Of all the stench from corruption, not much is more odious than that from the Venezuelan state oil company Petróleos de Venezuela SA (PDVSA). Whether it is shaking down contractors for Rolex watches to simply schedule a meeting, requiring a bribe to get payments on outstanding invoices or simply good old fashioned cash to get on a bid list; PDVSA is perceived to be one of the most institutionally corrupt energy companies around. For those who claim the Foreign Corrupt Practices Act (FCPA) is not designed to be applied to US companies doing business corruptly overseas, PDVSA is a prime example of why FCPA enforcement is so critical to maintain.

The inherent corruption at PDVSA was emphasized once again this week with two guilty pleas. According to the Department of Justice Press Release, “Juan Jose Hernandez Comerma (Hernandez), 51, of Weston, Florida, pleaded guilty in federal court in Houston to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and one count of violating the FCPA. Charles Quintard Beech III, 46, of Katy, pleaded guilty to one count of conspiracy to violate the FCPA.”

According to his Information, Hernandez “conspired with U.S.-based businessmen Abraham Jose Shiera Bastidas (Shiera) and Roberto Enrique Rincon Fernandez (Rincon) to pay bribes and other things of value to PDVSA purchasing analysts. This ensured Shiera’s and Rincon’s companies were placed on PDVSA bidding panels, which enabled the companies to win lucrative energy contracts with PDVSA. From 2008 until 2012, Hernandez admitted that while general manager and later partial owner of one of Shiera’s companies, he provided recreational travel and entertainment and offered bribes to PDVSA officials, including Alfonzo Eliezer Gravina Munoz (Gravina), on a percentage of contracts the officials helped to award to Shiera’s companies.”

The Information specified three payments made by Hernandez; one wire transfer of cash in the amount of $7782.21, one wire transfer of cash in the amount of $9745.21 and one payment for hotel expenses in the amount of $14,502.29, and another (much cheaper) hotel payment for $1,093.13. All were wired through the US banking system. In one interesting note, a payment was made to help get invoices paid, which has been the subject of one previous FCPA enforcement action, involving ADM.

According to his Criminal Information, Beech “paid bribes to multiple PDVSA officials, including Gravina, in exchange for their assistance in placing Beech’s companies on PDVSA bidding panels and assisting Beech’s company or companies in receiving payment for previously awarded PDVSA contracts. Beech also admitted that he agreed with others, including PDVSA officials, to engage in financial transactions to conceal the nature, source and ownership of the bribe proceeds.”

Beech’s Information further specified that the bribes were paid to (1) win PDVSA Purchase Orders, (2) secure inside information on the PDVSA bid process, (3) getting Beech’s companies on the approved bid panel list and (4) assist Beech in receiving payments and having his companies. Bribes paid by Breech were listed as one for $15,000 and one in the amount of $132,240.32.

At some point in the future the current corrupt regime in Venezuela will be thrown out of office. When that happens and the light of transparency disinfects PDVSA, the rats looting the company will literally be running for cover. Perhaps, more ominously, the DOJ Press Release noted, “In addition to Hernandez and Beech, the Justice Department has announced the guilty pleas of six other individuals as a part larger, ongoing investigation by the U.S. government into bribery at PDVSA.” Also the Swiss Federal Office of Justice provided assistance in these two cases.

All of this means the government is clearly communicating that any company which did business with PDVSA may well be subject to a sweep. Moreover, for US companies, they will need to be prepared for a major US regulatory sweep investigating companies which have done business with PDVSA over the past 10 years or so. With the ongoing investigation of Petrobras and the recent Odebrecht FCPA and greater enforcement action, both coupled with this ongoing PDVSA investigation, Latin America may well become a focal point of US regulatory interest.

My other suggestion would be to call Matt Ellis.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

0 comments