PDVSA Pension Ponzi: Guillen sentenced

Since I am traveling, we shall let the US Attorney for Connecticut do the talking. I will be back on line (with a keyboard I understand how to use) one of these days, I promise.


David B. Fein, United States Attorney for the District of Connecticut, announced that JUAN CARLOS GUILLEN ZERPA, 44, a citizen of Venezuela, was sentenced today by United States District Judge Stefan R. Underhill in Bridgeport to 14 months of imprisonment, followed by two years of supervised release, for conspiring to obstruct a U.S. Securities and Exchange Commission investigation of a Connecticut hedge fund advisor. GUILLEN also was ordered to pay a fine in the amount of $10,000.
“The U.S. Attorney’s Office, FBI and our Connecticut Securities, Commodities and Investor Fraud Task Force are committed to the aggressive investigation and prosecution of individuals who attempt to obstruct the SEC and its critically important mission of protecting investors and the integrity of American capital markets,” stated U.S. Attorney Fein.
According to court documents and statements made in court, Francisco Illarramendi of New Canaan, Conn. acted as an investment adviser to certain hedge funds. In approximately 2006, one hedge fund he advised lost millions of dollars of the money he was charged with investing. Rather than disclose to his investors the truth about the losses incurred, Illarramendi intentionally chose to conceal this information by engaging in a long-running scheme to defraud and mislead his investors, creditors and the SEC to prevent the truth about the losses from being discovered. As part of the scheme, Illarramendi and others created fraudulent documents, including a fictitious asset verification letter falsely representing that one of the hedge funds, the Short Term Liquidity Fund (“STLF”), had at least $275 million in credits as a result of outstanding loans, when Illarramendi and others knew it did not have any such credits.
GUILLEN is a resident and citizen of Venezuela who was the managing partner of a Venezuelan accounting firm associated with a major international accounting firm. In late 2010, GUILLEN agreed to prepare the asset verification letter that would falsely indicate that the STLF had made outstanding loans to Venezuelan companies. A co-conspirator, Juan Carlos Horna Napolitano, then worked with other persons to create a fraudulent list of loans and to incorporate this list in the asset verification letter to be signed by GUILLEN.
In approximately January 2011, GUILLEN executed the false asset verification letter and sent it by email to Illarramendi. Thereafter, GUILLEN and Horna learned that the false asset verification letter had been supplied to the U.S. Securities and Exchange Commission (“SEC”), and that the SEC had initiated a civil action against Illarramendi and others (SEC v. Illarramendi, et al., 3:11-CV-00078). In an effort to deceive and mislead the SEC and to prevent the SEC from learning during the civil action that the asset verification letter was false, GUILLEN, Illarramendi, Horna and others sought to create fraudulent documentation to falsely support the information contained in the letter. GUILLEN also participated in a telephone call with representatives of the SEC in January 2011 in which he intentionally misrepresented that the assertions in the asset verification letter about the existence of the hedge funds’ assets were true, when he knew they were false.
GUILLEN expected to receive approximately $1 million for his willingness to sign the false asset verification letter. Horna maintained control of a Florida bank account in the name of Jeislo Real Estate Investments, LLC. In furtherance of the conspiracy, Illarramendi caused two transfers of funds in the total amount of $1.25 million to be made into this bank account. As partial payment for GUILLEN’s services in this conspiracy, Horna caused $250,000 to be transferred to a third party for the benefit of GUILLEN.
As part of this case, GUILLEN has forfeited $315,000 to the government.
In a letter to the Court, David E. Bergers, Regional Director of the SEC’s Boston Regional Office stated, “…the Defendant’s conduct delayed the Commission staff’s detection of a very serious financial fraud. It also resulted in the Commission staff expending additional government resources to uncover the fraud via other methods. We consider this kind of misconduct, especially by industry professionals such as the Defendant, to be particularly damaging to investors, to our capital markets and to the Commission’s investigative mission.”
GUILLEN and Horna were arrested by FBI special agents on March 3, 2011, in Florida. On May 4, 2011, GUILLEN pleaded guilty to one count of conspiracy to obstruct an official proceeding of the U.S. Securities and Exchange Commission. Horna pleaded guilty to the same charge on May 19, 2011.
On March 7, 2011, Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment advisor fraud, and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.
Illarramendi and Horna await sentencing.
This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Senior Litigation Counsel Richard J. Schechter and Assistant U.S. Attorney Paul A. Murphy.
U.S. Attorney Fein also acknowledged the substantial assistance provided by the U.S. Attorney’s Office for the Southern District of Florida.
In December 2010, the U.S. Attorney’s Office and several law enforcement and regulatory partners announced the formation of the Connecticut Securities, Commodities and Investor Fraud Task Force, which is investigating matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act, and embezzlement. The Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Secret Service; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section and Antitrust Division; U.S. Securities and Exchange Commission (SEC); U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department and Stamford Police Department.
Citizens are encouraged to report any financial fraud schemes by calling, toll free, 855-236-9740, or by sending an email to ctsecuritiesfraud@ic.fbi.gov.
This case was brought in coordination with the President’s Financial Fraud Enforcement Task Force, which was established to wage an aggressive and coordinated effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
For more information on the task force, please visit http://www.StopFraud.gov.

