Dec. 9 (Bloomberg) -- Venezuelan corruption cases are surfacing in U.S. courts with civil and criminal allegations involving judges, financial regulators and senior military officers in President Hugo Chavez’s government.
Since October, U.S. prosecutors have brought an extortion case against an official of Venezuela’s securities regulator, an arms trafficking case tied to engine shipments for Venezuela’s air force and a cocaine smuggling case against an accused drug kingpin who implicated Venezuelan military figures. A civil suit alleging money laundering by seven top Venezuelan officials is on appeal after a trial judge dismissed it in August.
“There’s so much corruption that has washed ashore from Venezuela,” said Joel Hirst, an international affairs fellow at the Council on Foreign Relations in Washington. “More and more criminal activity is having its source in Venezuela. It’s spilling into the public and into the U.S courts because a lot of Venezuelans have fled to the U.S.”
The cases follow the 2008 conviction of Venezuelan businessman Franklin Duran by a Miami jury for failing to register as a foreign agent. Duran was arrested in Florida, where he pressured a money courier to remain silent about a suitcase seized at a Buenos Aires airport with $800,000 of cash inside. The Chavez government sent the money to back Argentine President Cristina Fernandez de Kirchner’s 2007 campaign, prosecutors said.
Venezuelan officials say corrupt businessmen are using U.S. antagonism toward Venezuela to protect themselves and tarnish the international reputation of Chavez’s self-described revolutionary, socialist government.
“Those speculating businessmen should show their faces in Venezuela and stop running away and accusing our officials in the United States,” Finance Minister Jorge Giordani told reporters in Caracas on Nov. 3, referring to charges brought against a securities regulator official, Rafael Ramos de la Rosa. Ramos was indicted last month for conspiracy to commit extortion and launder money as the government-appointed receiver of Caracas brokerage Uno Valores Casa de Bolsa CA.
He was arrested in October after coming to Florida allegedly to demand $1.5 million from the brokerage’s owner, Tomas Andres Vasquez Estrella, in exchange for a report that would clear the firm of wrongdoing.
The case is being handled by Assistant U.S. Attorney Richard Gregorie, the prosecutor who in 1992 won the conviction of deposed Panamanian dictator Manuel Noriega for drug trafficking and helped try seven men in 2007 on charges of aiding al-Qaeda by trying to destroy Chicago’s Sears Tower.
“We’re going to fight this,” Ramos’s lawyer, David Kubilion, told reporters after his client pleaded not guilty in federal court in Miami on Dec. 3.
In conversations recorded by the U.S. Federal Bureau of Investigation, Ramos said he was acting at the behest of Tomas Sanchez, the head of Venezuela’s securities regulator, according to the criminal complaint. Sanchez isn’t charged in the case.
Sanchez said today in an interview with government-run newspaper Correo del Orinoco that he traveled to Miami in April to represent Venezuela in a trial regarding a bank closed in the 1990s and that he didn’t meet with Ramos or Vasquez while there.
The exiled bankers are trying to force him from his post because he ruined their “illegal million dollar businesses,” he said.
“The Ramos case could become very important,” said University of Miami professor Bruce Bagley, chairman of the international studies department. “No one is quite certain how high it will go. If it’s Sanchez, then it means a fairly high level authority is engaged in systemic corruption.”
Ramos’s prosecution arises amid the seizure of more than 40 Venezuelan brokerages that Chavez accused of committing “fraud” and helping fuel the country’s 26.9 percent annual inflation rate through currency speculation.
In an Aug. 24 phone call cited in an FBI affidavit, Ramos refers to the “Taliban” -- radical members of the CNV, the Venezuelan securities regulator -- who “were putting a lot of pressure on the owners and presidents of other brokerage firms for having denounced various members of the Venezuelan government.”
Four days later, during a taped meeting at the Mandarin Oriental Hotel in Miami Ramos allegedly explained to Vasquez, who was cooperating with the FBI, that he had no choice but to participate in the corruption back home.
“You could be a great tango dancer, but if they’re playing salsa, you can’t do the tango,” Ramos said, according to the affidavit.
