Five Charged by SEC in Venezuelan Fraudulent Bond Kickback Scheme
In June 12, 2013, the Securities and Exchange Commission (“SEC”) brought an action against an additional defendant for his role in a fraudueltn kickback scehme involving the payment of millions of dollars in bribes to a Venezuelan finance official in order to obtain the bond trading business of a state-owned Venezuelan bank, the Banco de Desarrollo Económico y Social de Venezuela (“BANDES”).
In its latest SEC action, the SEC charged Ernesto of Miami, the former head of the Miami office of Direct Access Partners. The four original defendants named in the SEC’s action last month were Tomas Alberto Clark Bethancourt, a resident of Miami and an executive vice president of broker-dealer Direct Access Partners (“DAP”), Iuri Rodolfo Bethancourt, a resident of Panama and presumed relative of Tomas Clarke, José Alejandro Hurtado, a naturalized U.S. citizen who lives in Miami and works in DAP’s back office, and Haydee Leticia Pabon, a resident of Miami and Hurtado’s wife.
According to the SEC action, the conspirators began working their scheme in October 2008, and continued until at least June 2010. BANDES was a new customer of DAP, having been brought in with the help of Hurtado. Hurtado acted as the intermediary between the brokerage and María de los Ángeles González de Hernandez, Vice President of Finance at BANDES.
In return for BANDES’s custom, González demanded large amounts of money. The SEC charges allege that the perpetrators went to great lengths to conceal payment of the kickbacks to González, using internal wash trades, routing some trades through another brokerage and back to them, and engaging in massive round trip trades to beef up their revenue. In January 2010, they and González arranged two round trips with BANDES as both buyer and seller. They cost BANDES a cool $10 million in fees to DAP. Some of that money went to González.
For their part, Clarke and Hurtado often told González that DAP’s fees were lower than was actually the case, and kept the difference for themselves.
Iuri Bethancourt’s role was to launder the bribes paid to González through the account of the Panamanian shell company he controlled. Haydee Pabon received fabricated finder’s fees in the amount of $8 million. All told, the amount of DAP’s fees was $66 million.
In its amended complaint, the SEC alleges that Ernesto Lujan, the head of DAP’s Miami office was fully aware of his employees’ shenanigans from the start. They SEC investigation revealed that his share of the loot was more than $11.5 million.
”These traders triggered a fraud that was staggering in audacity and scope,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “They thought they covered their tracks by using offshore accounts and a shadow accounting system to monitor their illicit profits and bribes, but they underestimated the SEC’s tenacity in piecing the scheme together.”
For now, only the SEC is involved in a civil action, but it would be surprising if this securities fraud and kickback scheme were to escape the notice of the Department of Justice.