Tag Archives: Preet Bharara

French Citizen Sentenced for Obstructing a Criminal Investigation into Alleged Bribes Paid to Win Mining Rights in Guinea

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Frederic Cilins, a 51-year old French citizen, was sentenced today in the Southern District of New York to 24 months in prison for obstructing a federal criminal investigation into alleged bribes to obtain mining concessions in the Republic of Guinea.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the FBI’s New York Field Office made the announcement.    The sentence was imposed by U.S. District Court Judge William H. Pauley III.
“Cilins offered to bribe a witness in an FCPA investigation to stop the witness from talking to the FBI,” said Assistant Attorney General Caldwell.  “Today’s sentence holds Cilins accountable for his effort to undermine the integrity of our justice system, and sends a message that those who interfere with federal investigations will be prosecuted and sent to prison.”
“Frederic Cilins went to great lengths to thwart a Manhattan federal grand jury’s investigation into an alleged bribery scheme in the Republic of Guinea,” said U.S. Attorney Bharara.  “In an effort to prevent the federal authorities from learning the truth, Cilins paid a witness for her silence and to destroy key documents.  Today, Cilins learned that no one can manipulate justice.”
“Cilins obstructed the efforts of the FBI during the course of this investigation,” said Director in Charge Venizelos.  “His guilty plea and sentence demonstrate our shared commitment with the department’s Criminal Division and U.S. Attorney’s Office to hold accountable those who seek to interfere with the administration of justice. This case should be a reminder to all those who try to circumvent the efforts of a law enforcement investigation: the original crime and the cover-up both lend themselves to prosecution.”
According to court documents, Cilins obstructed an ongoing federal investigation concerning potential violations of the Foreign Corrupt Practices Act (FCPA) and other crimes.    Federal law enforcement was investigating whether a particular mining company with which Cilins was affiliated paid bribes to officials of a former governmental regime in the Republic of Guinea to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region.    During monitored and recorded phone calls and face-to-face meetings, Cilins agreed to pay substantial sums of money to induce a witness to the alleged bribery scheme to leave the United States to avoid questioning by the FBI, as well as to give documents to Cilins for destruction that had been requested by the FBI as part of the investigation.    Cilins also sought to induce the witness to sign an affidavit containing false statements regarding matters under investigation by the grand jury.    That witness was the former wife of a now-deceased Guinean government official who held an office in Guinea that allowed him to influence the award of mining concessions.
Cilins pleaded guilty on March 10, 2014 to a one-count superseding information charging him with obstruction of a federal investigation.    In addition to his sentence, he was ordered to pay a fine of $75,000 and forfeit $20,000.
The case was investigated by the FBI.    The case is being prosecuted by Trial Attorney Tarek Helou of the Criminal Division’s Fraud Section and Assistant United States Attorney Elisha J. Kobre of the Southern District of New York.    The Criminal Division’s Office of International Affairs and Office of Enforcement Operations provided valuable assistance in the investigation.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa .

 

“Karl Lee” Charged for Evading US Sanctions

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Sanctions Previously Had Been Imposed Because of “Karl Lee’s” Role in Iranian Weapons Proliferation Activities; an Additional Round of Sanctions Are Also Announced Today
Li Fangwei, who is more commonly known by his alias “Karl Lee,” is charged with violating the International Emergency Economic Powers Act (IEEPA) by using United States-based financial institutions to engage in millions of dollars of U.S. dollar transactions in violation of economic sanctions that prohibited such financial transactions. In addition, Li Fangwei is also charged with conspiring to commit wire fraud and bank fraud, a money laundering conspiracy, two separate violations of IEEPA and two separate substantive counts of wire fraud, in connection with such illicit transactions.   Li Fangwei, a national of the People’s Republic of China, is a fugitive.

The announcement was made today by Assistant Attorney General John P. Carlin of the Justice Department’s National Security Division, Preet Bharara, U.S. Attorney for the Southern District of New York, George C. Venizelos, Assistant Director in Charge for the FBI’s New York Field Office.

