Venezuela’s Business Elite Face Scrutiny in $1.2 Billion Money Laundering Case

As Venezuela’s oil-based economy continues to crumble, a politically connected class of businessmen with financial ties to Miami has grown fabulously wealthy from energy deals with the socialist government. Among the Venezuelan upper crust who have made fortunes during the Bolivarian revolution: Alejandro Betancourt.

Without any experience in the energy industry, Betancourt co-founded a power company called Derwick Associates a decade ago that has reaped billions of dollars in government contracts for a string of new plants in Venezuela — drawing barbs about being overpaid for the projects and having cozy relationships with top politicians.

With his windfall, Betancourt not only expanded his business into the United States but also bought a penthouse apartment in Manhattan’s Olympic Tower, along with a castle estate and other luxury properties in Spain, according to court documents.

In Miami, Betancourt has surfaced in a massive money laundering case that charges his cousin and several of the so-called Boliburgueses — young , well-educated entrepreneurs close to the Venezuelan regime — with conspiring to bribe government officials to approve a loan scheme to embezzle $1.2 billion from the country’s national oil company during the presidency of Nicolas Maduro.

Although Betancourt is not identified by name in the federal case filed in Miami, several sources familiar with the widening investigation say that he is “Conspirator 2” among the dozen unnamed Venezuelan conspirators and officials listed in a criminal complaint that details the alleged international racket.

Betancourt, 39, and some of the other unidentified conspirators and officials could be added as defendants to an indictment, according to sources familiar with the federal case. So far, nine defendants have been charged in the Miami case, with two pleading guilty and one awaiting trial. The remaining six defendants, including Betancourt’s cousin, Francisco Convit Guruceaga, are considered fugitives by the U.S. Attorney’s Office in Miami.

Betancourt’s attorney, prominent Miami lawyer Jon Sale, issued a statement Friday denying his involvement. “My client denies any wrongdoing,” Sale said.

In Miami, Houston and New York, several corruption cases have been pursued by the Justice Department alleging bribery, embezzlement and money laundering activities in Venezuela and the United States that have taken a devastating toll on Venezuela’s economy. The country has suffered the loss of billions of dollars embezzled from its state-owned oil company, Petroleos de Venezuela S.A, or PDVSA, mainly because of green-palming between government officials and the country’s elite business class, federal authorities say.

Russell Dallen, a lawyer and investment manager, spoke about foreign corruption at the Latin America Summit on Friday in Miami, spotlighting the prosecution of the PDVSA money-laundering case and others. Dallen, head of Caracas Capital in Miami, said Venezuela’s rampant corruption has caused dramatic declines in oil production and income over the past two decades, fueling hyperinflation, widespread poverty and the exodus of more than four million people.

“Instead of reinvesting the money and rebuilding the country, it was all stolen through these currency-exchange and loan schemes,” said Dallen, pointing out that Venezuela was once among the biggest oil producers in the world.

“The Venezuelan people are starving,” he added. “The [minimum wage] is $5 a month, up from $2. That’s all they make — it’s less than Haiti, less than Cuba. That’s why people are voting with their feet and leaving the country.”

In the Miami case, federal court records say that “Conspirator 2” was among the ring of Boliburgueses and government officials who received hundreds of million of dollars in late 2014 from PDVSA as payment for a loan that they made to the state-owned oil company. A criminal affidavit alleges the ring used a shell company to loan $42 million worth of bolivars and then got repaid in euros at the government’s favorable exchange rate. That currency exchange transaction instantly multiplied the loan repayment to the equivalent of $600 million.

Betancourt’s cousin, Convit, who also sits on the board of directors of Derwick’s Oil and Gas Corp., is the lead defendant mentioned with Conspirator 2 in the introduction to the complaint affidavit.

Betancourt’s chief financial officer at Derwick, Orlando Alvarado, is listed as “Conspirator 4” in the Miami case and also as an associate of his cousin, Convit. According to the affidavit, Conspirator 4 discussed a plan in 2016 with one of the ring’s leaders to create “fake” foreign currency exchange contracts to make the embezzlement of the national oil company’s funds look legitimate so the proceeds could be transferred to Convit and several others, including Conspirator 2 and Venezuelan officials accused of accepting bribes.

“Conspirator 4 [Alvarado] suggested a meeting with everyone who has ‘an interest’ to sort things out and fix ‘the papers’ before things get bad when it is too late,” the affidavit says.

The close relationship between Convit, Betancourt and Alvarado raises questions about what Betancourt knew of the alleged loan scheme at Venezuela’s state-owned oil company and the flow of laundered money. The detailed affidavit, however, does not provide evidence of Betancourt’s knowledge of the illicit PDVSA loan scheme. Nor does it provide proof, such as a bank record or wire transfer, showing he was aware of the source of the laundered money he allegedly received.

According to the affidavit filed in July of last year, PDVSA repaid the ring’s loan to a shell company called Rantor Capital, transferring the $600 million to Portmann Capital Management in Malta. The oil company’s loan repayment was eventually turned over to another shell company, Eaton Global Services Limited, set up in Hong Kong, which was controlled by the Venezuelan leaders of the money-laundering conspiracy, federal prosecutors say.

The $600 million windfall was then divided up among the group of wealthy Venezuelan businessmen, the three stepsons of Maduro and PDVSA officials, according to an email obtained by agents with Homeland Security Investigations and sources familiar with the criminal case. The president and his stepsons — Yosser Gavídia Flores, Walter Gavídia Flores and Yoswal Gavídia Flores — are under investigation in the Miami case, sources said.

According to the affidavit, here is how the government funds were distributed in in late 2014 and early 2015:

▪ $272.5 million went to Raul Gorrín, the Venezuelan tycoon who owns a Caracas TV network, insurance company and other businesses. He has not been charged in the Miami case, but is considered a main suspect in the federal investigation. In turn, Gorrín kept about $72.5 million for himself — wiring some money to pay for aviation, yacht and brokerage services in Miami — and gave the balance, $200 million, to Portmann Capital Management for the benefit of Maduro’s three grown stepsons from his marriage to Cilia Flores.

