U.S. Broker-Dealer CEO And Managing Director Plead Guilty In Manhattan Federal Court To Massive International Bribery Scheme
Senior Venezuelan Banking Official Received At Least $5 Million In Bribes In Exchange For Directing Business To U.S. Defendants
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, the Assistant Attorney General for the Criminal Division of the United States Department of Justice, announced the guilty pleas of BENITO CHINEA and JOSEPH DEMENESES , the former Chief Executive Officer and former Managing Director, respectively, of a United States broker-dealer (the “Broker-Dealer”), on felony charges arising from a conspiracy to pay bribes to Maria De Los Angeles Gonzalez De Hernandez (“Gonzalez”), who was a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (“BANDES”). CHINEA and DEMENESES, working with others, arranged the bribe payments to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. CHINEA and DEMENESES pled guilty today in Manhattan federal court before United States District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara stated: “In exchange for overseas trading business for their brokerage firm, Benito Chinea and Joseph Demeneses arranged millions of dollars in bribe payments to an officer at a state-run economic development bank of Venezuela. With their guilty pleas today, they are the latest defendants to answer for their roles in this massive international bribery conspiracy.”
Assistant Attorney General Leslie R. Caldwell said: “Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas. The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”
According to the allegations in the Indictment and other documents previously filed in Manhattan federal court:
Background on the Broker-Dealer and BANDES
At all times relevant to the charges, CHINEA was the chief executive officer and DEMENESES was a managing director in the Broker Dealer, which was headquartered in New York, New York, with offices in Miami, Florida. In 2008, the Broker-Dealer established a group called the Global Markets Group, which included DEMENESES, Lujan, and Clarke, 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 a BANDES official 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 BANDES a mark-up on purchases and a mark-down on sales.
The Bribery Scheme
From late 2008 through 2012, CHINEA and DEMENESES, together with three Miami-based Broker-Dealer employees, Ernesto Lujan, Tomas Alberto Clarke Bethancourt, and Jose Alejandro 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 commissions from trades with BANDES.
In order to conceal their conduct, CHINEA, DEMENESES and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts. In several instances, CHINEA personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.
As further alleged in court documents, as a result of the bribery scheme, BANDES quickly became the Broker-Dealer’s most profitable customer. As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend BANDES’s business. In response, DEMENESES and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds. CHINEA and DEMENESES agreed to use Broker-Dealer funds to reimburse DEMENESES and Clarke for these bribe payments. To conceal their true nature, CHINEA and DEMENESES agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.
CHINEA, 48, of Manalapan, New Jersey, and DEMENESES, 46, of Fairfield, Connecticut, each pled guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and to violate the Travel Act. Each defendant faces a maximum term of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. CHINEA and DEMENESES have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.
Each defendant also faces pending civil charges filed by the U.S. Securities and Exchange Commission.
Gonzalez, Clarke, Hurtado, and Lujan have also pled guilty in connection with the scheme.
Mr. Bharara praised Department of Justice’s Criminal Division and the Federal Bureau of Investigation for their work in the investigation. He also thanked the U.S. Securities & Exchange Commission for its assistance in this case.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
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 Senior Deputy Chief James Koukios 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.