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Monday
Dec072015

Former brokerage exec jailed two years for Venezuela bribes

A former executive of a Wall Street broker-dealer was sentenced Friday to two years in prison for bribing an official at a state-owned bank in Venezuela in exchange for trading business.

Ernesto Lujan, 52, a former managing partner at Direct Access Partners in charge of its Miami office, pleaded guilty in mid 2013 to conspiracy, money laundering, and violating the FCPA.

Federal judge Denise Cote in Manhattan also ordered Lujan to forfeit $18.5 million he made from the bribery scheme.

In March, the former CEO and the managing director of Direct Access Partners were each sentenced to four years in prison.

Benito Chinea, 48, of Manalapan, New Jersey, and Joseph DeMeneses, 45, of Fairfield, Connecticut, pleaded guilty in December last year to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.

Chinea forfeited $3.6 and DeMeneses forfeited nearly $2.7 -- the amounts of commissions and bonuses they made from the offenses, the DOJ said.

Two other employees of Direct Access Partners -- Tomas Alberto Clarke Bethancourt and Jose Alejandro Hurtado -- pleaded guilty in 2013. Clarke's sentencing before Judge Cote is scheduled for Tuesday (December 8).

The five defendants paid at least $5 million in bribes to María de los Ángeles González de Hernandez, a vice president at Banco de Desarrollo Economico y Social de Venezuela (BANDES). The Venezuelan government held a majority ownership interest in Bandes and provided funding for it.

In return for bribes from 2008 to 2012, González directed bond trading work to Direct Access and approved fraudulent trades.

She pleaded guilty in late 2013 to conspiracy to violate the Travel Act and commit money laundering, as well as two substantive counts of the offenses. She lives in Venezuela but was arrested in Miami.

Direct Access, an SEC registered broker-dealer, had offices in New York and Miami. It generated more than $60 million in revenue on trades in Venezuelan sovereign or state-sponsored bonds for BANDES. Some of the trades were phony round-trip trades with no business purpose except to generate brokerage fees.

The parent of Direct Access Partners LLC filed for bankruptcy in 2013. The broker-dealer once had 120 employees.

Clarke and Hurtado and two other brokers were charged in 2013 in an SEC civil complaint with fraud and manipulation.

In court Friday, Lujan's lawyer pleaded for leniency. He said his client's cooperation helped the DOJ prosecute Chinea and DeMeneses, according to Reuters.

Judge Cote imposed a reduced sentence but said sending Lujan to prison would send a "clear message about the enormity of this conduct and the consequences that come with it."

In his report of Lujan's sentencing, the Wall Street Journal's Sam Rubenfeld said:

With members of his family in attendance and his daughter crying, Mr. Lujan broke down in tears while delivering an apology to the judge prior to receiving the prison sentence, saying he’s turned his life around since his 2013 arrest, by, among other things, volunteering with underprivileged children.

“The shame will be with me for the rest of my life,” Lujan said.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.