Two employees of a U.S. broker-dealer and a senior official in Venezuela’s state economic development bank have been charged in New York’s federal court for their alleged roles in a massive international bribery scheme.
Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division; Preet Bharara, the U.S. Attorney for the Southern District of New York; and George Venizelos, the Assistant Director-in-Charge of the New York Office of the FBI, made the announcement.
According to the criminal complaint unsealed today, Tomas Alberto Clarke Bethancourt (Clarke) and Jose Alejandro Hurtado – who were both employees of a U.S. broker-dealer (Broker-Dealer) – and Maria de los Angeles Gonzalez de Hernandez (Gonzalez) – who is a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (BANDES) – are accused of conspiring to pay bribes to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. Gonzalez, 54, a resident of Caracas, Venezuela, was arrested in Miami on May 3, 2013. Clarke, 43, and Hurtado, 38, were also arrested Friday in Miami, where they reside. All three defendants were presented yesterday in federal court in Miami and remain in custody.
“Today’s announcement is a wake-up call to anyone in the financial services industry who thinks bribery is the way to get ahead,” said Acting Assistant Attorney General Raman. “The defendants in this case allegedly paid huge bribes so that foreign business would flow to their firm. Their return on investment now comes in the form of criminal charges carrying the prospect of prison time. We will not stand by while brokers or others try rig the system to line their pockets, and will continue to vigorously enforce the FCPA and money laundering statutes across all industries.”
“The defendants’ arrests lay bare a web of bribery and corruption in which employees of a U.S. broker-dealer allegedly generated tens of millions of dollars through transactions in order to fund kickbacks to a Venezuelan government official in exchange for her directing the Venezuelan economic development bank’s financial trading business to their employer,” said U.S. Attorney Bharara. “As alleged, the defendants also engaged in international money laundering to carry out their corrupt scheme. This Office, along with all of our federal partners, is committed to holding individuals who violate the Foreign Corrupt Practices Act to account.”
“As alleged, the defendants conspired to use Venezuela’s economic development bank as their personal piggy bank,” said FBI Assistant Director-in-Charge Venizelos. “Clarke and Hurtado reaped huge commissions from their trading of the bank’s assets, and kicked back significant sums to Gonzalez. The brazenness of the alleged scheme was exemplified in their buying bank bonds and selling them back on the same day.”
In a separate action, the U.S. Securities and Exchange Commission (SEC) announced
civil charges against Clarke, Hurtado, and two others.
According to the allegations in the criminal complaint unsealed today, the forfeiture complaint, and other documents filed in Manhattan federal court, Clarke and Hurtado worked or were associated with the Broker-Dealer, based in New York City, principally through its Miami offices. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Clarke and later Hurtado, and which offered fixed income trading services to institutional clients. One of the Broker-Dealer’s clients was BANDES. Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.
From April 2009 through June 2010, Clarke, Hurtado, and Gonzalez participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez. During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES. Agents and employees of the Broker-Dealer, including Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer. Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez received a substantial share of the revenue generated by the Broker-Dealer for BANDES -related trades. Specifically, Gonzalez received monthly kickbacks from Broker-Dealer agents and employees that were frequently in six-figure amounts.
Some of the trades the Broker-Dealer executed for BANDES had no discernible business purpose. For instance, in January 2010, the Broker-Dealer executed at least two round-trip trades between itself and BANDES for the same bonds on the same day. In other words, the Broker-Dealer bought certain bonds from BANDES and then immediately sold those same bonds back to the bank. The result of the trades was that BANDES was left with the same bond holdings as before the trades, except that it had paid the Broker-Dealer approximately $10.5 million in mark-ups in the course of the two round-trip transactions.
Certain payments to Gonzalez directly from Hurtado and an entity controlled by Clarke totaled at least $3.6 million. When added together with other payments referenced in the Complaint, Gonzalez received a total of at least $5 million.
To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places. For instance, Clarke used an account he controlled in Switzerland to transfer funds to an account Gonzalez controlled in Switzerland. Gonzalez then transferred some of this money to an account she held in the United States. Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland. Hurtado also sought and received reimbursement from Gonzalez for the payment of U.S. income taxes related to the money that he used to make kickback payments to Gonzalez.
In addition to the criminal complaint, on May 6, 2013, the government filed a civil forfeiture action in Manhattan federal court, seeking the forfeiture of assets held in a number of bank accounts associated with the scheme, including several bank accounts located in Switzerland. The forfeiture complaint also seeks the forfeiture of several properties in the Miami area related to Hurtado that were purchased with his proceeds from the scheme. As set forth in the forfeiture complaint, in addition to Gonzalez, another BANDES official, identified as CC-1 in the forfeiture complaint, also received kickback payments as part of the scheme. Also on May 6, 2013, the Court issued seizure warrants for multiple bank accounts and a restraining order relating to the Miami properties.
This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs. Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is also responsible for the forfeiture aspects of the case.
Additional information about the Justice Department’s FCPA enforcement efforts can be
found at www.justice.gov/criminal/fraud/fcpa.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.