August 19, 2019

August 19, 2019

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Two Former Venezuelan Officials and Energy Executives Indicted as DOJ Continues to Use Money Laundering Charges to Combat Foreign Corruption

Last week, a grand jury in the Southern District of Florida indicted two former Venezuelan officials, charging them with seven counts of money laundering and one count of money-laundering conspiracy. The charges relate to bribes and kickbacks provided to the officials who headed the country’s energy department and state-owned electricity company, Corporacion Electrica Nacional, S.A. (“Corpoelec”). The former officials allegedly received cash payments and received wire transfers, including from a bank in the Southern District of Florida.

As we have blogged about here, here, here, the U.S. Department of Justice (“DOJ”) has been pursuing Venezuelan nationals through high-dollar, high profile money laundering and foreign bribery charges. We also have previously discussed how the DOJ has been utlizing the money laundering statutes as a way to accomplish what the Foreign Corrupt Practices Act (“FCPA”) cannot accomplish directly – the bringing of charges against a foreign official.

The Indictment

The indictment charges Luis Alfredo Motta Dominguez (“Motta Dominguez”) and Eustiquio Jose Lugo Gomez (“Lugo Gomez”), both citizens and nationals of Venezuela who are identified as “foreign officials” as defined in the FCPA. Motta Dominguez was formerly the Venezuelan Minister of Electrical Energy and President of Corpoelec and Lugo Gomez was the director of procurement of Corpoelec.

The indictment alleges that the defendants and their co-conspirators sought to unlawfully enrich themselves by making and concealing corrupt payments Motta Dominguez and Lugo Gomez in exchange for the award of contracts on behalf Corpoelec to Florida companies owned and controlled by the bribe-paying co-conspirators.

The indictment names two other men central to the plot: Luis Alberto Chacin Haddad of Miami and Jesus Ramon Veroes of Venezuela, both of whom reportedly pleaded guilty to conspiring to pay the bribes in exchange for the Corpoelec contracts.

The indictment explains that beginning in the second half of 2015, the co-conspirators unsuccessfully submitted bids to Corpoelec to obtain contracts to provide equipment. In early 2016, the co-conspirators allegedly met with the defendants to discuss and negotiate the award of contracts. Lugo Gomez allegedly explained that for every contract awarded by Corpoelec, the co-conspirators would be required to pay Lugo Gomez and Motta Dominquez kickbacks from the profits. The co-conspirators accepted the terms and were awarded the contracts. The co-conspirators inflated the contracts to increase their own profits and to fund the corrupt payments to the defendants.

Through the conspiracy, the three Florida companies were awarded over $60 million in contracts to supply equipment to Corpoelec. In exchange, the defendants received cash payments and wire transfers, including from a bank in the Southern District of Florida, totaling over $700,000. The indictment also cites over $20 million in transfers made by Corpoelec to bank accounts for the Florida companies located in the Southern District of Florida as being part of the conspiracy. The indictment identifies seven transactions the defendants allegedly knowingly transmitted from various foreign bank accounts to accounts held in the Southern District of Florida. Although Counts 2-8 of the indictment do not identify the source of the funds transferred, the descriptions in the conspiracy count suggest these were transfers from Corpoelec to the Florida companies owned by the co-conspirators.

Political Context

The same day the indictment was released U.S. Treasury Secretary Steven Mnuchin announced sanctions on Motta Dominquez and Lugo Gomez that will block all property and interests in property and any entities they own or control. The imposition of sanctions prohibit any dealings by U.S. persons that involve any of the two men’s property or property interests.

Motta was removed as the Minister in April following nationwide blackouts. According to reports, the Venezuelan government blames the U.S. for the outages on the U.S., claiming it sabotaged the nation’s largest dam, but “experts said it was more likely caused by years of neglect compounded by seasonal wind fires that blazed across a transmission line”

According to the Treasury statement, some of the equipment received as part of the Motta Dominquez/Lugo Gomez conspiracy was “incompatible with the Venezuelan electrical system, rendering them useless and contributing to the ongoing deterioration of the electrical system.” “As corruption ran rampant through Corpoelec, senior officials continued to exacerbate the ongoing mismanagement intertwined in the Venezuelan electrical infrastructure and ignored their responsibility to the Venezuelan people.”

“The illegitimate Maduro regime exploits the public trust by plundering Venezuelan assets, enriching themselves, and watching idly as basic public systems needlessly and catastrophically fail,” Secretary Mnuchin said in a statement. “Treasury will continue to target officials who exacerbate corruption at the expense of the Venezuelan people and knowingly fail to provide basic public service.”

Legal Significance

The FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business.   However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it.  Therefore, Motta Dominquez and Lugo Gomez could not be prosecuted for their conduct in soliciting or receiving bribes under the FCPA.

However, by using the money laundering statute to address the wire transfers centered in Florida which constituted the payments of the contracts being exchanged for the bribes, the DOJ was able to charge Motta Dominquez and Lugo Gomez for their corrupt acts as officials of the Maduro regime.

Given this tremendous advantage, the DOJ is likely to continue to use the money laundering statutes to pursue foreign corruption at the highest levels.

Copyright © by Ballard Spahr LLP

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About this Author

Jessica Case Watt, Ballard Spahr, Deleware attorney, Commercial Litigation, Mortgage Banking, Securities Enforcement and Corporate Governance Litigation
Associate

Jessica Case Watt is an associate in the Litigation department. Ms. Watt practices complex commercial litigation, with experience in cases involving breach of contract, fraud, and disputes related to lending and finance agreements. She has experience representing commercial lenders in pursuing foreclosure actions to judgment and sale in the State of Delaware.

Ms. Watt practices corporate litigation, including matters of corporate control, corporate governance, statutory and contractual disputes, statutory demands for inspection of corporate books and records, and breach of fiduciary...

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