▪ That account was set up for the stepsons in the name of a “straw” representative, Mario Enrique Bonilla Vallera, a Venezuelan businessman who owns a handful of Florida companies with addresses linked to four multimillion-dollar homes in the exclusive Cocoplum neighborhood of Coral Gables. Bonilla has been charged in the money-laundering indictment, but remains at large.

▪ $272.5 million also went to Convit and Conspirator 2. Of that total, $94 million was distributed to Pedro Binaggia, an attorney and businessman who was tasked to launder millions of dollars from Venezuela to Europe and the United States. (In 2016, Binaggia became a confidential source for Homeland Security Investigations out of fear that he would get caught laundering funds.)

▪ Binaggia, using Deltec Bank in the Bahamas, redistributed about $20 million to: Carmelo Urdaneta Aqui, former legal counsel for the Venezuelan Ministry of Oil and Mining; Abraham Edgardo Ortega, a former director of finance at PDVSA; Jose Vicente Amparan Croquer, described as a professional money launderer, and three other unnamed Venezuelan conspirators with ties to the state-owned oil company.

Those three are Victor Eduardo Aular Blanco, a former PDVSA vice president of finance who authorized the state-owned oil company’s loan with the ring; Alvaro Ledo Nass, a former PDVSA general counsel, and his lawyer-brother, Adolfo Ledo Nass, according to sources familiar with the investigation.

The remaining funds were absorbed by the cost of the initial loan to the oil company and Portmann Capital’s charges related to the transaction.

Significantly, some of Venezuela’s embezzled money was funneled through shell companies into fabricated investment funds, U.S. banks and South Florida luxury real estate, forming the foundation for the federal money-laundering case in Miami. Gorrin, who was close to the late Venezuelan President Hugo Chavez as well as Maduro, invested tens of millions of dollars in Cocoplum and in luxury condominiums in Miami and Manhattan.

The news media in Venezuela and the United States have focused on Gorrin because of his high profile in business and political circles. Although he has not been charged in the Maduro-era money laundering case, Gorrin has been indicted in a similar $1 billion bribery and embezzlement scheme involving the former Venezuelan treasurer, Alejandro Andrade, in the Chavez administration. Andrade, who cooperated with federal authorities, has already pleaded and begun a 10-year prison sentence..

Betancourt, though less well known, exerts tremendous influence in Venezuela as well. A graduate of Suffolk University in Boston, Betancourt founded Derwick a decade ago with Pedro Trebbau Lopez, the energy company’s vice president. (Trebbau has not been implicated in the ongoing Venezuelan kleptocracy case in Miami.) Betancourt and Trebbau made immediate inroads with the Chavez administration as it looked for private partners in the oil and energy industries.

Ever since, Derwick has been surrounded by controversy. At times, the company has been accused of corruption for obtaining huge energy construction contracts from the Venezuelan government without having the required know-how. The company has also been accused of overcharging for the installation of used and inadequate equipment.

According to a 128-page report on the energy sector written by ONG Transparencia Venezuela, the local chapter of Transparency International, Derwick was awarded 11 construction contracts worth $2.9 billion, which was overpriced by an average of 162 percent.

José Aguilar, an engineer who was tasked with investigating Derwick for the Wall Street Journal, said the company records he reviewed suggests that it charged the Venezuelan government between $2 billion and $2.2 billion for the 11 projects — work that could have been done for between $1.3 billion and $1.4 billion.

“There was at least $800 million in overbilling,” Aguilar told el Nuevo Herald, noting the company hired inexpensive contractors to do much of its work.

But a study written by a professor at the Simon Bolivar University in Caracas commended Derwick’s work, saying it was one of the few government energy contractors that actually completed their plants within budgets.

But not all of Derwick’s plants came online, and at least one never produced electricity, Aguilar said. “The output of all these plants has been traditionally poor,” he said.

Derwick’s rapid rise led to confrontations with a leading financial institution, Banco Venezolano de Credito, which adopted an anti-Chavez stand and accused the energy company of being in league with the president. The rivals’ accusations sparked defamation lawsuits, with Derwick firing the first salvo with a libel suit in Miami.

Then, Otto J. Reich, a former ambassador to Venezuela and diplomat in three Republican administrations, was hired by the Venezuelan bank to take on Derwick in a public relations war. Reich himself ended up suing Betancourt and other Derwick officials in a libel case filed in New York federal court, accusing them of paying bribes to Venezuelan government officials. Reich’s suit against Betancourt, Derwick’s CEO, and its vice president, Trebbau, was dismissed. After the dismissal, Reich reached a confidential settlement with a third defendant in 2016.

Derwick’s Betancourt and Alvarado have been collaborating on energy- and oil-related business deals for years.

Betancourt and Alvarado made headlines in 2015, when they became major shareholders in a Panama-based company called O’Hara that sought to take control of a Canadian oil company, Pacific Rubiales, which ran some of Colombia’s largest oil fields.

According to press reports, O’Hara joined with other investors to acquire about 20 percent of Pacific Rubiales’s shares, establishing the group as the company’s largest shareholders. But Betancourt’s investment push — along with his becoming a member of Pacific Rubiales’ board — led to strained relations with the company’s original shareholders.

Facing imminent bankruptcy amid falling oil prices, the Canadian oil company was sold to another investment group in an emergency transaction — but Betancourt, Alvarado and other investors lost millions in the end.

Betancourt and Alvarado continue to face potential trouble as they come under scrutiny in the Miami money-laundering case. It is moving along, despite the absence of six defendants who are at large in Venezuela and possibly elsewhere.

Matthias Krull, an international banker who catered to mega-rich Venezuelans including Gorrin, pleaded guilty soon after his arrest in July of last year and was sentenced to 10 years in prison. Krull admitted that he was retained by Gorrin to help launder some of the Venezuelan ring’s $600 million from Europe to the United States in 2016, including efforts to move $200 million through straw representatives for Maduro’s three stepsons..

But Krull has been allowed to remain free on a bond in Miami because of the value of his cooperation with the U.S. Attorney’s Office, according to his lawyer, Oscar S. Rodriguez.

