This previous post briefly mentioned the DOJ’s recent Foreign Corrupt Practices Act enforcement action against Roberto Rincon and Abraham Shiera for alleged improper business practices with officials at Petroleos de Venezuela S.A. (PDVSA), Venezuela’s alleged state-owned and state-controlled oil company.

This post goes in-depth regarding this recently unsealed criminal indictment.

In the indictment, Rincon is described as a U.S. lawful permanent resident and a resident of Texas who controlled, together with others, a number of closely held companies, including several U.S. companies, that he used to secure contracts with PDVSA.

Shiera is described as a Venezuelan national who resided in Florida who controlled, together with others, a number of closely held companies, including several U.S. companies, that he used to secure contracts with PDVSA.

Both Rincon and Shiera, along with their respective unnamed Texas or Florida-based companies, are alleged to be “domestic concerns.”

The “foreign officials” are described as follows.

Official A – employed by PDVSA, including as a buyer at PDVSA and a supervisor of other PDVSA buyers. Official A’s job responsibilities including assigning bidding panels to PDVSA buyers, including Official C and Official D, who would then be responsible for selecting companies for the bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

Officials B – employed by PDVSA, including as a purchase analyst for PDVSA. Official B’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

Official C – employed by PDVSA, including as a purchasing manager and superintendent of purchasing at PDVSA. Official C’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects, and selecting which companies would win the economic portion of the bid process.

Official D – employed by PDVSA, including as a buyer for PDVSA. Official D’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

Official E – employed by PDVSA, including as a purchasing manager.  Official E’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

The indictment refers to various PDVSA entities collectively as PDVSA including PDVSA Services Inc. (a U.S. based affiliate of PDVSA located in Houston, Texas that was, at various times, responsible for international purchasing on behalf of PDVSA) and Bariven S.A. (a PDVSA procurement subsidiary responsible for equipment purchases).

The indictment alleges that Rincon and Shiera “referred to the PDVSA officials who were assisting them in obtaining and retaining contracts with PDVSA in exchange for the bribes as ‘aliados,’ which translates into English as ‘allies’ or “allieds.”

The indictment alleges a conspiracy between 2009 and 2014 in which Rincon, Shiera and others enriched themselves “by obtaining and retaining lucrative energy contacts with PDVSA through corrupt and fraudulent means, including by paying bribes to PDVSA officials.” The alleged bribes to PDVSA officials were to “influence acts and decisions of the PDVSA officials in their official capacities and to induce the PDVSA officials to do and omit to do certain acts, including, but not limited to:

• assisting Rincon’s and Shiera’s companies in winning PDVSA contracts;
• providing Rincon and Shiera with inside information concerning the PDVSA bidding process;
• placing one or more of Rincon’s and Shiera’s companies on certain bidding panels for PDVSA projects;
• helping to conceal the fact that Rincon and Shiera controlled more than one of the companies on certain bidding panels for PDVSA projects;
• supporting Rincon’s and Shiera’s companies before an internal PDVSA purchasing committee;
• preventing interference with the selection of Rincon’s and Shiera’s companies for PDVSA contracts;
• updating and modifying contract documents, including change orders to PDVSA contracts awarded to Rincon’s and Shiera’s companies;
• assisting Rincon’s and Shiera’s companies in receiving payment for previously awarded PDVSA contracts, including by requesting payment priority for projects involving Rincon’s and Shiera’s companies.

The indictment alleges that “in addition to monetary bribes, Rincon and Shiera, together with others, bribed PDVSA officials by providing things of value, including recreational travel (including stays at the Fontaineblue Hotel in Miami Beach), meals (including whiskey), and entertainment, in order to obtain and retain business on behalf of Rincon’s and Shiera’s companies.”

The indictment also alleges that money was transferred from a bank account in the name of one of Rincon’s companies “to pay off the balance of a mortgage loan in Official E’s name for a residence in the Southern District of Texas, in exchange for Official E’s assistance in connection with PDVSA contracts” as well as money to “a close personal associate of Official E, but over which Official E held power of attorney.”

According to the indictment, Rincon and Shiera “provided to certain PDVSA officials who were receiving bribes proposed bidding panel lists that would include more than one company controlled by Rincon or Shiera to create the false appearance that the bidding process was competitive.” The indictment also alleges that Rincon and Shiera “attempted to conceal the bribes to certain PDVSA officials, which they referred to as ‘commissions,’ by creating false justifications for the bribes, including requesting or receiving invoices for equipment that was not provided and services that were never rendered in order to disguise the bribe payments to PDVSA officials.”

In addition to the conspiracy charge, the indictment also charges: (i) Rincon with four substantive violations of the FCPA’s anti-bribery provisions; (ii) Shiera with five substantive violations of the anti-bribery provisions; and (iii) Rincon and Shiera with money laundering conspiracy as well as seven substantive money laundering offenses.

An Order of Detention Pending Trial against Rincon states that the DOJ’s investigation “covered 730 bank accounts; of those 108 were related to Rincon, his family and his companies.” According to the filing, “the indictment seeks forfeiture of three Swiss bank accounts” that the Government has “traced $100 million from the scheme.” The filing further states that “from 2009 to 2014, over one billion dollars was traced to this conspiracy.”

In response to the U.S. allegations, PDVSA released the below statement.