“ These charges are an important part of the ‘ all tools’ approach our government is takingagainst Li Fangwei to shut down and deny him the profit from his proliferation activities,” said Assistant Attorney General Carlin.  “This case is an outstanding example of multiple agencies working together to focus various enforcement efforts on the significant threat to our national security posed by such proliferation networks.”

“As alleged, Li Fangwei has used subterfuge and deceit to continue to evade U.S. sanctions that had been imposed because of his illicit trade in prohibited materials with Iran,” said U.S. Attorney Bharara.   “Previously having been exposed as a violator of those sanctions, Li spun a web of front companies to carry out prohibited transactions essentially in disguise.   He now stands charged with serious crimes, and millions of his dollars have been seized.   It is the hope of this Office not only that Li’s banned commerce cease once and for all, but that he be apprehended and brought before the bar of American justice.”

“Whether motivated by greed or otherwise, Li Fangwei allegedly ignored sanctions imposed by the United States Government and hid behind front companies he developed to engage in a series of illegal transactions, including attempts to acquire ‘dual use’ items on behalf of Iran-based entities,” said Director in Charge Venizelos.  “IEEPA makes it a crime to willfully violate U.S. sanctions on designated countries such as Iran.  Individuals and companies who evade U.S. sanctions and misuse our banking system to further their illegal activity not only undermine the integrity of our financial markets but also threaten U.S. National Security interests.  The FBI is committed to ensuring that strategically important goods and technology, particularly those that could be used in the production or delivery of weapons of mass destruction, do not end up in the wrong hands.”

According to the superseding indictment previously filed in Manhattan federal court and other court documents:

Li Fangwei controls a large network of industrial companies based in eastern China, one of which is LIMMT Economic and Trade Company Ltd. (LIMMT).   Over the years, Li Fangwei’s companies have done millions of dollars of business with Iran.   This business has included selling to Iranian entities various metallurgical goods and related components that are banned for transfer to Iran by, among others, the United Nations, because the items are controlled by the Nuclear Supplier’s Group (a multinational group that maintains “control lists,” which identify nuclear-related dual-use equipment, material and technology).   Li Fangwei has been, among other things, a long-time supplier to Iran’s Defense Industries Organization and Iran’s Aerospace Industries Organization.   In addition, Li Fangwei has been a principal contributor to Iran’s ballistic missile program, through China-based entities that have been sanctioned by the United States.

In light of his supply of restricted items to Iran, the United States has imposed targeted sanctions on both Li Fangwei and LIMMT.   Specifically, the United States Department of the Treasury’s Office of Foreign Asset Controls (OFAC) publicly added LIMMT (in 2006) and Li Fangwei (in 2009) to its List of Specially Designated Nationals and Blocked Persons (SDN List).  By virtue of their inclusion on the SDN List, Li Fangwei and LIMMT were effectively precluded from conducting any business within the United States without first obtaining a license or authorization from OFAC.   Neither Li Fangwei nor LIMMT has sought such a license or authorization.

The above-referenced restrictions have forced Li Fangwei to operate much of his business covertly.   In response to United States sanctions, Li Fangwei has built an outsized network of China-based front companies to conceal his continuing participation, and LIMMT’s continuing participation, in sanctioned activities.   The front companies are listed in Exhibit A to the superseding indictment.   As shown in Exhibit A, many of those front companies have used the same address as LIMMT, or a close variant thereof.

During the period from 2006 through to the present, Li Fangwei has used front companies to engage in more than 165 separate U.S. dollar transactions, with a total value in excess of approximately $8.5 million dollars.   Included in those illicit transactions have been transactions involving sales to U.S. companies and sales of merchandise by Li Fangwei to Iran-based companies utilizing the U.S. financial system.   Li Fangwei also attempted to acquire on behalf of Iran-based entities so-called “dual use” items from the United States, China and other countries that could be used in the production of weapons of mass destruction and/or devices used to deliver weapons of mass destruction.