Krull, the German-born son of a Lutheran pastor who was raised in Venezuela and educated in Switzerland, was based in Panama as a banker for the Swiss bank Julius Baer before his arrest. According to court records, he has helped investigators understand the complex web of relationships between the defendants and other suspects in the huge money laundering case.

“Mr. Krull’s value actually comes from the fact that he has been a banker in Venezuela … for a long time,” prosecutor Michael Nadler said in September while alerting a federal judge that he would be recommending a sentence reduction for Krull when he surrenders in March. “The amount of people that he has put us in contact with … is large.”

Abraham Edgardo Ortega, a former executive director of financial planning at PDVSA, also pleaded guilty a year ago to accepting millions of dollars in bribes that were secretly wired to U.S. and other financial institutions with the assistance of a Miami investment manager and others.

Ortega, who worked at PDVSA for more than a decade, admitted he used his official role to give “priority” status to Venezuelan companies that did business with the government so they could tap into its vast oil income to make overnight fortunes through loan and currency exchange schemes. He has been free on bond while cooperating with authorities and still awaits sentencing.

In February, Miami investment manager Gustavo Hernandez Frieri faces trial on charges of helping launder at least $12 million in bribery payments to Ortega. Hernandez’s alleged role was to put that money into a fake mutual fund so that it looked legitimate and then launder it into U.S. banks for a fee.

Hernandez, who lives in the exclusive Bay Point neighborhood of Miami and ran his business from a Brickell Avenue office, remains free on bond. Nadler, the prosecutor, indicated in court that Hernandez may not go to trial because he and his attorney Michael Pasano, are “in discussions about pleas” and that “the terms are still being worked out.”

https://www.miamiherald.com/news/local/article236793383.html

British Columbia’s money laundering is an emergency. The public deserves an inquiry.

By David Moscrop

In June 2018, former Royal Canadian Mounted Police officer Peter German released his report into money laundering in British Columbia. His independent review found that more than $75 million (or 100 million Canadian dollars) had been laundered through the province’s casinos. Canada’s westernmost province is home to about 4.8 million people, so that’s a hefty sum per capita.

In January, we learned that German’s figure was probably low — very, very low — given that an international report put the total amount laundered at more than 1 billion Canadian dollars per year. (The Canadian government knew this, evidently, but didn’t share with British Columbia in the summer.) The new report also includes details about sources of gangsterism not found in the German report. Now, British Columbia is undertaking two parallel processes to better understand what’s happening: a second German report, this time focused on real estate, horse racing and luxury vehicles, and a Department of Finance review.

All of that is perfectly fine — and perfectly inadequate.

Wise and wily governments survive in the long run because they can anticipate and manage crises. Journalist John Ibbitson calls it the “Rhodes Maxim,” citing Paul Rhodes, a former Progressive Conservative press secretary in Ontario, who once told him that the government he served handled controversies by asking itself “How will this end?” and then going there. Smart.

The maxim comes to mind today, with demands in British Columbia for a public inquiry into money laundering in the style of Quebec’s 2011 Charbonneau Commission, which probed public works corruption. That commission’s findings led to millions of dollars in fines, the resignation of politicians and a handful of high-profile arrests — alongside 60 reform recommendations. British Columbia’s largest union, the Government and Service Employees’ Union, is leading the call for a deep dive into the dark cave of misdeeds that hide links to fentanyl trafficking, out-of-control real estate prices and, almost surely, corrupt, complicit and incompetent public officials past and present.

As public pressure mounts on the government to launch an inquiry, the city of Vancouver — a central site for money laundering — has joined the call, as has Richmond, B.C., and the province’s capital city, VictoriaSo has the B.C. Green Party, whose support is critical for the government in the legislature. British Columbians already overwhelmingly support the idea, with 76 percent in favor and 73 percent expecting that an inquiry would expose the truth about what’s been going on in the province’s shadows for all these years — and what it has cost British Columbia in dollars, reputation (the scheme has become known as the Vancouver model), real estate prices, cost-of-living challenges and even lives (money laundering is linked to fentanyl trafficking, which has killed thousands in the province since 2012).

The entire thing is an emergency. Recently, a federal case — known as the E-Pirate investigation — related to money laundering in British Columbia resulted in stayed charges when the RCMP botched the case by exposing the identity of an informant. The investigation reads like something out of a crime novel. As investigative journalist Sam Cooper, perhaps the top journalist on this file, summarized it, “The E-Pirate investigation found loan sharks allegedly connected to drug-traffickers in China used legal and illegal Metro Vancouver casinos to wash drug cash, helping ultrawealthy high-rollers from China buy Vancouver real estate, and fund fentanyl imports into Canada.”

The truth must come out. And it looks like there’s lots to out.

So far, B.C. Premier John Horgan has been noncommittal and prone to temporizing. That’s unwise. He cites cost, time and existing fact-finding efforts as reasons to wait, as well as concerns that such an inquiry could interfere with developing prosecution efforts.

Please. A wide-ranging, long-term commission is critical to exposing the truth and rooting out corruption in the province. And it’s well worth the money (as a member of the Charbonneau Commission has said) — it might even pay for itself in fines and funds saved through reforms. Moreover, findings from a commission, which can compel witnesses to appear before it and require them to testify under oath, can be used in prosecutions. Meanwhile, every day without an inquiry is an extra day for thugs and crooks to get away with illicit acts that harm citizens and residents of the province.

The public is tired of waiting and already deeply suspicious of the province after years of inadequately addressing money laundering and its attendant issues under the previous government. Now, Canada and the world are watching and waiting. The premier and cabinet ought to recognize this fact now and follow the Rhodes Maxim by starting out where this issue will inevitably end and saving everyone the time, energy and frustration from the political posturing that will precede an eventual capitulation.

The province, first under the Liberals and now the New Democrats, has already wasted too much time waiting to get serious about organized crime. The delay is undermining governance in the province and destroying the lives of innocent people. Everyone knows what the right thing to do is. All that’s left is to do is get to it.

Democrats are planning to grill Michael Cohen about Trump Organization money laundering

By Travis Gettys

Michael Cohen’s testimony has already set off bombshells, based on a prepared statement he will deliver to the House Oversight Committee, but Democrats plan to pursue another area that hasn’t yet drawn as much attention.

