US oil sector firms' FCPA cases play into sanctions against PDVSA

Ten US oil equipment firms were at the center of a bribery scheme the US Treasury Department referenced when it sanctioned Venezuela's national oil company this week. The owners and former employees of those firms are facing sentencing for Foreign Corrupt Practices Act charges.

Although Treasury's announcement Monday of sanctions against Petroleos de Venezuela SA, or PDVSA, only mentioned Venezuelan officials who have been indicted in the US, their cases are inherently connected with charges against US defendants.

Also, Venezuelan officials indicted in a scheme involving a former Julius Baer banker and the owner of Venezuelan broadcaster Globovision were referenced by Treasury as examples of corruption in Venezuela that the US government said justified the PDVSA sanctions pursuant to an executive order.

Oil firm prosecutions

The oil sector firms, located in the Miami and Houston areas, obtained business with PDVSA through bribes their owners, former managers or employees paid to officials, according to US court documents.

ISS Industrial Sourcing and five other Miami firms controlled by Abraham Shiera, and Tradequip Services & Marine and five other Houstons firms controlled by Robert Enrique Rincon were among the companies obtaining business through the FCPA conspiracy. When their indictment addresed one of these firms, it only identified the firm as a "Shiera Company" or a "Rincon Company." Subsequent court filings and public business registration records confirmed some of the corporate names.

Both Shiera and Rincon in 2016 pleaded guilty to FCPA charges and are scheduled to be sentenced in the Southern District of Texas before US District Judge Gray H. Miller on Feb. 21, along with six other defendants who have also pleaded guilty to participating in the scheme. The day before, Miller is scheduled to sentence three other defendants on related FCPA or money laundering charges.

The Venezuelan officials who received some of the Houston/Miami oil service firm bribe money were singled out in the Treasury announcement. "US prosecutors have alleged that, from 2011 to 2013, senior Government of Venezuela and PDVSA officials, including Nervis Villalobos, the former Venezuelan vice minister of energy; Rafael Reiter, who worked as PDVSA’s head of security and loss prevention; and Luis Carlos de Leon, a former official at a state-run electric company, sought bribes and kickbacks from vendors in exchange for helping them secure PDVSA contracts and gain priority over other vendors for outstanding invoices during its liquidity crisis," Treasury said.

De Leon in July pleaded guilty to money laundering and FCPA conspiracy charges. Villalobos is in custody in Spain pending a US extradition request. Reiter is a fugitive.

Another Venezuelan official who has pleaded guilty to money laundering charges in the scheme, but who wasn't addressed in the Treasury statement, is Cesar David Rincon Godoy. He was a manager of Bariven, a procurement subsidiary of PDVSA.

Foreign exchange scheme

The other PDVSA official referenced by Treasury, former finance director Abraham Edgardo Ortega, has pleaded guilty to US money laundering conspiracy charges in a currency exchange scheme that, overall, embezzled $1.2 billion from PDVSA. Treasury said the money was "obtained through bribery and fraud."

Former Julius Baer banker Matthias Krull was sentenced to 10 years in prison after pleading guilty to money laundering conspiracy.

Globovision owner Raul Gorrin Belisario was charged on Foreign Corrupt Practices Act conspiracy charges and multiple counts of money laundering in connection with the currency manipulation scheme.

Forfeiture

Executive Order 13850, issued in November, authorized Treasury to impose sanctions against Venezuelan individuals and entities, among other reasons, "in light of actions by the Maduro regime and associated persons to plunder Venezuela's wealth for their own corrupt purposes". Nicolás Maduro is Venezuela's embattled, contested president.

The case of one former Venezuelan official, who in November was sentenced to 10 years after pleading guilty to laundering money derived from bribes in the currency fraud, shows the magnitude of the financial crimes.

DOJ said former Venezuelan national treasurer Alejandro Andrade "received over $1 billion in bribes from Gorrin and other co-conspirators in exchange for using his position as Venezuelan national treasurer to select them to conduct currency exchange transactions for the Venezuelan government.

"As part of his plea agreement, Andrade agreed to a forfeiture money judgment of $1 billion and forfeiture of all assets involved in the corrupt scheme, including real estate, vehicles, horses, watches, aircraft and bank accounts," DOJ said.