Additionally, the U.S. Attorney’s Office and the FBI announced the seizure of over $6,895,000 in funds attributable to the Li Fangwei front companies, and the filing of a civil complaint seeking the forfeiture of those funds to the United States.   The seized funds are substitutes for money held by Li Fangwei’s front companies at banks in China, and were seized from accounts at U.S. banks held in the name of foreign banks used by these front companies to conduct U.S. currency transactions (the correspondent accounts).   The funds were seized pursuant to seizure warrants issued on Dec. 18, 2013, and April 25, 2014.   The $6,895,000 represents funds used by the Li Fangwei front companies to engage in transactions that violate the U.S. sanctions laws and thus are subject to forfeiture.   There are no allegations of wrongdoing by the U.S. or foreign banks that maintain these accounts.   Because the funds used in those transactions are held in banks overseas, the United States is unable to seize the funds directly.   However, pursuant to U.S. law, the United States can seize funds located in a bank’s correspondent accounts in the United States if there is probable cause to believe that funds subject to forfeiture are on deposit with that bank overseas.   Based on this provision and others, the seizure warrants were executed.   These funds were transferred to a seized asset account maintained by the United States Marshals Service pending resolution of the forfeiture action.

Based on information developed in the course of the FBI’s investigation into Li Fangwei that forms the basis of the superseding indictment, OFAC today is adding eight additional front companies used by Li Fangwei to its List of Specially Designated Nationals and Blocked Persons.

Finally, the United States Department of Commerce announced today the addition of nine China-based suppliers of Li Fangwei to its Entity List.

The Superseding Indictment charges Li Fangwei with seven separate offenses:

  • Count One: Conspiracy to violate the International Emergency Economic Powers Act;

 

  • Counts Two and Three: Substantive violations of the International Emergency Economic Powers Act;

 

  • Count Four: Money laundering conspiracy;

 

  • Count Five: Conspiracy to commit wire fraud and bank fraud; and

 

  • Counts Six and Seven: Wire fraud.

If convicted, Li Fangwei faces a maximum sentence of 20 years in prison on each of Counts One through Four and Counts Six and Seven, and 30 years in prison on Count Five.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Additional efforts directed at Li Fangwei and his network were announced today by the U.S. Department of State’s Transnational Organized Crime Rewards Program, Department of Treasury and the Department of Commerce.

The charges contained in the indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.