The longtime Trump Organization lawyer will tell lawmakers the president knew about Roger Stone’s contacts with WikiLeaks and spoke with his son about an infamous meeting with a Russian attorney promising dirt on Hillary Clinton, but NBC News reporter Heidi Przybyla said Democrats are also interested in Trump’s shady business dealings.

“Beyond that, Democrats want a lot more, and they want to delve deep into this issue of money laundering, not just with Russia but other potential foreign countries,” Przybyla told MSNBC’s “Morning Joe.”

“There was a story that maybe didn’t get a lot of attention last year in February,” she continued, “about a Trump Tower last year in Panama, where the South Americans were essentially trying to kick out Trump business officials. They saw them going into a room with documents, and they heard a shredder going.”

“Why is that important?” Przybyla added. “Democrats are going to dig into this whole notion how the Trump Organization operates with these shell companies, which are supposed to be investments, and a lot of these individuals and foreign countries think are going to be investment but actually turn out to be shell companies potentially used for money laundering.”

 

US Political Activist Linked to Russian Agent Charged with Money Laundering, Fraud

Reuters

A conservative U.S. political activist romantically linked to admitted Russian agent Maria Butina has been indicted by a federal grand jury on wire fraud and money laundering charges, the U.S. Attorney’s Office in South Dakota said on Wednesday.

Paul Erickson, 56, was indicted on 11 counts of wire fraud and money laundering on Tuesday and pleaded not guilty to the charges in an appearance before U.S. Magistrate Judge Mark Moreno, the office said in a statement. Erickson’s attorney did not immediately respond to a request for comment.

Erickson is a well-known figure in Republican and conservative circles and was a senior official in Pat Buchanan’s 1992 Republican presidential campaign.

He was romantically linked to Butina, a 30-year-old native of Siberia, who pleaded guilty in December to conspiracy.

Butina admitted working with a top Russian official to infiltrate the powerful National Rifle Association gun rights group and to make inroads with American conservatives and the Republican Party as an agent for Moscow.

Butina, a former graduate student at American University in Washington, had publicly advocated for gun rights. She was the first Russian to be convicted of working to influence U.S. policy during the 2016 presidential race.

Erickson’s indictment did not specifically refer to Butina by name, but it indicates he made a payment of $8,000 to an “M.B.” in June 2015 and another payment of $1,000 to “M.B.” in March 2017. The indictment also indicates he paid American University $20,472.09 in June 2017.

The indictment against Erickson alleges that between 1996 and 2018, Erickson made “false and fraudulent representations” to people in South Dakota and elsewhere about his business schemes in an effort to convince potential investors to give him money, the U.S. Attorney’s Office said.

Erickson owned and operated Compass Care Inc, Investing with Dignity LLC, and an unnamed venture to develop land in the Bakken oilfields in North Dakota, the U.S. Attorney’s Office said.

He faces a maximum penalty of 20 years in prison on each count as well as possible fines, the U.S. Attorney’s Office. He was released on bond, and no date has been set for a trial.

This is the world’s “money-laundering paradise”

By Kevin Sun

Everything’s bigger in Dubai. Home to the world’s tallest building since 2010, the emirate’s real estate industry could also be one of the world’s largest money laundromats.

Transparency International, the anti-corruption group behind the annual Corruption Perceptions Index (CPI), has now joined the chorus of voices decrying the city-state’s weak regulations and lax enforcement, according to Forbes.

With the release of its latest CPI results, Transparency International singled out Dubai for special attention in its summary for the Middle East region, citing investigations from the Organized Crime and Corruption Reporting Project and the Washington-based Center for Advanced Defense Studies.

“Dubai has become a money laundering paradise, where the corrupt and other criminals can go to buy luxurious property with no restrictions,” said the report.

The United Arab Emirates, of which Dubai is the largest city and second-largest state, was ranked as the “least corrupt” country in the Middle East and Northern Africa, mainly because of efficient public administration and a high level of human development. Other countries in the region, like war-torn Syria, Yemen and Libya, were at the bottom of the worldwide CPI rankings.

Of course, Dubai is far from the only global city where real estate has become a conduit for dirty money. Malaysia’s infamous 1MDB scandalinvolved a number of NYC properties, and efforts to improve transparency in the U.S. have been stymied by political infighting.

Transparency International also notes that the CPI does not really measure money laundering. Denmark, the “least corrupt” country in this year’s rankings, has been rocked by a scandal involving its largest lender, Danske Bank, which is accused of knowingly allowed the laundering of hundreds of billions of dollars through a branch in Estonia.

Dubai Has Become A “Money Laundering Paradise” Says Anti-Corruption Group

The Gulf city of Dubai has been slammed as a “money laundering paradise” by leading anti-corruption group Transparency International.

Dubai – one of the seven emirates that make up the UAE – has built a reputation as the pre-eminent business hub in the Middle East, with an open economy that welcomes companies and individuals from around the world. It is a city that has gained fame for giving supercars to its police and building palm-shaped islands in the sea. However, it has also garnered notoriety as a place where normal rules can at times be ignored or easily sidestepped.

In its latest Corruption Perceptions Index, anti-graft campaigning group Transparency International says that “Dubai has become an active global hub for money laundering … where the corrupt and other criminals can go to buy luxurious property with no restrictions.”

Citing investigations last year by the Organized Crime and Corruption Reporting Project and the Center for Advanced Defense Studies (C4ADS), Transparency International said that real estate worth millions of pounds can be bought in Dubai in exchange for cash with few questions ever asked.

In a report issued in June last year, C4ADS said it had identified 44 properties worth some $28.2m that were held directly by sanctioned individuals, and a further 37 properties worth almost $80m that were owned by members of these individuals’ wider networks. The data was based on a leaked database of property and residency data compiled by real estate professionals.

Clearly these issues are not new and indeed Transparency International has itself previously raised concerns about the dubious practices that go on in Dubai’s real estate market. Despite the negative publicity, however, the authorities appear reluctant to take decisive action.

