(More) Money Laundering Charges Announced for Alleged $1.6 Billion Venezuelan Corruption Scheme

Ballard Spahr LLP
Contact

Ballard Spahr LLP

Indictment Alleges $1.6 Billion in Corrupt Contracts, Funneled Through Shell Companies and Correspondent Accounts, and Paid With Gold Sold on Behalf of Venezuela

On October 21, 2021, a grand jury indictment was unsealed in the Southern District of Florida charging two Venezuelan and three Colombian citizens with one count of conspiracy to commit money laundering and four counts of money laundering.  The indictment revealed an alleged bribery scheme involving a former Venezuelan state governor and Venezuelan government authorities that provide food and medicine to citizens in need.  A portion of the $1.6 billion in contracts secured by alleged bribes was laundered into or through the United States through a web of accounts and businesses.  This indictment serves as yet another example of the United States Department of Justice’s (“DOJ”) use of money laundering charges to combat corruption in Venezuela (as we have blogged about repeatedly: here, here, here, here, here and here).  It also represents another example of DOJ using the money laundering statutes to charge foreign government officials at the highest levels when the Foreign Corrupt Practices Act cannot apply.

The Individuals

This newest indictment is one of a string of federal cases and sanctions emanating out of the alleged corruption in Venezuela during the regime of its former president, Nicolás Maduro.  In July 2019 and September 2019 press releases by the United States Department of Treasury (“Treasury”) announced that Alex Nain Saab Moran (“Saab”) orchestrated “a vast corruption network” that enabled former President Maduro and others to illicitly profit from government contracts.  Included in this vast corruption network are three of the defendants (and many of the entities) in the recently revealed indictment: Alvaro Enrique Pulido Vargas (“Pulido”), Emmanuel Enrique Rubio Gonzalez (“Rubio”), and Jose Gregorio Vielma-Mora (“Vielma-Mora”).

According to the Treasury press releases, Pulido was Saab’s primary business partner.  Rubio is Pulido’s son and the owner “of the key food packing companies involved in the corruption network.”  Vielma-Mora, the former governor of Tachira, a Venezuelan state, received bribes and steered contracts into the corruption network.  There three were added to the Office of Foreign Asset Control’s Specially Designated Nationals and Blocked Persons List in July 2019.  In addition, Pulido was indicted on money laundering charges in July 2019 for his alleged role in a bribery scheme with Saab involving a $350 million contract to build low-income housing units in Venezuela.  Pulido might have been previously indicted, but he is still at-large.  The United States Department of State announced it is offering a $10 million for information leading to his arrest and/or conviction.

Two other individuals have been indicted for their alleged role in the present scheme.  Two unindicted (and unnamed) co-conspirators allegedly facilitated the bribes to government officials.

The Alleged Scheme

Added to Pulido, Rubio, and Vielma-Mora’s run-in with Treasury (and Pulido’s previous indictment) is a new scheme revealed in the October 21 indictment.  At the heart of the scheme is Comité Local de Abastecimiento y Produción (“CLAP”) a Venezuelan state-owned and state-controlled food and medicine distribution program for Venezuelan’s in need.  Comercializadora de Bienes Y Servicios Del Estado Tachira (“COBISERTA”) and Corporación Venezolana de Comercio Exterior (“CORPOVEX”) are two state-owned, state-controlled entities that contract with companies to purchase and import food and medicine into Venezuela.  These two entities supply the CLAP program.  (The Treasury press releases explain that CLAP was used by the Maduro regime “as a political tool to reward support and punish political criticism.”)

The alleged scheme—spanning July 2015 until 2020—involved bribes and kickbacks to Venezuelan government officials in order to secure contracts to export food and medicine from Mexico and other countries to Venezuela.  For example, the indictment alleges that the defendants and unindicted co-conspirators secured a contract with COBISERTA to supply 10 million boxes of food at $34 each in October 2016.  The true cost of procuring and exporting the food was much lower than the $340 million charged.  The defendants allegedly used the excess money to pay bribes, offer kickbacks, and enrich themselves at the expense of the Venezuelan government and its people.

The defendants and unindicted co-conspirators allegedly created “a web of dozens of companies and associated bank accounts in various countries” as well as “fake and fraudulent contracts and other documents” to justify the movement of money and pay bribes and kickbacks to government officials through intermediaries.  The indictment details similar allegations surrounding contracts with COBISERTA and CORPOVEX for food and medicine in 2017 and 2018.

But the scheme did not end with the allegedly corrupt food and medicine contracts.  When Venezuela ran short on U.S. dollars to pay its contracts, Pulido and an unnamed co-conspirator “engaged in business to refine and sell gold on behalf of Venezuela” to ensure that the COBISERTA and CORPOVEX contracts were paid.  According to Treasury press releases, this involved a complex scheme of sourcing raw gold from Venezuelan mines, refining it, selling it to the Central Bank of Venezuela, and then flying it to the United Arab Emirates or Turkey for sale to Turkish entities.  In all, the indictments allege that the contracts grossed the defendants $1.6 billion.

The Alleged Money Laundering

The indictment points out that at least $10 million in proceeds received from “the corruptly obtained food and medicine contracts” were wired directly into United States bank accounts, with over half of that amount wired directly into the Southern District of Florida.  Some of that money allegedly was sent to Vielma-Mora as a bribe or kickback in furtherance of the conspiracy.  Nearly another $250 million was wired through correspondent bank accounts in the United States.

The indictment alleges the entire $1.6 billion were ill-gotten gains.  More specifically, the DOJ identifies the unlawful activity at the heart of the money laundering charges as felony violations of the Foreign Corrupt Practices Act (“FCPA”) and an offense against a foreign nation, here bribery of a Venezuelan public official.  The FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business.  In other words, because the defendants obtained these contracts by bribing government officials, all the money received was illicit.  The DOJ did not bring FCPA charges against any defendant.

Once again, the DOJ has shown a willingness to lean on money laundering statutes to bring criminal charges against foreign actors for a corruption scheme involving a foreign government.  Although the DOJ could have (theoretically) alleged FCPA charges against many of the defendants, it could not pursue FCPA charges against Vielma-Mora: he is considered a “foreign official” and therefore cannot be charged under the FCPA.  Thus, to pursue charges against Vielma-More, the DOJ has once again turned to the money laundering statutes.  As we have blogged (here and here), the DOJ will continue to use the money laundering statutes to pursue foreign government officials at the highest levels.

Written by:

Ballard Spahr LLP
Contact
more
less

Ballard Spahr LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.