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Another Sprawling Money Laundering and Bribery Scheme Involving Venezuela: Currency Exchange Rate Manipulation, Rewarded By Aircraft, Real Estate, and Thoroughbred Horses

The U.S. Department of Justice (“DOJ”) continues to pursue Venezuelan nationals through high-dollar and high-profile money laundering and foreign bribery charges. The latest development in this ongoing saga is the recent sentencing of the former national treasurer of Venezuela, Alejandro Andrade Cedeno (“Andrade”), by the Southern District of Florida to a decade in prison, after Andrade pleaded guilty last year to a single-count information charging him with conspiracy to commit money laundering (specifically, a conspiracy to violation 18 U.S.C. § 1957, the so-called “spending” money laundering provision, which requires transactions involving over $10,000 in criminal proceeds, but no specific intent) in an alleged sprawling bribery and money laundering scheme. His plea agreement (the “Plea”) was one of several connected proceedings unsealed on November 20, most notable of which is the grand jury indictment (the “Indictment”) of fugitive Raúl Gorrín Belisario (“Gorrín”), the owner of Venezuelan cable news network Globovision, erstwhile resident of Miami, and alleged architect of the money laundering conspiracy.

Although he retired to Florida after having served as the head of the Venezuelan treasury, Andrade did not begin his career in the world of high finance. Rather, his climb to power and wealth began when he used to serve as the bodyguard for the President of Venezuela, Hugo Chavez.

As we will discuss, there is more to come. Aside from telling a lurid tale of corruption rewarded through high-end bribes involving aircraft, real estate (widely acknowledged as a major vehicle for laundering) and thoroughbred horses, Andrade’s plea agreement contains cooperation language, and his counsel has stated publically that Andrade has been cooperating with the DOJ for some time. Notably, Andrade was charged only with a single count of Section 1957, which has a statutory maximum sentence of 10 years – exactly the sentence imposed on Andrade, whose advisory Federal Sentencing Guidelines range was presumably much, much higher. It is fair to assume that Andrade will be pursuing a second sentencing hearing at which his sentence could be reduced based on his cooperation with the government.

Andrade’s case is part of a steady stream of money laundering and bribery charges recently brought by the DOJ which relate to Venezuela, which is reeling from massive inflation and a near-existential economic crisis that is inflicting widespread suffering. His case also represents another instance of the DOJ’s increasing tactic of using the money laundering statutes to charge foreign officials who cannot be charged directly under the Foreign Corrupt Practices Act (“FCPA”).

The Allegations: Currency Exchange Manipulation and High-End Bribes

The factual proffer (the “Proffer”) appended to Andrade’s Plea lays out the alleged scheme. In 2007, Andrade was appointed head of the Venezuelan national treasury (the Oficina Nacional del Tesoro, or “ONT”) by then-president Hugo Chavez. He served in that role until early 2011. To assist the government in meeting its financial obligations, the ONT periodically would sell bonds denominated in foreign currency – often U.S. dollars – and then exchange the proceeds from those sales for domestic currency (the Venezuelan bolivar). The official exchange rate in Venezuela at that time was kept artificially low by the Venezuelan National Bank. However, if the exchange was subcontracted to an independent brokerage house, that entity could access a parallel private exchange market unavailable to the ONT, which offered much higher rates of exchange more in line with the global weakness of the bolivar. The brokerage house then could provide the ONT with a higher payoff while still retaining a significant profit.

According to the Proffer, Andrade admitted to accepting bribes from various individuals in return for ensuring their selection to perform these lucrative currency exchanges on behalf of the ONT. Andrade accepted these bribes not only during his term in office, but for years afterward. Many of those bribes manifested either as wire transfers to or purchases in southern Florida, as Andrade maintained a residence in the Miami metropolitan area from 2012 onward. Although the initial corrupt acts took place in Venezuela, the locus of the ongoing bribery moved with Andrade to metro Miami, thus bringing him within the jurisdiction of the Southern District of Florida.

