BNP Paribas Sued by U.S. Over Alleged Commodities Payment Guarantee Scheme
BNP Paribas SA was sued by the U.S. over allegations the Paris-based bank aided a grain export fraud scheme involving commodity payment guarantees provided by the Department of Agriculture.
A corporate banker in BNP’s Houston office allegedly helped a scheme that defrauded the Agriculture Department of at least $78 million through deals he made with four U.S. grain exporters, according to a complaint filed yesterday in federal court in Houston.
The banker knew the exporters were secretly controlled by the same foreign businessman who owned the companies importing the shipments into Mexico, the U.S. said in the complaint. The Agriculture Department’s Supplier Credit Guarantee Program prohibits payment guarantees on commodity sales between a U.S. exporter and a foreign-owned importer controlled by the same person or group.
“Because the U.S. exporters and Mexican importers were under common ownership and/or control, which fact defendants knew, none of the commodity sales between these entities were eligible for SCGP payment guarantees,” Assistant U.S. Attorney Michelle Zingaro said in the complaint.
When the Mexican importers defaulted on payments for dozens of grain shipments from 1998 to 2006, BNP and Jovenal “Jerry” M. Cruz, its former trade finance manager, “presented or caused to be presented false or fraudulent claims to the USDA,” Zingaro said in the complaint, which also names Cruz, BNP Paribas (BNP) North America and BNP Paribas Houston Agency as defendants.
Michele Sicard and Julie Beuter, spokeswomen for BNP Paribas, didn’t immediately return e-mails seeking comment on the U.S. complaint after regular business hours yesterday.
Not Guilty Plea
Philip Hilder, Cruz’s attorney, said in a phone interview that the former BNP vice president has entered a plea of not guilty and is awaiting trial in February. Three other people charged in the scheme have pleaded guilty and are awaiting sentencing, according to court records.
The government seeks triple damages, or $234 million, plus penalties of as much as $11,000 for each violation of the False Claims Act.
The U.S. shipping companies assigned their falsely obtained export guarantees to BNP, “along with the payment obligation from the Mexican importer,” according to the complaint. In exchange, BNP provided the U.S. exporter a line of credit up to the amount of the guarantees, minus the bank’s fee.
“By financing these transactions, BNP earned fees in exchange for providing a line of credit to U.S. exporters that was fully secured by the United States,” the government said in the complaint. “Cruz solicited and received payments of kickbacks and/or bribes” from others in the alleged conspiracy “for BNP’s role in financing the scheme through expanding lines of credit from BNP to the U.S. exporters based on ineligible commodity sales to the Mexican importers.”
The case is US v BNP Paribas SA, 4:11-cv-03718, U.S. District Court, Southern District of Texas (Houston).
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