A Billion Dollar Venezuelan Bribery And Money Laundering Scheme Unfolds
By: Marc S. Raspanti
The Department of Justice recently announced charges against 17 individuals for their alleged participation in bribery and money laundering schemes which took place at Petroleos de Venezuela S.A., Venezuela’s state owned and controlled oil company. The government found their actions to be clear violations of the Foreign Corrupt Practices Act. This type of activity has undoubtedly contributed to the turmoil Venezuela is currently embroiled in at this time.
Venezuela is in a state of crisis; its citizens are left in a state of chaos. Tens of thousands of Venezuelans are fleeing to Ecuador, Brazil, and Argentina in order to survive. How is it that one of the world’s largest exporters of oil and the country with the world’s largest oil reserves is in such a state of despair? Internal corruption at Petroleos de Venezuela S.A. (PDVSA) and massive violations of The Foreign Corrupt Practices Act (FCPA) are partially to blame according to the United States Department of Justice.
The Foreign Corrupt Practices Act (FCPA) prohibits all United States persons and entities from making payments, bribes, to foreign government officials to assist in obtaining or retaining business. 15 U.S.C. §§ 78dd-1, et seq. Thus far, 12 individuals have pleaded guilty for their involvement in bribery, money laundering, and embezzlement schemes with officials from PDVSA, PDVSA subsidiaries, and other Venezuelan government agencies in violation of the FCPA.
On July 31, 2018, Jose Manuel Gonzalez Testino, a dual U.S. Venezuelan citizen, was arrested while waiting for his plane at Miami International Airport. Gonzalez was charged with bribing a PDVSA official with $629,000 to gain contract priority, payment priority, and payment in U.S. dollars rather than in Venezuelan bolivars. One week earlier on July 24 and 25, 2018, Matthias Krull, a German national and Panamanian resident, and Gustavo Adolfo Hernandez Fieri, a Columbian national and naturalized U.S. citizen, were arrested and charged with conspiracy to commit money laundering for their participation in a scheme that laundered $1.2 billion of embezzled funds from PDVSA using money derived from Florida real estate and false investment schemes.
On July 16, 2018, Luis Carlos De Leon-Perez, a dual U.S. Venezuelan citizen, pleaded guilty for conspiracy to violate the FCPA and conspiracy to commit money laundering for facilitating bribes of PDVSA officials. De Leon solicited bribes from U.S. and foreign based vendors, and directed said bribes towards PDVSA officials for contracts and payment priority. According to the government, he then conspired to launder the proceeds of the bribery scheme.
The Take Away
The FCPA is in place to ensure that government officials act in the best interest of their country. PDVSA is Venezuela’s primary source of income. The Trump Department of Justice appears to have no hesitation in making these cases. The misconduct of PDVSA officials and their participation in bribery and embezzlement schemes have played a role in Venezuela’s economic collapse.