U.S.

Said to Be Closing In on PDVSA-Linked Seizures, Charges

Ben Bartenstein
Tiffany Kary
Alan Katz
October 25, 2016 4:30 AM VET Updated on October 25, 2016 10:00
AM VET

$11 billion may have been siphoned from Venezuela oil firm

20 homes, some in Florida and Texas, likely to be seized

Federal prosecutors are preparing to charge several individuals and confiscate

their property over the alleged looting of Venezuelas state oil company in
what may amount to one of the biggest asset seizures in U.S. history.

Three people familiar with the case say the government has been investigating
at least a dozen Venezuelans and is expected to file charges in Houston against
a few of them as soon as next month. Those on the list, including former
executives of Petroleos de Venezuela SA, known as PDVSA, are suspected of
having taken bribes from middlemen to award contracts at inflated prices,
helping to siphon more than $11 billion out of the country.

All three people spoke on condition of anonymity because the investigation is

ongoing and sensitive due to its impact on U.S. foreign policy.

The government has set its sights on a number of U.S. assets, including about
20 residential properties, some in West Palm Beach and the Houston suburbs.
Switzerland has seized $118 million in assets from Swiss banks related to the
matter and sent $51 million to U.S. authorities, Bloomberg reported on
Tuesday.

Venezuelas Congress Accuses

Venezuelas opposition-run congress is separately seeking to recover $11.3
billion that went missing from PDVSA between 2004 and 2014 while Rafael
Ramirez, currently Venezuelas ambassador to the United Nations, was
company president. It seeks to hold him politically responsible.

Ramirez has rejected the congressional accusations as lies.

Investigators are also looking at the dealings involving PDVSA and a number
of companies, including Pratt & Whitney, General Electric Co. and Rolls
Royce Holdings Plc, as well as ProEnergy Services, a Missouri-based firm,
two of the people said. The prosecutors have been tracking money that flowed
through Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co., they
added.

A Pratt & Whitney spokesperson declined to comment and noted that its
power systems business, which operated in Venezuela, was divested in June
2013 and became PW Power Systems. PW Power Systems did not respond to
requests for comment. The other three companies declined to comment, as did
all three banks and PDVSA.

The banks handled transactions through accounts held by the individuals who
transferred some of their gains out of the country, two of the people said.
Money-laundering controls may not have caught transactions done through
shell companies, they said.

Cocaine Trafficking

The people under investigation include current Venezuelan government

officials, prominent businessmen and individuals suspected of involvement
with cocaine trafficking, two of the people said.

Homeland Security Investigations, the Drug Enforcement Administration and

the FBI are all involved in the investigation, which has been under way for at
least three years and looks at activity going back to 2005.

The FBI declined to comment, as did the DEA, the Justice Department,
Homeland Security Investigations and the U.S. Attorneys office in Houston.

The investigation comes at a time when the cost of corruption is vividly

apparent in Venezuelas crumbling economy. A former finance minister, Jorge
Giordani, has said that as much as $300 billion was embezzled from
Venezuela in the last decade through high-level corruption. Meanwhile,
hunger is spreading in a country that was once one of the worlds wealthiest.
Struggling to avoid default, PDVSA on Monday reached an agreement with
some creditors to push back bond maturities.

Confrontation with Maduro

In response to the national crisis, the opposition has sought a voter signature
drive aimed at recalling President Nicolas Maduro. Last week the National
Electoral Council, which is run by Maduro loyalists, suspended that effort. On
Sunday, the opposition accused the president of carrying out a coup and
vowed to try to replace key figures on the Supreme Court and electoral
council and appeal to the International Criminal Court.

The U.S. has a strong legal interest in the case because the allegedly ill-gotten
money passed through its banks and was used to buy property here. The
people under investigation have been linked to billions of dollars of gains,
much of which was transferred to offshore accounts in Panama, the people
said.

The U.S. would seize homes and properties -- many of them worth tens of
millions each -- as well as private jets and other assets to create a fund that
would eventually be returned to the Venezuelan government after a democratic
election, one of the people said.

Ricardo Hausmann, a Venezuelan economist at Harvard who would like to see

the current government replaced, said U.S. leadership in this area could prove
important.

Devastating Political Effect

If the U.S. were to say, Weve identified billions of dollars, it would have a
devastating political effect at home with Venezuelas current government, he
said. Washington would also earn goodwill if it later returned any stolen funds,
he added.

Javier Corrales, a political scientist at Amherst College, said that in dealing

with Venezuela the U.S. has made a point of sanctioning individuals rather
than the government as a whole. Some within law enforcement have
nonetheless alleged that the Obama administration is dragging its feet in
pursuing Venezuelan officials because of its desire to avoid a political and
economic implosion there and to help negotiate a soft landing from the current
crisis.

Corrales said that while political interference may play a role in the sealing of
some indictments, the U.S. government largely lets its justice system do its
work.

PDVSAs U.S. affiliate that handles international purchasing is in Houston,

where the U.S. recently prosecuted a case which investigators say resembles
this one. Roberto Rincon-Fernandez, a Venezuelan national living there, took
part in a $1 billion bribery scheme to secure contracts with PDVSA. He
pleaded guilty to two counts, including conspiracy to violate corruption laws.

Ever since the leftist party of Hugo Chavez was elected in 1998, Venezuela
has allied itself with historic opponents of the U.S., including Cuba and Iran.
The U.S. accuses Venezuela of allowing itself to be used as a route for illegal
drugs and of failing to adhere to international counter-narcotics agreements.

Two nephews of President Maduro arrested in Haiti are being held in the U.S.
on charges that they were involved in a drug-trafficking ring. They have
denied it. A State Department official said they are cooperating with federal
investigators.