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Legal battle over Venezuela's looted billions heats up

Venezuela’s interim government wants access to funds confiscated in the US from corrupt officials, saying it belongs to the Venezuelan people. But US officials appear to have other plans. The Treasury Department diverted $601 million last year from its forfeiture fund to help build President Trump’s border wall. (Leer en español)
12 Jun 2020 – 02:56 PM EDT
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MIAMI - As Venezuela slides deeper into political chaos and financial ruin, billions of dollars of public assets looted by corrupt government officials and their cronies, are being held by governments around the world, including the Trump administration, gathering dust.

Now, Venezuela’s U.S.-backed government is gearing up efforts to try and recover that money to help its impoverished population battle the coronavirus pandemic, on top of an already calamitous public health crisis.

Meanwhile, the U.S. government is fighting in court to keep control of hundreds of millions of dollars of those ill-gotten gains, part of a treasure chest of forfeited assets from around the world.

“There is a moral imperative to look closely at this issue. The need in Venezuela is growing and the scale of the corruption is industrial,” said Michael Camilleri, who is writing a report on the forfeiture funds for the Inter-American Dialogue, a Washington, D.C., group that promotes democracy in Latin America.

He estimated that more than $1 billion in looted money is currently held in the United States, either in frozen banks accounts or being held by in government forfeiture funds. As much as $24 billion may be held in accounts globally, mostly in Europe.

“Even if you could recover a small fraction of this money you would be looking at a far greater sum than the total humanitarian assistance that the international community has been able to muster up for Venezuela,” Camilleri said.

U.S. officials point out that Trump administration has provided more than $610 million since 2017 to provide emergency humanitarian assistance in Venezuela, including to United Nations agencies, for emergency food, health, and nutrition.

"The United States has long been committed to finding a solution to the man-made crisis in Venezuela," Secretary of State Mike Pompeo said in a statement announcing the administration’s latest effort to put pressure on the outlaw regime of Nicolas Maduro.

"The urgency for this has become all the more serious in light of the Maduro regime's failure to adequately prepare for and address the global COVID-19 pandemic," he added.

Piles of cash

But U.S. officials have so far appeared to turn a blind eye to the mounting pile of cash resulting from the federal prosecution of a growing list of high profile cases of Venezuelans accused of bribery and money laundering. In the process, U.S. authorities have seized hundreds of millions of dollars in bank accounts, luxury homes, cars, yachts and expensive watches.


But none of that money, the result of official corruption involving currency trading and the embezzlement of public funds from the state owned oil company, PVDSA, has been returned to the Venezuelan people.

Instead, most of the money is being collected by the U.S. Justice and Treasury Departments and held in special forfeiture funds used mostly to fund law enforcement investigations.

A small portion of the money is shared with foreign governments in cases where they can show they provided assistance and deserve a cut of the proceeds. But, so far Venezuela has received nothing.

Last year, some $601 million from the Treasury Department Forfeiture Fund went to building President Donald Trump’s border wall, according to congressional records and court documents examined by Univision.


Complicating the issue is the unresolved battle for political control in Venezuela, pitting the widely repudiated regime of Nicolas Maduro against the interim government headed by National Assembly president Juan Guaido, which is recognized by the United States and most western democracies.

The U.S. does not have diplomatic relations with the Maduro regime, who stands accused by the Justice Department of massive corruption and narco-terrorism. The Guaido government, on the other hand, is locked out of power and controls none of the country’s law enforcement agencies that might be able to provide U.S. law enforcement assistance.

“Why, if I am the United States would I share anything with Maduro if he isn’t cooperating, and the money was stolen by his government officials in the first place?” said David Weinstein a former federal prosecutor in Miami.

“As for the new government, it would be nice to give them a helping hand but why reward them if they haven’t participated in any of these investigations or done anything to help us,” he added.

"Horde of locusts"

In the process, Venezuela has gone from an oil rich country to one of the most indebted in the world, leaving behind a crushing financial crisis which has led more than four million Venezuelans to flee abroad.

“The Venezuelan people have been screwed left and right. These malandros (gangsters) are like a horde of locusts who descended on the rich and fertile oil-blessed lands of Venezuela and they have devoured everything, leaving nothing,” said Russell Dallen, a Florida-based lawyer with Caracas Capital Markets, who follows Venezuelan financial affairs closely.

