Managing Partner Of U.S. Broker-Dealer Charged In Manhattan Federal Court With Participating In Massive International Bribery Scheme
Defendant Allegedly Participated In Scheme That Generated Broker-Dealer More Than $60 Million In Fees For Business Directed By A Senior Venezuelan Banking Official Who Was Allegedly Paid Over $5 Million In Kickback Payments
Preet Bharara, the United States Attorney for the Southern District of New York, Mythili Raman, the Acting Assistant Attorney General for the Criminal Division of the United States Department of Justice, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), today announced the arrest of ERNESTO LUJAN (“LUJAN”), a managing partner of a U.S. broker-dealer (the “Broker-Dealer”), on felony charges arising from a conspiracy to pay bribes to Maria De Los Angeles Gonzalez De Hernandez (“Gonzalez”), a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (“BANDES”). LUJAN, among others, allegedly arranged the bribe payments to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. LUJAN, 50, was arrested this morning in Wellington, Florida, where he resides and was presented in federal court in West Palm Beach, Florida.
On May 3, 2013, Gonzalez, along with two employees of the Broker-Dealer, Tomas Alberto Clarke Bethancourt (“Clarke”) and Jose Alejandro Hurtado (“Hurtado”) were arrested on separate charges relating to this bribery scheme. On May 6, 2013, the Government filed a civil forfeiture action in Manhattan federal court seeking the forfeiture of assets held in a number of bank accounts associated with the scheme, including several bank accounts located in Switzerland, and the forfeiture of several properties in the Miami, Florida, area related to Hurtado that were purchased with his proceeds from the scheme. That same day, the Court also issued seizure warrants for multiple bank accounts and a restraining order relating to those Miami properties.
Manhattan U.S. Attorney Preet Bharara stated: “From his perch as managing partner Ernesto Lujan allegedly engaged in a bribery scheme designed to drum up foreign trading business for his firm. Along with his alleged cohorts, three of whom were arrested last month, he pocketed millions from the alleged scheme which was executed through kickbacks to a Venezuelan government official and through money laundering.”
Acting Assistant Attorney General Mythili Raman said: “The huge bribes Mr. Lujan and others allegedly paid funneled millions to his firm and into his own pockets. Bribery corrupts markets, and this arrest – just the latest in the Department’s recent series of anti-corruption charges in various districts – is yet another demonstration that, at the end of the day, the real dividends bribe payors reap are criminal charges.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Lujan led a conspiracy to bribe a foreign government bank official to steer business to his firm. As previously alleged, much of this trading activity was conducted solely to generate fees for the firm. Lujan personally reaped millions in profits, and used Swiss bank accounts to conceal both the bribes and his own proceeds of the scheme.”
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against LUJAN.
According to the allegations in the Criminal Complaint unsealed today, and other documents filed in Manhattan federal court:
Background on the Broker-Dealer and BANDES
LUJAN, a managing partner of the Broker Dealer, which was headquartered in New York City, was the branch manager of its Miami offices. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included LUJAN, Clarke and Hurtado, and which offered fixed income trading services to institutional clients. One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance. The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding. Gonzalez, a BANDES official, oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.
The Bribery Scheme
From December 2008 through October 2010, LUJAN, along with Clarke, Hurtado, and Gonzalez, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer, including LUJAN, split the revenue the Broker-Dealer generated from this trading business with Gonzalez. During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES. Agents and employees of the Broker-Dealer, including LUJAN, Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.
To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places. For example, at least $9.5 million was transferred from the Broker-Dealer to a Swiss bank account controlled by Clarke, who in turn transferred at least $6.5 million to a Swiss bank account controlled by LUJAN. LUJAN then transferred at least $1.5 million of these proceeds to a Swiss bank account controlled by Gonzalez.
A chart containing the charges and maximum penalties LUJAN faces is attached below.
Mr. Bharara praised DOJ’s Criminal Division and the FBI for their work in the investigation. He also thanked the SEC for its assistance in this case and noted that the investigation is continuing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is also responsible for the forfeiture aspects of the case.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.