Several prior posts (see here and here for instance) have highlighted the clustering phenomenon and how a few discreet instances of alleged bribery yield an inordinate amount of Foreign Corrupt Practices Act enforcement activity.
One such example is the DOJ’s long-standing enforcement action (charges were first brought in late 2015) in connection with alleged corrupt schemes to secure contracts from Venezuela’s state-owned and state-controlled energy company, PDVSA.
Yesterday, the DOJ announced that additional criminal charges were unsealed “against five former Venezuelan government officials for their alleged participation in an international money laundering scheme involving bribes made to corruptly secure energy contracts from Venezuela’s state-owned and state-controlled energy company, PDVSA.”
The indictment charges the following individuals:
- Luis Carlos De Leon Perez (De Leon) described as dual citizen of the U.S. and Venezuela who was previously employed by instrumentalities of the Venezuelan government. De Leon is charged with one count of conspiracy to commit money laundering; four counts of money laundering; and one count of conspiracy to violate the FCPA.
- Nervis Gerardo Villalobos Cardenas (Villalobos) described as a citizen of Venezuela who was previously employed by instrumentalities of the Venezuelan government. Villalobos is charged with one count of conspiracy to commit money laundering; one count of money laundering; and one count of conspiracy to violate the FCPA.
- Cesar David Rincon Godoy (Cesar Rincon) described as a citizen of Venezuela who was employed by PDVSA and its subsidiaries, including Bariven (a PDVSA procurement subsidiary responsible for equipment purchases) and is alleged to be a “foreign official.” Cesar Rincon is charged with two counts of conspiracy to commit money laundering and four counts of money laundering.
- Alejandro Isturiz Chiesa (Isturiz) described as a citizen of Venezuela who was employed by Bariven and is alleged to be a “foreign official.” Isturiz is charged with one count of conspiracy to commit money laundering and five counts of money laundering.
- Rafael Ernesto Reiter Munoz (Reiter) described as a citizen of Venezuela who was employed by PDVSA and is alleged to be a “foreign official.” Reiter is charged with one count of conspiracy to commit money laundering and four counts of money laundering.
The FCPA conspiracy charges against De Leon and Villalobos are most interesting as they seem to conflict with U.S. v. Castle, 925 F.2d 831 (1991), a Fifth Circuit decision which held that “foreign officials” could not be prosecuted for conspiring to violate the FCPA.
Although De Leon and Villalobos (unlike the other three defendants) are not technically alleged to be “foreign officials” they are both alleged to have been previously employed by instrumentalities of the Venezuelan government (which is basically saying that they were “foreign officials” without specifically saying so).
As stated in the DOJ’s release:
“The indictment alleges that the five defendants, all of whom were then-current officials of PDVSA and its subsidiaries or former officials of other Venezuelan government agencies or instrumentalities, were known as the “management team” and wielded significant influence within PDVSA. According to the indictment, the management team conspired with each other and others to solicit several PDVSA vendors, including vendors who were residents of the United States, and who owned and controlled businesses incorporated and based in the United States, for bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business. The indictment further alleges that the co-conspirators then laundered the proceeds of the bribery scheme through a series of complex international financial transactions, including to, from or through bank accounts in the United States, and, in some instances, laundered the bribe proceeds in the form of real estate transactions and other investments in the United States.”
In the DOJ’s release, John Cronan (Acting Assistant Attorney General of the DOJ’s Criminal Division) stated:
“Corruption threatens economic and political stability, and victimizes ordinary law-abiding people by diverting public funds into the pockets of corrupt officials and bribe payers. The charges announced today demonstrate our commitment to fighting corruption at its source and to prosecuting those who allegedly launder their illicit gains through American financial institutions and real estate. Through cases like this, we are sending a strong message to corrupt foreign officials: if you launder your ill-gotten gains through the United States, you will be prosecuted.”
Ryan Patrick (U.S. Attorney – Southern District of Texas) stated:
“Effective deterrence of corruption requires prosecution of culpable individuals, wherever those individuals are located. We will continue to enforce the FCPA against those that avail themselves of the privileges of the American marketplace.”
Mark Dawson (Special Agent in Charge – U.S. Immigration and Customs Enforcement’s Homeland Security Investigations in Houston) stated:
“This case is an example of what can be accomplished when international law enforcement agencies work together to thwart complex cross-border crimes. HSI is committed to upholding the rule of law and investigating those that would participate in illegal practices.”
The indictment contains a section titled “Gifts and Other Things of Value” which references the following:
- a beach house in Parrot Cay in the Bahamas;
- a luxury hotel in Aruba;
- two $107,500 armored cars
- a $10,300 handbag
- invoices for English classes for two children of a “foreign official” (one in the amount of $16,672 and the other in the amount of $8,755).
Elsewhere the indictment references: “recreational travel, vehicles, gifts (including watches and wine), meals, and entertainment.
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