In one case alone a Palm Beach court sentenced the former head of Venezuela's treasury, Alejandro Andrade, to 10 years in prison for money laundering $1 billion in bribes. His forfeited assets including jets, a $7 million mansion in Wellington, Floria with a horse farm with 17 show-jumping horses, a fleet of luxury vehicle and nine bank accounts.

Even larger sums, between $4-$5 billion have also been frozen in Europe, mostly in Spain and Andorra, the proceeds of alleged corruption at the state electricity company.

“This is a Pandora’s Box and we are not going to know everything until the end,” said Miguel Pizarro, Guiado’s Special Commissioner for Humanitarian Aid.

They bought the Ferraris and the Rolex, the mansions and the palaces with the money of the Venezuelan people. We have the rightful intent of getting that money back again,” he added.

Pizarro said the interim government of Guaido has begun the legal process to recover the looted assets through a proposed asset recovery law in the National Assembly. “We are going to need it for the reconstruction of the country after Maduro. But, in order to that, we need to build the institutional framework to be able to interact with the rest of the world and we are building that now. If we don’t do that the countries are going to keep our money,” he said.

Forfeiture funds

U.S. officials say court ordered forfeitures go into one of two funds, one administered by the Justice Department and one by Treasury Department.

Forfeited funds can potentially be returned to a requesting foreign country; however, that determination is made on a case-by-case and fact-specific basis,” a Department of Justice spokesman said.

The Justice Department fund collected $323 million in 2019, of which $73 million was shared with foreign countries, mostly $53 million which went to Malaysia, as well as smaller amounts disbursed to other nations, including Panama, the Dominican Republic, Bahamas, Ghana, and Iceland.

The Treasury Department said it does not formally track assets going into the Treasury Forfeiture Fund by country, defendant’s name, or court case name. The funds are used to pay for investigations and pay for expenses such as reward money, outside contractors and storage of seized good, such as drugs, as well as payment of overtime salaries, travel, fuel, training, and equipment.

The proceeds are also shared with other federal agencies, state and local law enforcement agencies, and foreign countries, depending on their level of participation in the investigation, according to its website.

“It seems to be just the way this works,” said Dallen. “ To be fair, we are helping them by cleaning things up down there. There is the cost of litigation and keeping them all in jail,” he added.

A Justice Department spokesman provided a partial chart of the financial judgments for sentenced defendants in Venezuela-related cases in New York, Miami and Houston totaling as much as $1.5 billion, though the amounts collected are not publicly available.

Andrade has so far paid $250 million from a Swiss bank account. Another $40 million was collected from the auction of his homes, including his horse farm in Central Florida, and luxury watches and cars, according to federal authorities.

But it remains unclear when or if the remaining $700 million will ever be delivered.

U.S. Marshals have also seized dozens of bank accounts, yachts, airplanes and multimillion-dollar homes from other Venezuelan defendants accused in the bribery and kickback schemes.

That includes $270 million in one bank account owned by an alleged frontman for former Venezuelan vice president Tarek El Aissami, as well as a collection of luxury watches, including a $250,000 Hublot LaFerrari.



In March, when the Justice Department brought drugs and terrorism charges against Maduro, the U.S. Attorney for South Florida, Ariana Fajardo Orshan, said corrupt Venezuelan government officials had “systematically looted Venezuela of billions of dollars.”

“Far too often, these corrupt officials and their co-conspirators have used South Florida banks and real estate to conceal and perpetuate their illegal activity,” she said, noting the seizure of approximately $450 million dollars.


“As I drive from my house in Miami to the U.S. Attorney’s Office in downtown Miami, I can literally see the fraud and corruption of Maduro’s regime — from multimillion-dollar condos on Fisher Island owned by corrupt Venezuelan executives and generals, to luxury yachts on Biscayne Bay and private jets owned by Venezuelan officials,” she added.

Who are the victims?

However, when it comes to who gets to keep the money from those looted assets, the U.S. appears unwilling to relinquish the cash.

In court documents, lawyers representing the Guaido government in one test case have argued that Venezuela’s state-owned oil company, PDVSA, which fueled much of the corruption, is a “victim” of the greed of government officials and therefore deserves restitution of its confiscated assets.

Under international law, including the 2003 United Nations Convention Against Corruption, the U.S. may not have such a strong claim to the funds, according to some experts.

