Foreign Corrupt Practices Act sentencings show only part of overall Venezuela corruption risk to US firms
17 Jan 2020 12:00 am by Robert Thomason
Recent and upcoming US sentencings in a Venezuelan oil sector bribery scheme are set to close about 20-related prosecutions that grew and lingered in US federal court for years. But these cases, based on crimes in Miami and Houston, are just a few of many emanating from Venezuela's political chaos and casting a range of risk on US businesses.
Citgo, a Venezuelan-owned firm operating in the US, and Glencore, a commodity trader with a US footprint, are under investigation for suspected corruption. US banks are drawn into legal actions as the Justice Department freezes deposits that are subject to forfeiture as the proceeds of corruption; a forfeiture action can freeze hundreds of millions of dollars in US assets.
And US companies that continue to do business in Venezuela must steer clear of more than 130 Venezuelan entities facing US sanctions and generally guard against bribe requests from actors in a country that ranks in the bottom tenth of major corruption indices. Venezuela ranks 168th out of 180 countries on the 2018 Transparency International Corruption Perception Index and 187th out of 202 on the World Bank's Control of Corruption Index.
— Southern District of Texas —
Next month, Roberto Enrique Rincon Fernandez of Texas and Abraham Jose Shiera Bastidas of Florida are to be sentenced in the Southern District of Texas for Foreign Corrupt Practices Act violations based on bribing Venezuelan oil officials to direct purchasing orders to their drilling companies.
Rincon and Shiera were charged in 2015, and prosecution of the conspiracy snowballed over the coming months and years as the DOJ charged more conspirators in the scheme. Often new indictments would issue against defendants when previously charged people had entered plea deals in which they agreed to cooperate. Court filings described how some defendants gave evidence against others.
US businessmen, many working for Rincon or Shiera, were charged with FCPA offenses for bribing Venezuelan officials, primarily associated with Bariven, a purchasing subsidiary for Venezuela's national oil company. Those officials, in turn, were charged with laundering the proceeds to the bribery. US District Judge Gray Miller has sentenced some of the defendants and in February will sentence eight more, including Shiera and Rincon.
— Sanctions and corruption —
The corruption risk for US business is complicated by the US sanctions towards certain entities in Venezuela. The US has crafted sanctions to deny resources to Maduro, rather than to cut off trade to the country as a whole. In some cases, the sanctions are based on what the US says are significant acts of corruption.
The key Venezuelan state-owned enterprise in the bribery probes has been Petroleos de Venezuela SA, the national oil company. It's former top officials, many close to the Venezuelan leader Nicolas Maduro, have been charged or locked up by the US for laundering the proceeds of bribery by US-linked firms.
Thus, a reduced number of US firms still do business in Venezuela. Five large US oil sector firms (Baker Hughes, Chevron, Halliburton, Schlumberger and Weatherford) have been granted waivers from the sanctions; they may keep their billion-dollar operations running in conjunction with Venezuelan state-owned enterprises, but they may not sell petroleum products to the US.
— Glencore, Citgo —
Just as prosecution of bribery and money laundering spread from these medium-sized business dealings with Venezuelan officials, other and larger firms with operations in the US have been entangled in investigations of Venezuelan corruption.
Some of those firms are facing multiple investigations for their dealings with PdVSA. Glencore, an Anglo-Swiss commodity trader that is publicly traded and has offices in the US, has been subpoenaed by DOJ and is also under investigation by the US Commodity Futures Trading Commission.
Citgo, a US oil refiner and marketer that is owned by Venezuela but faces sanctions, is also under investigation by DOJ for bribery. In June, Citgo said it had responded to DOJ requests for subpoenas and would cooperate further. A Miami oil businessman, Jose Manuel Gonzalez Testino, pleaded guilty to bribing Citgo officials. Gonzalez, who also admitted to bribing officials of PdVSA's Bariven, will be in court in February with Rincon and Shiera.
Brazilian meat processing firm JBS, which has a US subsidiary, is also on the radar of regulators. In October, US Senators Marco Rubio and Robert Menendez asked the Treasury Department's Committee on Foreign Investment in the US to initiate an investigation into JBS. One specific connection the senators asked about was JBS's work with the Venezuelan Corporation of Foreign Trade (Corpovex). Corpovex was flagged as a corruption concern by the US Financial Crimes Enforcement Network. The senators also made note of the relationship between the Bautista brothers, owners of JBS, and Diosdado Cabello, a Venezuelan politician who is under US sanctions for corruption.
— Money laundering and forfeitures —
The risk to US firms extends beyond paying bribes to Venezuelan officials. Indictments allege and guilty pleas say those officials laundered the bribes and other corrupt proceeds they received into the US, making them liable for prosecution under money laundering statutes.
In July, DOJ announced the indictments of Alex Nain Saab Moran and Alvaro Pulido Vargas on money laundering charges, alleging they transferred the proceeds of corrupt public housing and public food distribution deals into the US financial system. DOJ also initiated a forfeiture action seeking $350 million in the US.
In another case, high-ranking officials of Venezuela and a businessman have been charged with, and in some cases have pleaded guilty to, laundering the proceeds of a foreign exchange scam into the US. In that scheme, the officials participated in a plan to bribe Venezuelan officials to manipulate currency deals, buying Bolivars, the Venezuelan currency, at the low official rate and selling them at the much higher black-market rate. Millions of dollars worth of Southern Florida real estate has been frozen or forfeited in this case, and a former Julius Baer banker working in Miami is serving a 10-year prison sentence for his role in the conspiracy.
FinCEN Files show banks should play greater role in disrupting financial crimes, head of New Zealand's FIU says16 Oct 2020 8:44 am by Ben LucasThe FinCEN Files show that banks and other financial institutions should be playing a greater role in disrupting and preventing financial crimes early on.
24 Sep 2020 4:19 pm by Annie RobertsonThe current legal safeguard for whistleblowers in the UK is "toothless, overly complex and lacks the backing it needs to be effective."
Deloitte executives reading newspaper headlines would be forgiven for finding more to grimace about there than in the multimillion-pound malpractice fine.