CEO of Wall Street Broker-Dealer Charged with Massive FCPA Scheme

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FOR IMMEDIATE RELEASE
Monday, April 14, 2014
The chief executive officer and a managing partner of a New York-based U.S. broker-dealer were arrested today on felony charges arising from a conspiracy to pay bribes to a senior official in Venezuela’s state economic development bank.
Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.
According to the indictment unsealed today, Benito Chinea and Joseph DeMeneses, who were the Chief Executive Officer and a managing partner, respectively, of a New York-based broker-dealer (Broker-Dealer), are accused of conspiring with others to pay and launder bribes to Maria de los Angeles Gonzalez de Hernandez, a senior official in Venezuela’s state-owned economic development bank, Banco de Desarollo Económico y Social de Venezuela (BANDES), in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. DeMeneses was also charged with conspiring to obstruct an examination of the Broker-Dealer by the U.S. Securities and Exchange Commission (SEC) to conceal the true facts of the Broker-Dealer’s relationship with BANDES.
Chinea, 47, was arrested today in Manalapan, N.J., where he resides, and DeMeneses, 44, was arrested today in Fairfield, Conn., where he resides.   In a separate action, the SEC announced civil charges against Chinea, DeMeneses and others involved in the bribery scheme.
“ These senior Wall Street executives are accused of paying six-figure bribes to an official in Venezuela to secure foreign business for their firm,” said Acting Assistant Attorney General O’Neil.  “Today’s charges show once again that we will aggressively pursue individual executives, all the way up the corporate ladder, when they try to bribe their way ahead of the competition. ”
“These two defendants, senior executives at a U.S. brokerage firm, are the fifth and sixth people to be charged in an alleged conspiracy to corrupt the trading business of a state-run economic development bank of Venezuela,” said U.S. Attorney Bharara.    “They are alleged to have bribed a willing officer at the bank to steer its overseas trading business to the defendants’ brokerage firm, reaping millions for these defendants and their partners in crime.  This Office will not tolerate the kind of outright bribery and concealment that characterized this scheme.”
“As alleged in the indictment, Chinea and Demeneses bribed Gonzalez to secure bank Bandes’s financial trading business,” said FBI ADIC Venizelos.    “Demeneses compounded the Broker-Dealer’s illegal activities by conspiring to obstruct an investigation by regulators.   The arrests today of Chinea and Demeneses should be a reminder to all those in the business community that engaging in bribery schemes to secure business and make a profit is illegal. Together with our law enforcement partners, the FBI will continue to investigate bribery and fraud at all levels.”
According to the allegations in the indictment unsealed today, as well as other documents previously filed in Manhattan federal court, Chinea and DeMeneses worked at the headquarters of the Broker-Dealer in New York City.    In 2008, the Broker-Dealer established a group called the Global Markets Group (GMG), which offered fixed income trading services for institutional clients in the purchase and sale of foreign sovereign debt.    One of the Broker-Dealer’s GMG clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance.    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 commission.
As alleged in court documents, from late 2008 through 2012, Chinea and DeMeneses, together with three Miami-based Broker-Dealer employees, Ernesto Lujan, Tomas Alberto Clarke Bethancourt and Jose Alejandro Hurtado, 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 commissions from trades with BANDES.    In order to conceal their conduct, Chinea, DeMeneses and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts.    In several instances, Chinea personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.
As further alleged in court documents, as a result of the bribery scheme, BANDES quickly became the Broker-Dealer’s most profitable customer.    As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend BANDES’s business.    In response, DeMeneses and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds.    Chinea and DeMeneses agreed to use Broker-Dealer funds to reimburse DeMeneses and Clarke for these bribe payments.    To conceal their true nature, Chinea and DeMeneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.
Court documents also allege that beginning in or around November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011, the SEC’s exam staff made several visits to the Broker-Dealer’s offices in Manhattan.    In or about early 2011, DeMeneses and others involved in the scheme discussed that the SEC was examining the Broker-Dealer’s relationship with BANDES.    DeMeneses and others agreed they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including by deleting emails, in order to hide the actual relationship from the SEC.
Chinea and DeMeneses were each charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act, five counts of violating the FCPA, and five counts of violating of the Travel Act.    Chinea and DeMeneses were also charged with one count of conspiracy to commit money laundering and three counts of money laundering. DeMeneses was further charged with one count of conspiracy to obstruct justice.
Previously, on Aug. 29 and Aug. 30, 2013, Lujan, Hurtado and Clarke each pleaded guilty in Manhattan federal court to conspiring to violate the FCPA, to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, relating, among other things, to the scheme involving bribe payments to Gonzalez.    On Nov. 18, 2013, Gonzalez pleaded guilty in Manhattan federal court to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, for her role in the corrupt scheme.
The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
This ongoing investigation is being conducted by the FBI, with assistance from the Criminal Division’s Office of International Affairs.    The department appreciates the substantial assistance provided by the SEC.
Senior Deputy Chief James Koukios and Trial Attorney Maria Gonzalez Calvet of the Criminal Division’s Fraud Section and Assistant U.S. 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 U.S. Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

French Citizen Pleads Guilty to Obstructing Criminal Investigation into Alleged Bribes Paid to Win Mining Rights in the Republic of Guinea