I guess I should make one comment. This is the managing partner of a major accounting firm in Venezuela. So far I am unaware of an indictment for the guy in Venezuela. At what point does a country become a “failed state?”

9 thoughts on “PDVSA Pension Ponzi: Guillen sentenced

  1. www.inpraiseofchina.com

    PDVSA was arguably more corrupt before Chavez was elected, and such huge institutions are slow to change. Ditto the Venezuelan Government.
    Ditto, for that matter, the US Government which Chomsky describes as a “failed state”.

    The criteria which Chomsky and others use would, when applied to Venezuela, rank that country much higher than the USA.

    1. sapitosetty Post author

      I agree that PDVSA had corruption before Chavez was elected, but “more corrupt”? You’re going to have to present more arguments than just saying “arguably.”

      And talking smack about the USA is a very cheap way to defend Venezuela. I have paid more taxes in Venezuela in recent years than I have in the USA, so I think I have a right to demand better service from that country’s government.

      1. www.inpraiseofchina.com

        Any corporation/culture that would acquiesce to its own illegal sale to private interests and then attempt to bankrupt its own country because it did not like the democratically elected government is corrupt. Very. Perhaps hopelessly.

        Quoting Noam Chomsky, the world’s leading intellectual and MIT professor, whose books have sold millions, and whose criticisms have never been disproven, is hardly “talking smack”.

        1. Kepler

          You are not quoting Chomsky. You are mentioning him without referring to the validity or not of those criteria.

          MIT my foot. MIT professors have also pointed at electoral fraud in Venezuela’s referendum, using mathematics.
          Chomsky may have some good points on generative grammar or formal languages, but he also defended the Khmer Rouge and thinks that a poll
          now in Venezuela about whether people are happy and a comparison of such poll to the USA is “scientific” proof. My dog can do better science than that.
          First of all: is there comparison between Venezuela’s poll now with Chavez and before?
          Secondly: how reliable is it to compare happiness between countries?
          Many people in Manila slums are said to be happier than people living in Copenhagen or Zürich. And I believe they are. Does it mean Manilans are happier? Probably. But what does that really mean? Or they are only happy if the government is one Chomsky approves of because of its talk on the US?

          Einstein was also a recognized scientist. Have you read how he repeatedly defended Stalin? Not that Chavez is Stalin, but that shows how bloody wrong a “thinker” can be. Better stick to your grammar.

        2. sapitosetty Post author

          OK, that’s fine. Except that every corporation and culture in the world is, by this definition, deeply corrupt. If you’re talking about the usual definition of corruption, which is that individuals gain by breaking the publicly agreed rules, the current regime is worse.

          As far as Chomsky, just shut the fuck up. Chomsky himself has always opposed appeals to authority. Your immediate resort to such a childish fallacy shows how much you really respect him. I’d guess you just like him when his results match your prejudices.

        3. moctavio

          PDVSA did not sell any part to private interests, PDVSA found a way to finance, what could not be financed on its own, by creating partnerships which would raise the financing. In this manner PDVSA did not issue the debt but the partnerships, at a time that oil was below US$ 20 per barrel. This is the same model used in Canada and the projects were approved by the old Congress with a debate taking place and changes made to the proposed laws by current pro-Chavez politicians.

          Compare that to absolutely non-transparent “sale” of heavy crude fields to foreign Governments going on today to form partnerships, none of which have gotten off the ground and have yet to produce a barrel of oil, because there is no financing for them and PDVSA has debt of US$ 30 billion, all issued in the last four years. The result, unless oil goes to $200-300 is that PDVSA and Venezuela will have to go back to the partnership model, with the partnership issuing debt, as the country simply does not have the ability to raise the funds needed and oil production keeps going down.

          Without the projects created by the old partnerships, Cerro Negro, Petrozuata, Hamaca and Sincor, Venezuela’s oil production would be some 550,000-600,000 barrels of oil a day lower than it is today. All that oil production, by the way, has come online during Chavez’ presidency.

  2. Dr. Faustus

    Chomsky? Really? The man is a creep.

    However, since the poster appears to admire China and its economic system I would like to add a few pertinent comments. Over the past few weeks there have been increasing rumblings in the world financial markets concerning the ‘slowdown’ in the Chinese economy. This, my friends, has ominous implications. Why? Commodity prices. On OilPrice.com there was a posting, today, about the potential house-of-cards that is China. It is a must read.


    Yes, it may be an exaggeration but something that should not be ignored. It could collapse the entire economic structure of,….Venezuela as a result. Venezuela. Why? If what ‘Al Fin’ says is true, commodity prices around the globe may collapse in 2012. If oil prices sink to just 80 dollars a barrel (a not unreasonable figure), and it surely could drop further than that, Hugo and the boys are in for a heap of trouble. They’ve bet the farm that oil would remain high. They’ve built their own house-of-cards on that predicition. Two days ago Ramirez almost wept in Vienna when told that the Saudi’s would continue pumping at high rates. This is a fascinating story to pay attention to. What happens in China could reverberate around the world.

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