Regional leader

Despite Dubai’s shortcomings, the UAE as a whole is actually the best rated country in the Middle East and North Africa region when it comes to corruption. In the 2018 Corruption Perceptions Index it is ranked 23 out of 180 countries, with a score of 70 points, closely followed by its near neighbor – and regional rival – Qatar, which is ranked 33 overall, with 62 points.

The index scores countries on a scale from  zero to 100, where zero is highly corrupt and 100 is very clean. The best rated country overall is Denmark with a score of 88 points.

While the UAE and Qatar score higher on the index than other countries in the region, this is largely due to their levels of economic and social development, says Transparency International. Both countries have relatively efficient public bureaucracies, high GDP levels and good health and education systems.

However, both countries also lack democratic institutions and a respect for political rights – something that is common throughout the Gulf and the wider MENA region – making them highly susceptible to corruption. “This leaves control of corruption up to the political will of the incumbent ruling class, which can change suddenly and leave any improvements in anti-corruption efforts behind,” says the Transparency International report.

There is also no freedom of the press in these countries and academics such as British research Matt Hedges have been actively targeted by the UAE authorities.

The opaque nature of the political and legal systems in the UAE can often prove frustrating for businesses. One prominent recent example is the battle over $496m in funds owned by a Kuwaiti investment firm – the money was frozen in a Dubai bank account in November 2017, but despite sustained lobbying of officials in Kuwait and the UAE it remains frozen at the time of writing.

Deutsche Bank Faces Growing U.S Scrutiny Over Money Laundering

By Bloomberg

Deutsche Bank AG is facing broadening U.S. scrutiny as a leading Republican lawmaker joined Democratic colleagues in questioning the company’s steps to combat money-laundering amid reports that its U.S. unit may have been a key conduit for dirty cash.

Representative Patrick McHenry, the top Republican on the House Financial Services Committee, sent a letter Thursday to CEO Christian Sewing, seeking documents that outline what internal and independent reviews have turned up about how the bank shields against illicit transactions.

The North Carolina lawmaker’s move comes as the bank acknowledged that it has received an inquiry from House Democrats who are coordinating efforts to probe the Frankfurt-based lender and as the Federal Reserve looks into the company’s involvement with a scandal-plagued Danish bank.

“It is critically important for the American public to have confidence Deutsche Bank is adequately addressing the vulnerabilities that allowed billions of dollars tied to criminal activities to move through the international banking system,” McHenry said in his letter, which set a Feb. 7 deadline for a response from the bank.

McHenry highlighted Deutsche Bank’s involvement in scandals ranging from “mirror trading” to how its U.S. unit handled billions of dollars in tainted transactions from Danske Bank A/S. Bloomberg reported Wednesday that the Fed is looking into the Danske transactions, adding to the international authorities, including the U.S. Department of Justice, pursuing investigations on those interactions.

In response to the probes, the bank has launched internal reviews and been required to bring in outside firms to investigate its conduct and controls. McHenry requested that findings from those reviews be provided to the committee, even though the reports haven’t been made public.

“We remain committed to providing appropriate information to all authorized investigations,” the bank said Thursday in a statement responding to a request for comment. Deutsche Bank acknowledged earlier Thursday that it is engaged in “productive dialogue” with the House Financial Services and Intelligence Committees, whose leaders have said they will work together on oversight of the company.

Representatives Maxine Waters of California, who leads the financial services panel, and Adam Schiff of California, who leads the intelligence group, have said they’d jointly pursue information on the bank’s dealings with the real estate business of President Donald Trump.

The Democrats, who ascended to chairmanships when their party took control of the House this year, have long been interested in the bank’s ties to the Trump Organization, but previously lacked authority to call witnesses or issue subpoenas for other material.

“The House Financial Services and Intelligence Committees are engaged in productive discussions with Deutsche Bank, and look forward to continued cooperation,” Waters and Schiff said in a statement.

Senate Democrats Elizabeth Warren of Massachusetts and Chris Van Hollen of Maryland last month urged Banking Committee Chairman Mike Crapo to probe the company’s correspondent banking business for vulnerabilities to money laundering.

The German lender has been sanctioned before by the Fed, its primary U.S. regulator. In 2017, the company agreed to pay $41 million to settle allegations its U.S. business failed to keep up sufficient money-laundering protections.

The bank’s faulty monitoring involved billions of dollars in “potentially suspicious transactions” processed from 2011 through 2015, the Fed said, adding that the transactions involved affiliates in Europe that failed to provide “accurate and complete information.”

In corruption-plagued Chicago, high-level shakedown charges loom over mayoral race, candidates

By Aamer Madhani

CHICAGO – Over the last four decades, federal prosecutors have racked up more than 1,700 corruption convictions of elected officials, government employees and contractors, a whopping toll of graft and malfeasance that’s left longtime Chicagoans accustomed to the sight of public servants taking perp walks on the evening news.

Former Illinois Gov. Rod Blagojevichex-Rep. Jesse Jackson Jr. and disgraced public schools chief Barbara Byrd-Bennett are among the many who in recent years have done or are still doing time in the federal penitentiary for using their office to enrich themselves.

More than 30 Chicago aldermen – members of the City Council – have been convicted of political corruption since 1973. Another, Willie Cochran, heads to trial in June to answer charges of wire fraud, bribery, and extortion. Federal authorities say the retired police officer solicited a bribe from a local business owner and made off with $30,000 he collected to help people in his ward.

But the latest political scandal unveiled by federal prosecutors this month has shocked even hardened veterans of Chicago’s political scene – and cast a shadow over next month’s mayoral election.

Authorities say Democratic Alderman Ed Burke, a 50-year veteran of the City Council and chairman of its powerful finance committee, tried to shake down officials of a company that operates dozens of Burger King franchises in Illinois.

The 14-candidate mayoral race already was shaping up to the city’s most competitive in decades. In the weeks since charges of attempted extortion against Burke were unsealed Jan. 3, political corruption has become the dominant topic in the campaign.

“Chicago is still America’s most corrupt city,” said former Alderman Dick Simpson, a political scientist at the University of Illinois at Chicago.

Simpson co-authored a study last year that showed Chicago had tallied more convictions for political corruption than any other U.S. city between 1976 and 2016.

