FCPAméricas Blog

How the U.S. Government Criminally Charges a Latin American Public Official

Author: Matteson Ellis

Last November, then Assistant Attorney General for the Criminal Division of the U.S. Department of Justice (DOJ), Lanny Breuer, told an audience at an FCPA conference: “If you are a foreign official, corrupt, and living in the United States, the U.S. Government will prosecute you.” This month the DOJ made public its criminal charges against a Venezuelan public official for bribery-related offenses. The official’s connection to the United States was even more tenuous than the hypothetical provided by Mr. Breuer. María de Los Ángeles González de Hernandez was not even living in the United States.

Mrs. González was the Vice President of Finance at Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (BANDES). BANDES operates under the direction of Venezuela’s Ministry of Finance. She headed the bank’s overseas trading activity. The U.S. Government charged her with corruption-related offenses. Mrs. González, 58 years old, was arrested this month in Miami and remains in custody. Criminal charges were also brought against the U.S. traders involved in the scheme.

The scheme. The Complaint and press release tell how, over the span of fourteen months, Mrs. González is alleged to have received at least $5 million in bribes in exchange for steering BANDES’s financial trading business to a U.S. broker-dealer firm. The broker-dealer would charge the bank a mark-up fee on purchases and a mark-down fee on sales. The traders would split the resulting revenue with Mrs. González in the form of monthly kickbacks that were often in six-figure amounts. Remarkably, at least two trades had no apparent business purpose at all. On the same day, the broker-dealer conducted two “round-trip” trades where it bought BANDES bonds and then immediately sold them back, making approximately $10.5 million from the bank in mark-ups while the bank was left with the same holdings. To transfer funds back to Mrs. González, the traders used an intermediary Panamanian corporation set up by Mrs. González as well as Swiss bank accounts.

Interestingly enough, the traders even falsified the size of their firm’s fees in their reports to Mrs. González to decrease the amount of kickbacks and retain more of the profit themselves. Mrs. González seems to be a criminal who was hoodwinked by other criminals. One DOJ official stated: “Their return on investment now comes in the form of criminal charges carrying the prospect of prison time.” An official of the FBI, who participated in the investigation, stated, “the defendants conspired to use Venezuela’s economic development bank as their personal piggy bank.”

Proceeding against a foreign official. How is such an action against a foreign official possible? For starters, doesn’t the FCPA deal with the bribe payer, not the bribe receiver? Mrs. González was actually charged with FCPA-related offenses like conspiracy to violate the Travel Act, substantive Travel Act violations, conspiracy to commit money laundering, and substantive money laundering violations. Unlike the FCPA, these laws can reach non-U.S. officials who are receiving bribes. The FCPA Professor has discussed other examples of where the U.S. Government proceeded against foreign officials for non-FCPA offenses, like the Haiti Teleco case.

Don’t basic notions of state sovereignty suggest that one country should not put another country’s public officials in jail? Wouldn’t sovereign immunity apply? The U.S. Government is unlikely to recognize sovereign immunity in situations where the foreign official is acting in her own personal capacity. In the BANDES case, it does not appear that Mrs. González was acting on behalf of the state. Instead, she was making decisions that padded her own bank account. Some of these actions brought greater costs to the Venezuelan state. As such, she does not appear to have been acting within the scope of her public sector job. Nor does she appear to have been following orders from any government superiors. In addition, such corrupt activity was most likely in violation of local Venezuelan law.

The BANDES case serves as a wake-up call to Latin American executives working at state-owned enterprises throughout the region. Like it or not, the U.S. Government has made its position clear. It will proceed against you if it has cause to do so. The DOJ is even building stronger infrastructure to do so – the DOJ recently launched the Kleptocracy Asset Recovery Initiative to seize assets of corrupt foreign officials. We are beginning a new chapter of international anti-corruption enforcement.

The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.

The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.

@2013 Matteson Ellis Law, PLLC

Matt Ellis

Post authored by Matt Ellis, FCPAméricas Founder & Editor

Categories: Anti-Money Laundering, Enforcement, FCPA, Foreign Official/Instrumentality, Haiti, State-Owned Enterprises, Venezuela

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3 Responses to “How the U.S. Government Criminally Charges a Latin American Public Official”

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