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Frederic Cilins, 51, a French citizen, pleaded guilty today in the Southern District of New York to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.
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 FBI’s New York Field Office, made the announcement.
Cilins pleaded guilty to a one-count superseding information filed today, which alleges that Cilins agreed to pay money to induce a witness to destroy, or provide to him for destruction, documents sought by the FBI.   According to the superseding information, those documents related to allegations concerning the payment of bribes to obtain mining concessions in the Simandou region of the Republic of Guinea.
According to publicly filed documents, Cilins allegedly attempted to obstruct an ongoing federal grand jury investigation concerning potential violations of the Foreign Corrupt Practices Act and laws proscribing money laundering.   Court documents state the federal grand jury was investigating whether a particular mining company and its affiliates – on whose behalf Cilins had been working – transferred into the United States funds in furtherance of a scheme to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region.   During monitored and recorded phone calls and face-to-face meetings, Cilins allegedly agreed to pay substantial sums of money to induce a witness to the bribery scheme to turn over documents to Cilins for destruction, which Cilins knew had been requested by the FBI and needed to be produced before a federal grand jury.   Court documents also allege that Cilins sought to induce the witness to sign an affidavit containing numerous false statements regarding matters under investigation by the grand jury.
Court documents allege that the documents Cilins sought to destroy included original copies of contracts between the mining company and its affiliates and the former wife of a now-deceased Guinean government official, who at the relevant time held an office in Guinea that allowed him to influence the award of mining concessions. The contracts allegedly related to a scheme by which the mining company and its affiliates offered the wife of the Guinean official millions of dollars, which were to be distributed to the official’s wife as well as ministers or senior officials of Guinea’s government whose authority might be needed to secure the mining rights.
According to court documents, the official’s wife incorporated a company in 2008 that agreed to take all necessary steps to secure the valuable mining rights for the mining company’s subsidiary.   That same contract stipulated that $2 million was to be transferred to the official’s wife’s company and an additional sum was to be “distributed among persons of good will who may have contributed to facilitating the granting of” the valuable mining rights.   According to the complaint, in 2008, the mining company and its affiliates also agreed to give 5 percent of its ownership of particular mining areas in Guinea to the official’s wife.
The case is being investigated by the FBI.   The case is being prosecuted by Trial Attorney Tarek Helou of the Criminal Division’s Fraud Section and Assistant United States Attorney Elisha J. Kobre of the Southern District of New York.   The Justice Department’s Office of International Affairs and Office of Enforcement Operations also assisted in the investigation.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa .

High-Ranking Bank Official at Venezuelan State Development Bank Pleads Guilty to Participating in Bribery Scheme

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A senior official in Venezuela’s state economic development bank has pleaded guilty in New York federal court to accepting bribes from agents and employees of a New York-based broker-dealer (Broker-Dealer) in exchange for directing her bank’s security-trading business to the Broker-Dealer.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York, and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

Maria De Los Angeles Gonzalez De Hernandez, 55, pleaded guilty today before U.S. District Judge Paul A. Engelmayer in the Southern District of New York to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.  Sentencing for Gonzalez is scheduled for Aug. 15, 2014, before Judge Engelmayer.

At all times relevant to the charges, Banco de Desarrollo Económico y Social de Venezuela (BANDES) was a state-run economic development bank in Venezuela.  The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding.

According to court records, 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 early 2009 through 2012, Gonzalez participated in a bribery scheme in which she directed trading business she controlled at BANDES to the Broker-Dealer and, in return, agents and employees of the Broker-Dealer shared 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 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 millions in bribe payments from Broker-Dealer agents and employees.

Additionally, Gonzalez paid a portion of the bribe payments she received to another BANDES employee who was also involved in the scheme.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that Gonzalez and others held in Switzerland, among other places.

Previously, three former employees of the Broker-Dealer – Ernesto Lujan, Jose Alejandro Hurtado, and Tomas Alberto Clarke Bethancourt – each pleaded guilty in New York federal court to conspiring to violate the Foreign Corrupt Practices Act (FCPA), to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, relating, among other things, to the scheme involving bribe payments to Gonzalez.  Sentencing for Lujan and Clarke is scheduled for Feb. 11, 2014, before U.S. District Judge Paul G. Gardephe.  Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer Jr. on March 6, 2014.