“There is still a patronage problem left over,” Simpson told USA TODAY. “The bold corruption isn’t as rampant as it once was. But as we saw in Alderman Burke’s criminal charge, the old-style politics of shaking down businessmen for illegal bribes or campaign contributions still continues.”

Burke, who is running for re-election to the City Council next month, said he’s “not guilty of anything.”

“I have not done anything wrong,” Burke said. “And I’m sure that once it gets to court it will be clear.”

The nation’s third-largest city abounds with thorny challengesPersistent gun violence terrorizes pockets of the city, taxpayers face $27 billion in unfunded pension obligationsfor city workers, and an ongoing exodus of residents from Chicago complicates nearly all facets of governing.

Mayor Rahm Emanuel, who has served as Chicago’s mayor for nearly eight years, announced in September that he would not seek a third term.

Now, the city’s long-simmering problem with corruption has moved to the forefront.

The four top-funded candidates to succeed him – Cook County Board President Toni Preckwinkle, Illinois Comptroller Susana Mendoza, former Chicago Board of Education President Gery Chico and former U.S. Commerce Secretary Bill Daley – have all found themselves under scrutiny for longstanding ties to Burke.

Preckwinkle, who was endorsed by the powerful Chicago Teachers Union, says she has returned $116,000 in political donations she collected at a fundraiser at Burke’s home last year.

She’s also faced questions about why her administration hired Burke’s son, Edward Burke Jr., in 2014 to serve as the training and exercise manager for the Cook County Homeland Security and Emergency Management Department. The younger Burke left the job last year.

Mendoza was married at Burke’s home in a ceremony officiated by the alderman’s wife, Illinois Supreme Court Justice Anne Burke.

When Mendoza announced she was running for city clerk in 2010, she called Ed Burke her “true champion,” and told supporters the alderman was “primarily the reason why I stand before you today.”

Burke endorsed Chico, who worked as an aide to the alderman 30 years ago and in recent years partnered in a law firm that has earned millions lobbying at City Hall on behalf of Cisco Systems, Exelon Generation and Clear Channel and other companies.

Burke said “there’s probably nobody more qualified” in the mayoral race than Chico.

Daley, commerce secretary under Bill Clinton and chief of staff to Barack Obama, is the son and brother of Chicago’s two most famous mayors – Richard J. and Richard M. Daley.

Burke has given the Daley family at least $30,000 in political contributions over the years, according to the Chicago Tribune. But the Daleys and Burke have also been rivals: Richard M. Daley beat Burke in the 1980 race for the Cook County State’s Attorney’s office.

Former Obama strategist David Axelrod, director of the Institute of Politics at the University of Chicago, said the Burke case “already has had an impact in that there is more focus on ethics than there has been in previous elections.”

“Elections are often turned by things you never anticipate,” he told USA TODAY. “This certainly fits that.”

The four candidates with ties to Burke are working mightily now to distance themselves. Some are trying to use the moment to tout ethics reform plans they say will purge city from the pay-to-play and kickback schemes that have bedeviled the political scene.

Preckwinkle has called on Burke to resign from City Council. She has proposed prohibiting council members from holding outside employment.

Bill Daley has also called for banning outside employment, shrinking the size of the council from 50 to 15 and imposing term limits.

Chico has also backed term limits and called for a ban on most outside income for aldermen.

He also wants to do away with aldermanic prerogative – the Chicago practice, dating back to the 1930s, that gives council members wide latitude over permits, zoning changes and parking and liquor licenses within their wards.

“The time has come to end this old-school practice,” Chico said. “No one deserves this much power.”

Daley says any politician who has been active in Chicago over the last half-century has inevitably had contact with Burke. Still, he said, his three rivals’ ties to Burke should be more concerning to voters than his own.

He said he’s had an “arms-length political relationship with Burke.

“You have to get along for political reasons,” Daley told USA TODAY. “The others have business, and really strong personal or political (ties) with Burke.

I have yet to have someone do a fundraiser of $110,000. … That is a big fundraiser. Getting married in someone’s home is more than just showing up at a political event. Having your law business be very focused on City Hall – where Ed Burke is a force – is a different thing than engaging him around politics every four years when there is a campaign.”

Preckwinkle has also tried to play down her connections to Burke while spotlighting her rival’s connection to the powerful alderman.

“I won’t have my name dragged through the mud over the alleged criminal conduct of Susana Mendoza’s mentor, Gery Chico’s best friend and Bill Daley’s long-time political ally,” she said in a statement.

Mendoza has attempted to turn the spotlight on her rivals without addressing her own connections to Burke.

In a statement to USA TODAY, she said there is a “stark contrast to Bill Daley, who won’t release his tax returns and has chosen instead to hide his conflicts of interest, Toni Preckwinkle, who has a history of lying until she gets caught, and Gery Chico, who spent years lobbying Ed Burke at City Hall and is Ed Burke’s endorsed candidate in this race.”

Some candidates untouched by the Burke scandal question whether any candidate who has long been part of Chicago’s political establishment has the will or ability to bring meaningful change.

Former federal prosecutor Lori Lightfoot, ex-chairwoman of a city police accountability task force, began pushing ethics reform as key to solving other issues soon after she announced her candidacy last year.

She says voters should question the credibility of candidates who waited until the Burke charges landed to talk about corruption.

“If we’re going to truly have a new day in city government where we put people first, then we have to start attacking the elephant in the room,” Lightfoot said. “In some ways, we’re rotting from the inside out. We’re losing population, we’re losing our tax base, and the gap between the haves and have-nots continues to grow. I think there is a moral imperative to do something about it.”

Amara Enyia, a community organizer and municipal consultant running for mayor, said the Burke scandal seems to be spurring voters to consider how corruption connects to the other ails of a cash-strapped city that has seen the closure of dozens of schools in African-American neighborhoods, the shuttering of mental health clinics and disproportionate levels of poverty in black and Latino neighborhoods.

“Voters don’t want business as usual,” Enyia said. “They want someone who does not carry the baggage of corruption.

Burke, who was forced to give up his role as chairman of the finance committee after he was charged, has faced a federal investigation before.

In February 2012, a federal grand jury subpoenaed finance committee records related to the city’s workers compensation program.

