Four Charged By SEC Over Bribes To Venezuelan Official In Fraudulent Trading Scheme

Harriet Davies Editor - Family Wealth Report May 8, 2013

Four Charged By SEC Over Bribes To Venezuelan Official In Fraudulent Trading Scheme

Securities and Exchange Commission has charged four individuals with ties to a New York brokerage firm for paying bribes to a high-ranking Venezuelan finance official to secure bond trading business.

DAP Global, a unit of Direct Access Partners, generated over $66 million in revenue for DAP through transaction fees on trade executions in Venezuelan sovereign or state-sponsored bonds for Banco de Desarrollo Económico y Social de Venezuela, which is based in Caracas, the SEC’s complaint says.

A portion of this revenue was allegedly kicked back to María de los Ángeles González de Hernandez, the vice president of finance at Banco de Desarrollo, who authorized the trades.

The SEC has charged Tomas Alberto Clarke Bethancourt, who lives in Miami and is an executive vice president at DAP, saying he was responsible for executing the fraudulent trades and maintaining spreadsheets tracking the illicit markups and markdowns on those trades.

The authority has also charged Iuri Rodolfo Bethancourt, who lives in Panama and allegedly received more than $20 million in fraudulent proceeds from DAP via a Panamanian shell company, which then paid Gonzalez a portion of this amount.

Other charges are against Jose Alejandro Hurtado, who lives in Miami and served as the intermediary between DAP and Gonzalez, receiving more than $6 million in kickbacks disguised as salary payments from DAP, and Haydee Leticia Pabon, his wife. She allegedly received approximately $8 million in markups or markdowns on trades that were funneled to her from DAP in the form of sham finders' fees.

Separately, the US Attorney’s Office for the Southern District of New York, has announced criminal charges against Gonzalez, Clarke and Hurtado.

According to the SEC’s complaint, filed in federal court in Manhattan, the scheme began in October 2008 and lasted till at least June 2010.

The kind of fraudulent trading that was taking place, according to the SEC, included large roundtrip trades (where the bank was both buyer and seller) with no legitimate purpose but to generate fees and kickbacks. Offshore accounts and a shadow accounting system were then used to try and cover up the system, and track illicit trades and bribes.

"These traders triggered a fraud that was staggering in audacity and scope," said Andrew Calamari, director of the SEC's New York regional office.

The SEC's complaint charges Clarke, Bethancourt, Hurtado, and Pabon with fraud and seeks final judgments requiring them to return ill-gotten gains with interest and pay financial penalties.

Register for FamilyWealthReport today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes