Bruno Sammartino died this week. Perhaps not as well known to most people, if you were a pro wrestling fan in the 60s and 70s you certainly had heard of Sammartino. According to his New York Times (NYT) obituary he was “an Italian immigrant who was heavyweight champion of the World Wide Wrestling Federation for a record 11 years in the 60s and 70s.” In a time of clear good guys and bad guys, Sammartino was one of the good guys, besting the likes of Killer Kowalski, Hans Mortier, Waldo von Erich, Ivan Koloff, Gorilla Monsoon, Professor Toro Tanaka and George (the Animal) Steele. The matches were fake but the action was real. His defeats of these and many other bad guys in the world of pro wrestling informs today’s post on the continued unraveling of the Petróleos de Venezuela, S.A. (PDVSA) corruption.

Yesterday Cesar David Rincon Godoy (Rincon) pled guilty to a massive money laundering scheme which took the proceeds of his corruption while he was employed at PDVSA. According to the DOJ Press Release, Rincon, a citizen of Venezuela previously residing in Spain and who was extradited to the US, pled guilty in federal court to one count of conspiracy to commit money laundering. U.S. District Judge Kenneth M. Hoyt of the Southern District of Texas accepted Rincon’s plea and imposed a personal money judgment in the amount of $7,033,504.71 against the defendant, who agreed to the entry of an order of forfeiture. Rincon’s sentencing is scheduled for July 9.

According to his Indictment, Rincon was part of a group of PDVSA purchasing agents who “solicited PDVSA vendors for bribes and kickbacks in exchange with providing assistance to those vendors in connection with their PDVSA business, including assisting them in receiving PDVSA contracts and assisting them in receiving payment priority over other vendors”. Rincon admitted that he accepted bribes from Roberto Enrique Rincon Fernandez (Rincon) and Abraham Jose Shiera Bastidas (Shiera), in exchange to assist Rincon’s and Shiera’s companies in receiving payment priority and additional PDVSA contracts. Rincon further admitted that he then conspired with Rincon and Shiera to launder and conceal the proceeds of the bribery scheme through a series of financial transactions, including wire transfers to accounts in the US and Switzerland. Both Rincon and Shiera had previously pled guilty to charges under the Foreign Corrupt Practices Act (FCPA) for their respective roles in the bribery scheme.

Rincon made quite a bit of money from the scheme. He admitted to conspiring with others to launder at least $7,033,504.71 in proceeds from the various bribery schemes in which he participated. This is the amount he agreed to forfeit back to the US government. There was nothing in the Indictment or Press Release which indicated that the money was still in his Swiss bank account. Nor was there anything which might suggest if that money will be paid to any of the parties who have filed lawsuits involving the grand PDVSA bribery schemes or even PDVSA itself.

Other Potential Claimants?

I previously wrote about the first civil action filed in Houston for the massive bribery and corruption which engulfed PDVSA and those who tried to do business with it over the past few years. The case involves a Houston based company, Harvest Natural Resources, Inc. (Harvest), an oil and gas producer, which alleged it went out of business because it refused to pay $40 million in bribes to former officials and business partners of PDVSA. The lawsuit was filed against former Venezuelan and PDVSA officials and it alleged they blocked the sale of Harvest’s Venezuelan holdings after the company refused to pay them a bonus based upon the sales price. Harvest eventually had to sell the assets at fire sale prices and the company estimated it lost $470 million due the bribe demands. The company closed its operations in 2017.

Interestingly, PDVSA was not named as a party, only those individuals who tried to extort money from Harvest, which was trying to sell an interest in a Venezuelan entity, whose transfer PDVSA officials named in the lawsuit had to approve. These individuals were part of the PDVSA corruption ‘Management Team’ laid out in the DOJ indictments. It is unusual to bring suit against those who sought bribes, particularly when they were not paid. Yet that is exactly the legal strategy which Harvest is employing. It will be interesting to see how they proceed, if they can make a successful case and, most importantly, if they can collect damages on any award they may receive from the court.

Finally, there is the lawsuit filed by the PDVSA US Litigation Trust (the “Trust”) in federal court in Miami, Florida, on behalf of Venezuela’s state-owned oil company, PDVSA. The lawsuit alleges that the defendants, a group of 44 oil trading companies, banks and individuals, participated in a 14-year scheme to rig bids, underpay on purchases and overcharge on sales, allegedly resulting in billions of dollars of losses to PDVSA. It is not clear that PDVSA will have standing to bring the suit or that the US government would allow it to continue given the current state of sanctions against Venezuela.

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, 2018

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