To drum up trade commissions worth $66 million, the CEO and a managing partner of a Wall Street brokerage paid bribes and kickbacks to an official of Venezuela’s state economic development bank, according to a federal indictment unsealed Monday.
The arrested Wall Street tycoons are Benito Chinea and Joseph DeMeneses, formerly and respectively the CEO and managing partner of the now-defunct Direct Access Partners (DAP).
Their racket allegedly siphoned $66 million in bond sales commissions from the state run Banco de Desarrollo Económico y Social de Venezuela via deceitful bond purchases and sales made from late 2009 through 2012.
Chinea is free after posting the $1 million bail and surrendering his passport. DeMeneses remains in custody.
The development bank, known as BANDES, was founded by the Venezuelan government in 2001 to help finance desperately needed projects aimed at improving the social and economic well-being of Venezuelans.
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The bribed former Venezuelan bank official, Maria de los Angeles Gonzalez de Hernandez, who pleaded guilty to money laundering charges in November 2013, sold out Venezuela’s impoverished citizens for some $5 million in payments and kickbacks. Bank funds desperately needed for development projects wound up diverted to coffers of DAP and its conspirators.
The story, as described in court documents, could be an archetypal story of Wall Street greed — complete with details that include an upstart firm being brought down by a group of rogue brokers, “finder’s fees” being paid into a Swiss account controlled by one conspirator’s wife, offshore accounts, intermediary companies used to launder money, cash payments, and emails discussing how to deceive officials. This story though has real losers: the millions of Venezuelans living in poverty who were effectively robbed.
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The $66 million commission scheme consisted of artificially inflating the price of bonds sold to the Venezuelan bank, paying too little for the bonds the Venezuelan bank sold to DAP, and pocketing the difference. At the height of the conspiracy, the illicit bond-trading scheme accounted for about 70 percent of the firm’s overall business.
In addition to the indictment unsealed by the US Attorney’s Office, the Securities and Exchange Commission has also charged Chinea and DeMeneses with fraud in relation to the conspiracy.
The plot that Chinea and DeMeneses allegedly participated in unraveled in 2013 as a federal probe into the company became public on May 8, and DAP itself was forced to stop doing business.
Founded in 2002, DAP gained prominence on Wall Street in recent years, and its tenth anniversary was marked by its founding partners’ ringing the NYSE’s closing bell, which is considered an honor. After the initial charges become public in May in 2013, the brokerage closed down — costing some 120 employees their jobs.
DAP’s parent company has elected to file a civil suit against several former employees, including Chinea and DeMeneses, in an effort to seize the defendants’s funds and recover tens of thousands of documents in their possession.
Attorneys for DeMeneses declined to comment to VICE News, and Chinea’s representatives did not return calls by deadline.
A spokesman for the US Attorney’s office pointed out that thus far only one BANDES banker has been indicted, though during her plea hearing Gonzalez said others there had received DAP payments.
The investigation is ongoing.
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