Burke denied wrongdoing and vowed to cooperate with authorities. No charges were brought.

In the alleged Burger King shakedown, Burke first applied a light touch on operators of Tri City Foods Inc., the second-largest franchisee of Burger King restaurants with stores in six Midwest states.

Federal prosecutors say in court papers that Burke told the company’s owner that he had been holding up permits to renovate one of its Burger King restaurants in his wardbecause constituents expressed concerns about trucks parking there overnight.

Prosecutors say the company promised to address the matter.

Prosecutors say Burke told owner Shoukat Dhanani and another Tri City official that he was a partner in a law firm that works with clients on property tax appeals.

Dhanani told the FBI that he “read between the lines” that Burke was suggesting he’d smooth the permits in exchange for their business, prosecutors say. Dhanani said he told Burke that his company already had legal representation.

Less than two weeks later, prosecutors say, another official with the restaurant group called to give Burke an update on steps they had taken to address concerns about the trucks parking at the restaurant.

This time, prosecutors say, Burke was more direct.

“Good,” Burke said, in a conversation the FBI says was wiretapped. “And, um, we were going to talk about the real estate tax representation and you were going to have somebody get in touch with me so we can expedite your permits.”

Dhanani and others working for the restaurant group said Burke pressed them to give his law firm their business, prosecutors say. The FBI surveillance also picked up talk from the alderman that suggested he wanted the company as a client, they say.

Burke slow-walked the permitting process for months, prosecutors say, causing the Burger King franchise to lose 40 to 50 percent in sales because it couldn’t open an unfinished dining room to customers.

Dhanani told the FBI he eventually relented and informed Burke his company would hire his law firm, prosecutors say, but he never followed through.

Dhanani also told the FBI that he made a $10,000 political donation to Preckwinkle at the urging of Burke, prosecutors say.

Preckwinkle said her campaign returned the contribution to the donor because it exceeded the $5,600 contribution limit for individual contributions.

Former federal prosecutor Patrick Cotter, a white-collar defense attorney in Chicago, said an alarming number of city politicians have been caught committing graft and stealing taxpayer money.

Still, he said, it’s important to keep in perspective that Chicago is hardly alone in having to deal with political corruption.

Federal prosecutors in Los Angeles tallied more than 1,500 convictions for public corruption between 1976 and 2016, according to Simpson’s study. Federal prosecutors in New York counted more than 1,300 convictions during those years.

“The problems here are not because every once in a while an alderman gets caught doing something crooked,” Cotter said. “It is a bad thing, and it’s important to prosecute. But it’s not why the schools are not good. It’s not why we have a homeless issue in this city that’s insane. It’s not why we have the pension problem that is going to make life hard for every Chicagoan’s kids and their grandkids.

“There are basic structural problems in this city, and solving corruption alone is not going to bring an end to these big issues.”

https://www.usatoday.com/story/news/2019/01/23/chicago-federal-political-corruption-scandal-mayor-election-alderman-ed-burke/2581411002/

 

Attorneys for Russian national charged in money laundering, murder-for-hire plot want him released due to health concerns

By Natalie Matthews

Attorneys for a wealthy Raleigh man at the center of an international money laundering and murder-for-hire case want him freed for health reasons and say he is not a threat, according to newly released documents.

Leonid Teyf, a Russian national with connections to the Putin administration, is due in court on Tuesday for a detention appeal hearing.

Teyf and associates allegedly scammed more than $150 million in kickbacks on Russian government contracts, according to the charges against him.

In newly filed documents opposing Teyf’s motion for release, the attorneys for the federal government say Teyf not only tried to murder his wife’s suspected lover (his housekeeper’s son), but also discussed killing her.

Teyf allegedly bribed an undercover Department of Homeland Security official to try to have the young man deported, authorities said. When that took too long, he paid another federal agent to kill the man, even supplying him with an illegal gun, authorities said.

Federal officials raided Teyfs’ north Raleigh mansion in December. They also raided a condo Leonid Teyf owned in the Glenwood South area, where they found a safe, several assault weapons and a lot of ammunition.

The government believes that Teyf is a flight risk and said he has multiple apartments, a compound in Russia and a home in Switzerland.

Since December 2010, the Teyfs opened at least 70 financial accounts at four different banks, and wire transfers show money coming into the couple’s bank accounts from countries known to launder money, including Belize, the British Virgin Islands, Panama and the Seychelles. Investigators said the Teyfs bought hundreds of thousands of dollars’ worth of luxury cars and more than $2.5 million worth of art.

Teyf, his wife Tatyana, and four others are charged in the case involving murder for hire, bribery, money laundering and violation of immigration laws.

Federal attorneys promise to release more information at Tuesday’s court hearing.

Leonid Teyf remains in jail without bond.  Tatyana Teyf was released from jail without bond last month.

What drives a public official to white-collar crime? ‘Greed’

By Jennifer Bowman

ASHEVILLE — Buncombe County officials illegally used taxpayer dollars to enrich themselves, paying for daytime shopping trips, private phone bills, meals, vacations, spa treatments and other personal pleasures, according to federal indictments. Three of them have admitted as much.

Research says they’re not the first to try out government corruption.

A 2018 report by the Association of Certified Fraud Examiners found occupational fraud in government and public administration caused organizations a median loss of more than $125,000, most commonly through corruption schemes. Financial damage was worse when the fraud was committed by a person of authority like a manager or executive, and even greater when multiple perpetrators were involved.

What is the cost to Buncombe County?

In Buncombe, federal prosecutors say corruption has cost much more. Even without quantifying the alleged kickbacks received by former managers Wanda Greene, Mandy Stone and Jon Creighton, the U.S. Attorney’s Office cited more than $200,000 in illegal credit card purchases and more than $2.5 million used for life insurance policies.

That’s not including millions of dollars in other controversial expenses made under Greene’s 20-year tenure as county manager, prosecutors allege.

What would drive Buncombe’s highest-ranking administrators — already paid handsomely with six-figure base salaries, bonuses, retention incentives and some of the best benefits in the state — to behave in such a way?

If they’re like any white-collar criminal, it’s greed, said Michael Clark, a former FBI agent with decades of experience investigating public corruption.