Although the Proffer indicates that Andrade received bribes from an unspecified number of co-conspirators, it singles out one individual as the exemplar of how the corrupt scheme operated. This individual, referred to as “Co-Conspirator 1”, is described as “a Venezuelan national who maintains a residence in Miami”. The acts ascribed to this co-conspirator include arranging with Andrade to be selected for participation in the exchange process in exchange for bribes:

CC-1 purchased items, including but not limited to, houses in Wellington, Florida; aircraft, and horses for the Defendant’s use and benefit. CC-1 also controlled one or more bank accounts in Switzerland in which CC-1 held proceeds of the scheme that could be made available to the Defendant. These accounts contained approximately $70 to $80 million, which CC-1 used to pay the Defendant’s expenses. From approximately 2010 to in or about the present, when the Defendant requested items from CC-1, CC-1 would send money from his bank account in Switzerland to purchase items in the Southern District of Florida.

This litany of acts lines up directly with the allegations against Gorrín in the first count of the Indictment returned against the executive, charging conspiracy to violate the FCPA, conspiracy to commit money laundering, and several substantive counts of “international” money laundering based on wire transfers from Switzerland to Florida and New York. The Indictment alleges that Gorrín made precisely the sort of purchases and wire transfers highlighted in the Proffer in order to bribe an individual identified in the Indictment as “Foreign Official 1” for his role in the selection of Gorrín and his associates to perform currency exchanges on behalf of the ONT. It is presumably clear from reading the two documents in conjunction that the Proffer’s Co-Conspirator 1 is Gorrín, and the Indictment’s Foreign Official 1 is Andrade. The Indictment also alleges that Foreign Official 1 introduced Gorrín to “Foreign Official 2,” Andrade’s apparent replacement, and that Gorrín continued the exact same scheme.

More to Come?

As noted, Andrade already has been cooperating with the DOJ, and presumably will continue to do so as the DOJ pursues Gorrín. Of course, Andrade’s case and cooperation do not exist in a vacuum. In conjunction with unsealing the charges against Andrade, the DOJ similarly unsealed charges on November 20 against Gabriel Arturo Jiménez Aray (“Jiménez”), a Venezuelan citizen residing in Chicago, who owned and served as the President of Banco Peravia in the Dominican Republic. Jiménez has admitted that he conspired with Gorrín and others to acquire the bank and then use it to pay bribes to Venezuelan government officials to support various illegal financial schemes and then launder the proceeds from those schemes. More specifically, and according to the government’s press release, Jiménez and his co-conspirators used “Banco Peravia to pay bribes to Venezuelan government officials in exchange for contracts to conduct currency exchange schemes and to launder the money obtained from running those currency exchange schemes. Jimenez facilitated illegal transactions and bribe payments to foreign officials and others via bank issued credit cards, cash disbursements, wire transfers and other financial transactions.” On November 29, Jiménez was sentenced to three years in prison and $38 million in forfeiture.

Unfortunately, and as we have blogged, the Venezuelan currency exchange rate market has been highly susceptible to manipulation. Such manipulation is at the heart of another elaborate and high-dollar money laundering and corruption scheme detailed in a criminal complaint unsealed in July 2018 by the United States Attorney’s Office for the Southern District of Florida.

Finally, Andrade’s case represents yet another example of the DOJ tactic about which we have blogged: the increasing use by the DOJ of the money laundering statutes to accomplish what the FCPA statute cannot accomplish directly – the bringing of charges against a foreign official. Here, Andrade could not have been prosecuted for his alleged conduct in soliciting or receiving bribes under the FCPA. However, by using the money laundering statute to address the wire transfers and other purchases centered in Florida which constituted the payments of bribes to Andrade, the DOJ was able to charge Andrade for his corrupt acts as an official of the Chavez regime, and, moreover, to then leverage his cooperation to build an FCPA case against Gorrín. This use of the money laundering statute thus acts not simply as a supplement to the FCPA, but as an instrumental component of DOJ’s strategy to prosecute wrongdoing at the highest levels.

Copyright © by Ballard Spahr LLP

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About this Author

Brian N. Kearney Litigation Lawyer Ballard Spahr Law Firm
Associate

Brian N. Kearney is an associate in the Litigation Department who assists corporate clients in white collar criminal and civil matters. His white collar practice includes providing advice on AML and BSA litigation and compliance, including matters involving suspicious activity reports.

During law school, in addition to research and teaching assistantships, Brian worked as an intern in the office of Magistrate Judge Joel Schneider for the U.S. District Court for the District of New Jersey where he drafted legal memoranda on various federal issues...

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