007, is being held in pretrial detention.

Before his legal odyssey began, Cedeno was an influential businessman and president of Bolivar-Banpro Financial Group. He lent financial support to opposition politicians and had personal ties to leading anti-Chavez activists.

In 2005, prosecutors charged Cedeno with fraud in a case involving a banking client, Consorcio Microstar.

In the disputed transaction, Microstar ordered $27 million worth of computer products from the United States. Cedeno helped arrange the currency exchange as part of the transaction. However, no computer equipment was ever delivered to Venezuela.

The scheme aimed to circumvent Venezuelan currency rules to obtain U.S. dollars. Venezuelan currency law is widely seen as rife with such negligence and corruption. However, the sides of the case differ about how much Cedeno knew about the fraud.

Venezuelan prosecutors accused Cedeno of facilitating the fraudulent currency exchange. In February 2007, he was arrested. Under Venezuelan law, Cedeno could be held for a maximum of two years in pretrial detention. However, last June, the court added a possible additional two years to Cedeno's detention.

The judge at Cedeno's initial trial had close ties to Venezuelan authorities. The court proceedings were marked by irregularities. For instance, the judge prevented Cedeno from providing important documentary evidence in court. When the trial looked likely to result in a verdict favorable to Cedeno, the government suspended the case.

Earlier this year, the Venezuelan Supreme Court weighed in on the matter. The earlier trial proceedings were voided, and Cedeno will face prosecution again.

Striking Parallels

It is clear that Cedeno, like Khodorkovsky, operated in a business environment in which corruption was commonplace. However, to lawyer Amsterdam, the alleged criminality of his two clients has never been the central issue in their cases.

"The issue is the role of the state," Amsterdam says. "And I think it's this whole issue of relativism. Only if the court goes up against a priest, are we able to denounce an unseemly perversion of state power, and I don't accept that."

Amsterdam sees the breakdown of the rule of law as only one of many areas in which the Russian and Venezuelan cases are similar.

Ties That Bind

There are intriguing parallels in recent legal developments in Venezuela and Russia.

In the last decade, both countries have undergone a political sea change. When Chavez became president in 1999 and Putin rose to power in 2000, both came to office attacking the corruption of the established order. They replaced a previous generation of pro-American oligarchs.

Russia and Venezuela in the 1990s were places where corruption ran rife, and Chavez and Putin gained political traction by pledging to end crooked old ways.

However, such rhetoric has meant little. The current Russian and Venezuelan governments have chosen, rather than attack corruption, to take advantage of it. The corrupt oligarchy has been supplanted by a new order that is just as corrupt but now is at the handle of the instruments of state.

The prosecutions of Khodorkovsky and Cedeno reflect this tendency. In both cases, pro-government elites have benefited financially from the charges being brought.

Daniel Erikson, a senior associate at the Inter-American Dialogue in Washington, notes the similarity between Russia and Venezuela in recent years.

"If you look at Russia under Putin there is a remarkable similarity to Venezuela under Chavez in so far as democratically elected leaders have systematically eliminated the chances of the opposition to wield any significant authority within the system and you see an increasing state presence in the media and distorting the independence of the rule of law."

The similarity between the Russian and Venezuelan models here does not appear deliberate. Rather, domestic political forces were at work. As both Putin and Chavez sought to centralize executive authority, it was natural that the courts would fall under increasing control of the governing elite.

Nevertheless, Russia and Venezuela have deliberately strengthened diplomatic, economic, and military ties. Russia has sold over $4 billion worth of weapons to Venezuela.

However, these armaments mean little to members of the Venezuelan political opposition. The defense Venezuela may need is not against foreign enemies but against a government intent on usurping the rule of law.