Oct. 17 (Bloomberg) -- A U.S. jury in the case of a Venezuelan involved in a South American election scandal can hear that he took part in bribery and kickback schemes with government officials in his country, a judge ruled in Miami.

Prosecutors also can present the statement of defendant Franklin Duran to FBI agents after his arrest on Dec. 11, 2007, that ``he is able to succeed in Venezuela because he pays off politicians, government employees and high-ranking officials,'' U.S. District Judge Joan Lenard said today.

Duran, 41, is accused of helping Venezuelan intelligence agents hide the source of $800,000 seized Aug. 4, 2007, at an Argentine airport. Prosecutors say the government of Venezuelan President Hugo Chavez sent the cash to aid the campaign of Cristina Fernandez de Kirchner, who was elected president of Argentina on Oct. 28.

Carlos Kauffmann, a business partner of Duran who pleaded guilty, can testify that he and Duran made and accepted corrupt payments in Venezuela, Lenard ruled. The prospect of more government kickbacks drew them into the cover-up known as the suitcase scandal, Kauffmann said at a hearing.

``If we resolved this for the government, we were going to make sure we would receive big payments for this, big contracts,'' Kauffmann testified outside the jury's presence.

Duran is charged with acting as an unregistered agent of the Venezuelan government in Florida without approval of the U.S., as well as conspiracy.

After the cash seizure, the suitcase courier, Guido Alejandro Antonini Wilson, returned home to Florida and helped the Federal Bureau of Investigation. He secretly recorded Duran, Kauffmann and other South American men.

Entrapment Defense

Lenard ruled yesterday that Duran's lawyer can tell jurors in closing arguments that he was entrapped by FBI agents who induced him to commit a crime he had no previous intent to commit. She ruled today that prosecutors can offer Kauffmann's testimony to show Duran was predisposed to the crimes.

Kauffmann will testify Oct. 21, with closing arguments following the next day, Lenard ruled.

At today's hearing, Kauffmann spoke of a corruption scheme that reached into Venezuela's national guard, finance ministry and education ministry. Starting in 1998, Kauffmann said, he and Duran managed millions of dollars generated by kickbacks received by national guard officials from procurement contracts.

Kauffmann and Duran helped invest that money, kept financial statements for the national guard members, and took a 10 percent commission as their fees, Kauffmann said.

``We were like the bankers,'' he said.

$100 Million

Kauffmann and Duran made about $100 million more from the restructuring of Venezuelan bond sales, Kauffmann testified. The bonds were bought at a 50 percent discount and later sold on the market at a huge profit, Kauffmann said. He and Duran later paid about $25 million in kickbacks to four finance ministry officials, Kauffmann said.

Kauffmann and Duran took an average of a 10 percent commission for their services, which they then split with state officials, Kauffmann said. All profits from the schemes were split evenly between the two men, Kauffmann said.

``We gave part to the people in the government,'' Kauffmann said.

Kauffmann and Duran made ``millions of dollars'' when they managed the Venezuelan education department's budgets for ``a little while'' in 2001, Kauffmann said.

Duran also bought a Citigroup Inc. building in Venezuela for $4 million and sold it two weeks later for $9 million with the help of finance ministry officials, Kauffmann testified.

Later Contracts

Kauffmann testified that he and Duran made millions of dollars in profits. They kicked all but a few hundred thousand dollars to finance ministry officials because they believed it would help them secure later contracts, Kauffmann testified.

Lenard ruled that jurors can hear evidence about corruption involving the national guard, the Citigroup building, and the education ministry. She will not allow Kauffmann to tell jurors that he and Duran made $100 million on the bond restructuring and kicked back $25 million.

Defense attorney Edward Shohat, speaking at a hearing after Kauffmann's testimony, called the allegations ``unfairly prejudicial'' to Duran, and said they weren't relevant to the charges against him.

``There was no testimony by Mr. Kauffmann linking the kickback scheme to the motivation of participating in this case,'' Shohat said.

The case is U.S. v. Moises Maionica, 07-cr-20999, U.S. District Court, Southern District of Florida (Miami).

To contact the reporters on this story: Carlyn Kolker in federal court in Miami at ckolker@bloomberg.net; David Voreacos in federal court in Newark at dvoreacos@bloomberg.net.

Last Updated: October 17, 2008 20:19 EDT