The former chief executive officer and an ex-managing director of U.S. broker-dealer Direct Access Partners LLC pleaded guilty Wednesday to bribing an official of a state-owned Venezuelan bank in exchange for bond trading business.
Benito Chinea and Joseph DeMeneses admitted bribing Maria De Los Angeles Gonzalez De Hernandez, a former senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes).
In return for at least $5 million in bribes from 2008 to 2010, Gonzalez directed bond trading work to Direct Access that generated more than $60 million in commissions for the firm. She also approved fraudulent trades — round trip buying and selling with no business purpose except to generate trading commissions.
Gonzalez pleaded guilty in November 2013 to conspiracy to violate the Travel Act and commit money laundering, as well as two substantive counts of the offenses. She also agreed to cooperate with federal prosecutors.
She lives in Venezuela but was arrested in Miami.
Chinea, 48, of Manalapan, New Jersey, and De Meneses, 45, of Fairfield, Connecticut, entered their pleas in federal court in Manhattan. They each pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.
Chinea agreed to forfeit $3.6 million and De Meneses forfeited nearly $2.7 million, the amounts the DOJ said they earned from the bribery scheme.
Sentencing for both is scheduled for March 27, 2015. The FCPA and Travel Act conspiracy counts are punishable by up to five years in prison.
Direct Access was based in New York and had a Miami office. It stopped doing business after the first arrests in the case in May 2013.
Three other Direct Access defendants — employees Tomas Alberto Clarke Bethancourt and Jose Alejandro Hurtado, and managing director Ernesto Lujan — pleaded guilty earlier to conspiracy, money laundering, and violating the FCPA.
Clarke and Hurtado and two other brokers were also charged last year in an SEC civil complaint with fraud and manipulation.
The Venezuelan government held a majority stake in Bandes and funded it. The bank operated under the ministry of finance.
Gonzalez ran Bandes’ overseas trading activity. Most of the trading business she gave Direct Access involved fixed income investments. Direct Access charged Bandes a mark-up on purchases and a mark-down on sales.
The Direct Access defendants split the commissions the firm made from the Bandes trades with Gonzalez. They routed payments to her through third-parties posing as “foreign finders” and into offshore bank accounts.
“In several instances,” the DOJ said, “Chinea personally signed checks worth millions of dollars that were made payable to one of these purported ‘foreign finders’ and later deposited in a Swiss bank account.”
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.