Three Former Broker-Dealer Employees Plead Guilty In Manhattan Federal Court To Bribery Of Foreign Officials, Money Laundering, And Conspiracy To Obstruct Justice
Background On The Broker-Dealer, BANDES, And Banfoandes
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 (“DOJ”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that ERNESTO LUJAN, JOSE ALEJANDRO HURTADO, and TOMAS ALBERTO CLARKE BETHANCOURT pled guilty in Manhattan federal court to conspiring to violate the Foreign Corrupt Practices Act (the “FCPA”), to violate the Travel Act, and to commit money laundering, as well as substantive counts of these offenses. These charges relate to a scheme to bribe a foreign official named Maria de los Angeles Gonzalez de Hernandez (“Gonzalez”) at Banco de Desarrollo Económico y Social de Venezuela (“BANDES”), a state economic development bank in Venezuela, in exchange for receiving trading business from BANDES. LUJAN, HURTADO, and CLARKE each also pled guilty to an additional charge of conspiring to violate the FCPA in connection with a similar scheme to bribe a foreign official employed by Banfoandes (the “Banfoandes Foreign Official”), another state economic development bank in Venezuela, and to conspiring to obstruct an examination by the U.S. Securities and Exchange Commission (“SEC”) of the New York-based broker-dealer (the “Broker-Dealer”) where all three defendants had worked, to conceal the true facts of the Broker-Dealer’s relationship with BANDES. LUJAN and CLARKE entered their guilty pleas yesterday before U.S. Magistrate Judge James C. Francis, IV, and HURTADO pled guilty today, also before Judge Francis.
According to the Informations against LUJAN, HURTADO, and CLARKE filed this week, the allegations in the previously filed criminal Complaints, statements made during the plea proceedings, and other documents filed in Manhattan federal court:
At all times relevant to the charges, LUJAN, CLARKE, and HURTADO worked or were associated with the Broker-Dealer, principally through 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 was an official at BANDES and 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 Broker-Dealer also conducted business with Banfoandes, another state development bank in Venezuela that, along with its 2009 successor, Banco Bicentenario, operated under the direction of the Venezuelan Ministry of Finance. Banfoandes acted as a financial agent of the Venezuelan government in order to promote economic and social development by, among other things, offering credit to low-income Venezuelans. The Banfoandes Foreign Official was responsible for some of Banfoandes’s foreign investments.
The Defendants’ Bribery Schemes
From early 2009 through 2012, LUJAN, CLARKE, and HURTADO, 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 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. Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades. Specifically, Gonzalez received millions in kickback payments from Broker-Dealer agents and employees.
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 instance, LUJAN, CLARKE, and HURTADO used accounts they controlled in Switzerland to transfer funds to an account Gonzalez controlled in Switzerland. Additionally, HURTADO and his spouse received substantial compensation from the Broker-Dealer, portions of which HURTADO transferred to an account held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland. HURTADO also sought and received reimbursement from Gonzalez for the U.S. income taxes he had paid on money that he used to make kickback payments to Gonzalez. LUJAN and CLARKE also derived substantial profit from their roles in the bribery scheme.
The Defendants’ Efforts to Obstruct the SEC Examination
Finally, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011 the SEC’s examination staff made several visits to the Broker-Dealer’s offices in Manhattan. In early 2011, LUJAN, CLARKE, and HURTADO discussed their concern that the SEC was examining the Broker-Dealer’s relationship with BANDES and asking questions regarding certain emails and other information that the SEC examination staff had discovered. LUJAN, CLARKE, and HURTADO agreed that they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including deleting emails. LUJAN, CLARKE, and HURTADO then, in fact, deleted emails. Additionally as part of this effort to obstruct the SEC examination, CLARKE lied to SEC examination staff in response to an interview question about his relationship to an individual who had received purported foreign associate payments relating to BANDES.
In a related scheme, from 2008 through mid-2009, LUJAN, CLARKE, and HURTADO paid bribes to the Banfoandes Foreign Official, who, in exchange, directed Banfoandes trading business to the Broker-Dealer.
LUJAN, 50, CLARKE, 43, and HURTADO, 38, each pled guilty to the same six offenses. A chart containing the charges and the maximum penalties they carry is attached. Sentencing for Lujan and Clarke is scheduled for February 11, 2014, before U.S. District Judge Paul G. Gardephe. Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer, Jr. on March 6, 2014.
Gonzalez was charged in a criminal Complaint and arrested on May 3, 2013, in connection with the BANDES bribery scheme. The charges against Gonzalez are merely accusations and she is presumed innocent unless and until proven guilty.
Mr. Bharara praised DOJ's Criminal Division’s Fraud Section and Office of International Affairs 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 and the Fraud Section of the DOJ Criminal Division. Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Assistant Chief James Koukios and Trial Attorney Maria Gonzalez Calvet are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is 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.