August 20, 2019

August 20, 2019

Subscribe to Latest Legal News and Analysis

August 19, 2019

Subscribe to Latest Legal News and Analysis

Update: First Defendant Pleads and Agrees to Cooperate in $1.2 Billion Alleged Venezuelan Laundering Scheme

Professional Banker Described as “Door Opener” for Private Banking Clients and Alleged Co-Conspirators

As we have blogged, the United States Attorney’s Office for the Southern District of Florida is pursuing charges against eight individuals for allegedly conspiring to launder $1.2 billion embezzled from a Venezuelan state-owned oil company and other unlawfully-derived funds. On August 22, 2018, Matthias Krull, the first of those co-defendants, pled guilty for his role in the charged conspiracy. Krull, a German national and former high-ranking executive at Swiss bank Julius Baer who was based in Panama at the time of the alleged scheme, faces up to 10 years in prison according to the terms of the Plea Agreement but, due to his potential cooperation with authorities as reflected by paragraphs 10 to 12 of the Plea Agreement, may serve less.  The conduct of Krull illustrates the potentially key role of professionals in elaborate money laundering schemes.

While the original July 24, 2018 criminal complaint alleged that the eight defendants conspired to commit money laundering under 18 U.S.C. § 1956(h) and (a)(2) and engaged in interstate and foreign travel in aid of racketeering under 18 U.S.C. § 1952, Krull ultimately was charged on August 16, 2018 in an Information with a single count for conspiracy to commit money laundering, in violation of Section 1956(h) and 18 U.S.C. § 1957, the “spending” money laundering statute.  The fact that the conspiracy charge incorporates a Section 1957 violation means that Krull’s statutory maximum sentence is 10 years, as opposed to 5 years for a more general criminal conspiracy charge under 18 U.S.C. § 371, or 20 years for a substantive money laundering charge under Section 1956.

As described in our prior post, the over-arching scheme involved the defendants allegedly setting-up a sham lending arrangement between a Hong Kong shell company and the Venezuelan oil company, whereby the shell company would, through a series of transactions, secure the right to receive approximately 510 million Euros for retiring a 35 million Euro loan to the oil company. The transactions effecting the embezzlement were overseen and approved by unidentified Venezuelan officials who allegedly received kickbacks in exchange for their support. Those proceeds were then laundered through numerous international financial transactions, including fraudulent investment schemes and American real estate investment.

Along with the Plea Agreement, the government filed a Factual Proffer that sets forth the factual basis for Krull’s plea. Julius Baer employed Krull as a Managing Director and Vice Chairman whose primary role was attracting private banking clients to the bank, particularly from Venezuela. Referred to in the Factual Proffer as a “door opener” for these clients, Krull maintained banking relationships with several of the other co-conspirators for several years prior to the events giving rise to this case.

In 2016, a co-conspirator engaged Krull to manage the laundering of his share of the oil company embezzlement proceeds – approximately $260 million. Part of the scheme involved routing approximately $184 million of that tranche of cash to “Los Chamos” – described in the Factual Proffer as “the stepsons of Venezuelan Official 2″ and identified elsewhere as the stepsons of Venezuelan President Nicolas Maduro. To facilitate the laundering, Krull relied on various forged and falsified documents intended to give the impression the funds were from legitimate sources. He then engaged with other American and Venezuelan co-conspirators to funnel those proceeds through American real estate ventures and a shell investment fund, which made deposits into an unidentified American banking institution.

In the wake of Krull’s arrest and guilty plea, Julius Baer reportedly has launched an internal investigation into these events.

Copyright © by Ballard Spahr LLP

TRENDING LEGAL ANALYSIS


About this Author

Terence Grugan, Attorney, Ballard
Attorney

Terence M. Grugan is an associate in the firm's White Collar Defense/Internal Investigations and Commercial Litigation Practice Groups. In his white collar practice, Terence represents individuals and entities who are targets, subjects, or witnesses in criminal, regulatory, or administrative government investigations, including investigations conducted by the Department of Justice, Internal Revenue Service, Securities and Exchange Commission, state attorneys general, local, state, or federal inspectors general, and local law enforcement. Terence has defended clients from...

215-864-8320