“The money doesn’t belong to the United States. It’s Venezuela’s money,” said Jose Gonzales, a corporate financial advisor in New York who is familiar with the Venezuela case.

But federal prosecutors in Miami responded in May saying that PDVSA “does not qualify as a victim” due to its “complicity in the bribery and money laundering schemes” and because a sovereign entity cannot be considered crime victim.

The law providing restitution to crime victims only applied to individuals directly harmed, the prosecutors argued. It was not applicable where “the number of identifiable victims is so large as to make restitution impracticable,” they added, noting that Venezuela was a nation of almost 28 million people.

$601 million for the wall

Last year Trump declared a national emergency after losing a fight with Congress over funding for the wall that led to the 35-day government shutdown. He used the emergency to siphon $8 billion for wall construction from other government accounts, including $600,993,368.26 from the Treasury Forfeiture Fund.

Several unsuccessful efforts were made in Congress and the courts to block Trump using the confiscated assets for the wall. A bill in the House of Representatives sought to include a provision that “prohibits the use of funds from the Treasury Forfeiture Fund to plan, design, construct, or carry out a project to construct a wall, barrier, fence, or road along the southern border of the United States.”

But the wording was dropped in final passage of the bill due to Republican opposition.

The American Civil Liberties Union also challenged the emergency declaration in California court, but U.S. officials insisted they were following the letter of the law regarding the handling of assets in such cases. “ These expenses do not have to be related to seizure and forfeiture; they simply have to be law enforcement related,” John Farley, the director of the Treasury Department’s Executive Office for Asset Forfeiture, told the court, saying the wall fit that description as it was designed to keep out drugs and criminals.

He did not specify if the $601 million included any of the looted Venezuelan assets.

The U.S. Border Patrol says it plans to use the Treasury funds for border barrier projects in the Rio Grande Valley Sector, according to court docuements. Loren Flossman, the Acquisition Program Manager for the Wall Program at the U.S. Border Patrol, stated in court testimony in January that the funds would be used to construct border barriers in Hidalgo County and Cameron County, as well as raising the height of a planned segment of barrier in Starr County, Texas, from 18 feet to 30 feet.


Some funds would be used "for real estate planning activities for future year barrier construction in the United States Border Patrol’s priority locations along the southwest border," she stated. " CBP would allocate any remaining [Treasury Forfeiture Funds] to other activities in support of CBP’s law enforcement border security mission," she added.

Humanitarian dilemma

But some say the U.S. government should take into consideration the economic collapse of Venezuela and the devastating impact on its starving people, which has sparked an exodus of more than four million refugees.

Last year Republicans and Democrats pushed legislation to provide relief to Venezuela’s people, the so-called VERDAD Act , which requires the State Department “to establish a strategy to identify, block, and recover assets taken from the people and institutions of Venezuela through theft, money laundering or other illicit means.”

The State Department is due to deliver its strategy on June 15.

Kleptocracy Asset Recovery

“There are examples where creative thinking has been brought to bear,” said Camilleri, who is a specialist in human rights law.

In 2015, the U.S. was able to return $115 million to Kazakhstan that originated from corruption in that country, via a Kleptocracy Asset Recovery Initiative. In that case, the funds were returned via the creation of a charitable foundation overseen by the World Bank to provide scholarships and financial assistance to poor families.

The Venezuelan government also has an estimated $11.5 billion in "clean" frozen assets abroad, mostly the proceeds from oil sales that the Trump administration has so far declined to hand over to Guaido. But, the Venezuelan government owes so much international debt, including to U.S. bond holders, that its assets are likely going to be tied up in court battles for years.

For now, the Gauido only has access to $80 million in a frozen Venezuelan Central Bank account that was put under his control after the Trump administration withdrew its recognition of Maduro last year.

In a rare sign of cooperation, the rival Maduro and Guaido governments last week jointly agreed to channel humanitarian assistance to tackle the coronavirus response.

The Guaido government plans to dedicate $15 million to pay thousands of doctors and nurses $100 a month for three months, through the International Red Cross and the Pan American Health Organization, officials say.

It’s a start says Pizarro. But it’s a painfully slow bureaucratic process that requires going through hoops in the National Assembly as well as negotiating U.S. sanctions rules in the United States.

“We have to show this money is not to going to end up being used for corruption,” said Pizarro. “We don’t want to be in any scandal.”

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