For Venezuelans, whose country was criticized for “money laundering and judicial corruption” in a February report by the U.S. State Department, the cases in U.S. courts offer a glimpse of alleged profiteering within their government. From 2005 to 2010, Venezuela slipped to 164th from 130th on the Corruption Perception Index of Transparency International, the Berlin-based group that ranks 178 countries based upon the perception of corruption in the public sector.
“Everyone here has their hand in the cookie jar and the judicial system belongs to the government,” Manuel Guerra, 60, an events producer said in an interview in Chacao, a middle class neighborhood in eastern Caracas. “The country that should judge us is the U.S. or an impartial representative.”
An appeal is pending on dismissal of another case of alleged extortion involving a financial institution. Venezuelan banker Eligio Cedeno claims in his civil lawsuit filed in Manhattan in November 2009 that seven top Venezuelan officials laundered money through New York banks, had him jailed for almost three years after they deemed him a political adversary and forced him to sell his shares in a bank he controlled.
Citing a lack of jurisdiction, U.S. District Judge Jed Rakoff dismissed the suit in August, while calling Cedeno’s racketeering allegations “perfectly plausible.”
Cedeno, who fled Venezuela after being released from prison by a judge whom the government subsequently jailed, “obviously” can hope for a “fair hearing” only in the U.S., his lawyer, Jerome Marcus, said in an interview.
Venezuelan authorities say Cedeno and former banker Tomas Vasquez, the alleged victim in the Ramos case, are themselves criminals. Cedeno faces charges of fraudulently obtaining U.S. currency from the government, according to documents posted on his own website. Vasquez is charged with diverting foreign currency funds from his bank to acquire another bank, according to chief regulator Sanchez.
Allegations against Chavez officials have also surfaced in connection with the drug-trafficking case against Walid Makled-Garcia, designated by the U.S. in 2009 one of the world’s most powerful drug lords. Makled is accused by a Manhattan grand jury of operating airstrips in Venezuela that shipped tons of cocaine into Central America and the U.S.
Since his August arrest in Colombia, Makled has said in television interviews that he has documentation showing he amassed $1.2 billion by paying off Venezuelan generals, admirals, the head of the country’s narcotics agency and the brother of the Interior and Justice Minister.
Colombian President Juan Manuel Santos said on Nov. 16 that Makled should be extradited to Venezuela, not the U.S. Colombia’s Supreme Court will decide where the alleged drug kingpin goes within 18 months, said Adam Isaacson of the policy group Washington Office on Latin America. The court may rule he would face too much danger in Venezuela because of his denunciations of Chavez’s government, Isaacson said.
Makled’s accusations prompted Chavez to say he viewed the cases as warning signals about U.S. intentions.
“Makled himself said he has all the information the United States needs to intervene in Venezuela like it intervened in Panama to get Noriega,” he said on a visit to Cuba on Nov. 7. “That’s the Venezuelan bourgeoisie’s dream, and the empire is going about looking for cards to play with.”
Drugs aren’t the only Venezuelan-linked contraband the U.S. is targeting.
A grand jury in Phoenix indicted Floyd Stilwell and his Mesa, Arizona-based company, Marsh Aviation Co., on Oct. 12 on charges of violating the U.S. Arms Export Control Act by selling T-76 military aircraft engines to the Venezuelan air force in violation of a U.S. military embargo. Stilwell was paid $1.8 million after making the sale appear as if it were for civilian engines, prosecutors said. The company’s defense attorney David Lockhart declined to comment.
Larry Birns, director of the Washington-based Council on Hemispheric Affairs, a research group, said he thinks the cases signal that the U.S. government is targeting Chavez through the courts.
“There’s a huge political commitment to go after Chavez,” Birns said.
Michael Shifter, president of Inter-American Dialogue, a Washington-based policy center, said he sees no evidence of a litigation strategy against the Venezuelan leader. William Carter, a spokesman for the FBI, said there’s “no specific focus on Venezuela.”
More likely, Venezuelan-linked crime and the country’s divisive politics are leaking into the U.S. as Venezuelans take refuge here, said the Council on Foreign Relations’ Hirst.