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.

 

Two U.S. Broker-dealer Employees and Venezuelan Government Official Charged for Massive International Bribery Scheme

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Senior Venezuelan Banking Official Allegedly Received at Least $5 Million in Bribes in Exchange for Directing Business to U.S. Defendants

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.

Obstruction Charges Filed in Ongoing Fcpa Investigation into Alleged Guinean Mining Rights Bribe Scheme

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Frederic Cilins, 50, a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.

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 FBI’s New York Field Office, made the announcement.

“Mr. Cilins is charged with scheming to destroy documents and induce a witness to give false testimony to a grand jury investigating potential violations of the Foreign Corrupt Practices Act,” said Acting Assistant Attorney General Raman.  “The Justice Department is committed to rooting out foreign bribery, and we will not tolerate criminal attempts to thwart our efforts.”

“A grand jury can never learn the truth, and justice cannot prevail, where documents are intentionally destroyed and testimony is tainted by lies,” said U.S. Attorney Bharara.  “As alleged, Frederic Cilins attempted to obstruct a significant investigation by corrupting evidence and testimony in precisely those ways.  With today’s arrest, he now begins his own path to justice for his alleged conduct.”

“As alleged, Cilins attempted to buy evidence he sought to destroy,” said FBI Assistant Director in Charge Venizelos.  “The destruction of evidence was in furtherance of Cilins’s alleged effort to obstruct an investigation into a bribery scheme. In effect, he was allegedly willing to commit bribery in an effort to cover up a bribery.”

Cilins was arrested in Jacksonville, Fla., on April 14, 2013, and a criminal complaint was filed in the Southern District of New York today charging Cilins with tampering with a witness, victim or informant; obstructing a criminal investigation; and destroying, altering or falsifying records in a federal investigation.  The obstruction charge carries a maximum penalty of five years in prison, and the tampering and record-destruction charges each carry a maximum penalty of 20 years in prison. Cilins made an initial appearance in the Middle District of Florida and was detained pending a detention hearing scheduled for April 18, 2013.

According to the complaint, Cilins allegedly attempted to obstruct an ongoing federal grand jury investigation concerning potential violations of the Foreign Corrupt Practices Act and laws proscribing money laundering.  The complaint states the federal grand jury is investigating whether a particular mining company and its affiliates – on whose behalf Cilins has been working – transferred into the United States funds in furtherance of a scheme to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region.  During monitored and recorded phone calls and face-to-face meetings, Cilins allegedly agreed to pay substantial sums of money to induce a witness to the bribery scheme to turn over documents to Cilins for destruction, which Cilins knew had been requested by the FBI and needed to be produced before a federal grand jury.  The complaint also alleges that Cilins sought to induce the witness to sign an affidavit containing numerous false statements regarding matters under investigation by the grand jury.

The complaint alleges that the documents Cilins sought to destroy included original copies of contracts between the mining company and its affiliates and the former wife of a now-deceased Guinean government official, who at the relevant time held an office in Guinea that allowed him to influence the award of mining concessions.  The contracts allegedly related to a scheme by which the mining company and its affiliates offered the wife of the Guinean official millions of dollars, which were to be distributed to the official’s wife as well as ministers or senior officials of Guinea’s government whose authority might be needed to secure the mining rights.

According to the complaint, the official’s wife incorporated a company in 2008 that agreed to take all necessary steps to secure the valuable mining rights for the mining company’s subsidiary.  That same contract stipulated that $2 million was to be transferred to the official’s wife’s company and an additional sum was to be “distributed among persons of good will who may have contributed to facilitating the granting of” the valuable mining rights.  According to the complaint, in 2008, the mining company and its affiliates also “commit to giving 5% of the shares of stock” in particular mining areas in Guinea to the official’s wife.

A complaint is merely an accusation, and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Elisha J. Kobre of the Southern District of New York.  The case is being investigated by the FBI.  The Justice Department’s Office of International Affairs and Office of Enforcement Operations have also assisted in the investigation.