“They go in there usually with pretty good intentions, and they see (money) all around them,” Clark said. “They’re giving out a million-dollar contract to a sewer guy, another million to a road guy. Everyone’s getting rich around them — they have a lot of money, beach houses, ski trips, trips to Florida.

“The county manager — they’re civil servants. They’re making a set salary, which is comfortable but not rich. They kind of feel this sense of entitlement. ‘I’m as smart as these guys. They’re rich. I’m stuck with a civil service job. I deserve the perks.’ The greed part steps in. And we saw that time after time after time.”

No oversight? ‘That just opens the floodgates’

The report by the Association of Certified Fraud Examiners, conducted annually and in its 10th edition, said most employees never commit fraud. But when they do, researchers said, they can cause “enormous damage.”

Of nearly 2,700 cases across more than 100 countries, the study found that most occupational fraud costs a victim organization less than $200,000. Twenty-two percent, however, exceed $1 million in financial damage.

The schemes last an average of 16 months, according to the report. Government and public organizations are among the industries with the highest proportion of corruption cases.

Prosecutors allege fraud in Buncombe County government is wide-ranging, involves multiple longtime officials and dates back to more than a decade ago.

Four officials have been indicted: Greene, Stone, Creighton, and Michael Greene, Wanda Greene’s adult son and the county’s former business intelligence manager.

All but Wanda Greene have reached deals with the U.S. Attorney’s Office, pleading guilty to conspiracy charges. Joe Wiseman, a Georgia-based engineer said to be at the center of the yearslong kickback scheme with the former managers, has not been charged.

The four ex-officials represent a total of nearly 110 years as county employees. Wanda Greene served as county manager for two decades — nearly three times longer than the average tenure of city and county managers in the U.S. Stone and Creighton were Buncombe staffers for even longer.

Fraudsters who had been working with their company longer stole twice as much, according to fraud examiners’ findings: If the perpetrator had worked more than 10 years at the organization, the financial damage increased by over six times more than the median loss caused by the fraudulent scheme of someone who worked there less than one year.

“Some people get in these positions and there’s no oversight,” said Thomas Raftery III, a former FBI agent who investigated construction and contract fraud in the Afghanistan war zone.

“And that just opens up the floodgates. You gotta have some type of system of checks and balances and it doesn’t look like this county had any.”

The FBI investigation: 18 months and counting

Federal officials confirmed Wanda Greene “and others” were under investigation in August 2017, more than a month after county officials flagged financial irregularities during Greene’s last week as manager.

The investigation continues nearly a year and a half later. That’s common, former FBI agents said.

“Some of these types of investigations, they’ve taken several years — as many as five years,” Raftery said. “It depends on what’s involved, what else is going on. The agents typically have other cases, so there’s peaks and valleys in attention.”

Raftery said it’s likely the county investigation has required “a whole host of subpoenas.” The superseding indictment, in which a grand jury indicted Greene for additional charges in August, is evidence that investigators likely are picking up additional information along the way, he said.

Raftery, who has 23 years of federal law enforcement experience and served as the first inspector general for the Delaware River Port Authority, said the FBI also pays special attention to professional services contracts like those granted to Wiseman. In North Carolina and other states, they’re not subject to bidding requirements and “are a great way to shield bribes,” he said.

“They’re just more prone to manipulation,” Raftery said.

Clark said corruption cases can be complicated. A 22-year veteran of the FBI, he supervised the investigation of former Connecticut Gov. John Rowland, a case that ultimately led to the governor’s imprisonment for corruption and fraud.

Clark also oversaw major bribery and kickback investigations of several mayors throughout the state, and his work on high-profile corruption cases made the bureau’s public integrity operation in Connecticut a national model. He now is a senior lecturer in the criminal justice department at the University of New Haven.

Investigators looking into Buncombe County likely have been working through subpoenaed records, from credit card statements to travel documents, Clark said. And corruption cases often work on “moving up the food chain,” he said — finding others, perhaps more significant participants, potentially engaged in corruption.

“Let’s say they get a plea or someone decides to cooperate,” Clark said. “They’re cooperating behind the scenes before they even plead, most of the time. (Investigators) are lifting up the rocks and taking a peek and looking around, and they are sent down a whole new path.”

And the decision to cooperate is a common one, he said.

“For the most part, they’re not hardened criminals who are used to doing jail time,” Clark said. “If you’re a drug dealer or in the mob, that’s a red badge of courage. With a white-collar crime person or a public official, that’s not the case.

“They’ll cut a deal.”

‘There’s got to be checks and balances’

Internal control weaknesses were responsible for nearly half of all fraud cases, according the fraud examiners’ report. In Buncombe, officials quickly became aware of what they lacked, albeit after the fact.

“When they’ve been in that one job for that long, they certainly know how to manipulate the system, there’s no question about that,” Clark said. “They know where they can hide things or grab things from, things along those lines.”

The investigation revealed glaring problems in Buncombe County government.

Commissioners never received line-item budgets under Greene, never gave her annual performance reviews and did not regularly ask for information about her expense reports. Greene, meanwhile, redacted receipts she submitted for reimbursement, was accused of using bullying and intimidation techniques, and never reported back to commissioners on no-bid contracts,.

The county has since overhauled its policies, clamping down on how economic development money is spent, capping performance bonuses and promoting their whistleblower hotline. They’ve also changed auditing firms, strengthened the role of the county’s internal auditor and required more public reporting of contract activity.

Raftery said oversight is key, even if it’s unpopular in the organization. As inspector general, he said he regularly received pushback after issuing negative reports and implementing policies against waste and fraud. He left the job in 2014, penning a scathing resignation letter that accused officials of interfering with his independent watchdog role and preventing him from issuing audits.

Commissioners need to take responsibility for their fiduciary duty, Raftery said, and that includes being aware of contracts that don’t require their approval.

And they should remember that the county manager works for them, not the other way around, he said.

“What little I saw (about the case) just struck me — where is the oversight?” Raftery said. “Nobody’s watching. You’ve got two, three people there it looks like just doing whatever they wanted to do.

“And they got caught. Because, eventually, you’re going to get caught.”