UNITED STATES/VENEZUELA - The US federal investigation into corruption at Venezuela’s state-owned oil company, Petróleos de Venezuela SA (PDVSA), shows no sign of abating.

 

US authorities opened an investigation into corruption and money laundering tied to PDVSA’s joint ventures with major international companies in late 2017. They have since unearthed “wide-scale corruption”, according to an affidavit by a Homeland Security Investigations official on 20 March that was filed as part of a criminal complaint.

 

The same document said PDVSA had a majority stake in each of the joint ventures and also controlled the procurement process. None of the joint venture partners have been accused of wrongdoing.

 

The Petrocedeño scheme

On 12 March, a Miami federal court unsealed bribery-related charges against former PDVSA general counsel Edoardo Orsoni and Petrocedeño’s ex-procurement chief Lennys Rangel. Petrocedeño is a joint venture between majority partner PDVSA and minority partners Total, a French oil company, and Equinor, a Norwegian oil business.

 

According to two charging documents originally filed under seal in November, Orsoni and Rangel took bribes from a contractor who ran several companies in exchange for awarding business to them. Both individuals appeared before a Miami federal court on 12 March, entered not guilty pleas and were released on bond.

 

Rangel agreed to take over $5 million in return for awarding Petrocedeño contracts to the Florida contractors, her information says. Orsoni, meanwhile, also agreed to receive cash for directing Petrocedeño (and another unnamed PDVSA subsidiary) business to certain contractors. Both of them acted under orders from other unnamed senior PDVSA officials, court documents say.

 

Equinor declined to comment while Total did not return a request for comment. A lawyer for Orsoni, Michael Diaz at Diaz Reus & Targ, declined to comment while a lawyer for Rangel, Felipe Jaramillo, did not return a request for comment.

 

Petrocedeño part of larger scheme 

Then on 20 March, US federal prosecutors filed a criminal complaint against a contractor accused of paying bribes to secure business with several PDVSA joint ventures (including Petrocedeño): Leonard Santilli, a Venezuelan and Italian citizen who controlled companies in various places, such as Florida.

 

According to the complaint against Santilli, the corruption scheme went much further than Petrocedeño. Santilli’s companies secured inflated contracts from Petrolera Sinovensa (a joint venture with China National Petroleum Company), Petromonagas (a joint venture with Russian oil giant Rosneft), Petropiar (a joint venture with US oil company Chevron) and PDVSA’s procurement arm, Bariven.

 

Chevron spokesperson Ray Fohr said the company “is a positive presence in Venezuela”, adding that it and its affiliates “abide by a code of business ethics under which we comply with all applicable laws and regulations, and we expect our business partners to conduct business in compliance with these requirements as well.” Rosneft did not return a request for comment.

 

Some of the money from the inflated contracts then wound up with PDVSA officials or senior officials in the Venezuelan government or military, according to the complaint. Payments from the joint ventures to various contractors including Santilli totalled $1 billion, the court document said. Santilli’s companies received $146 million.

 

Also on 20 March, US federal prosecutors filed a criminal information against Carlos Enrique Urbano Fermin, a Venezuelan businessman who ran several contractors that supplied services to PDVSA.

 

Prosecutors alleged that Urbano bribed an unnamed senior Venezuelan prosecutor to save his companies from being charged with “corrupt activities related to the procurement process” at Petrolera Sinovensa and PetroMiranda, a joint venture between majority stakeholder PDVSA and a minority stakeholder, an unnamed Russian oil company. In 2014, Russian oil company Lukoil sold its stake in PetroMiranda to Rosneft.

 

Urbano’s lawyer, Norman Moscowitz at Moscowitz & Moscowitz, and Santilli’s lawyer, Wifredo Ferrer at Holland & Knight, did not return a request for comment.

 

PDVSA probe’s growing lines of enquiry

This is not the first time US charging documents have highlighted corruption at PDVSA’s joint ventures.

 

In 2018, Abraham Ortega, ex-director of planning at PDVSA, told federal prosecutors that he took $5 million in bribes to assist two joint venture partners: an unnamed French oil company and a Russian financial institution. They have been later identified in reports as French oil company Perenco and Russian financial firm Gazprombank. Neither company has been accused of wrongdoing.

 

The Ortega prosecution is part of a separate investigation into a billion-dollar conspiracy among Venezuelan officials and others to profit by gaming the difference between the Latin American country’s official currency exchange rate and a much lower black-market exchange rate. That case is being handled by Miami assistant US attorney Michael Nadler and FCPA unit trial attorney Paul Hayden.

 

Miami federal prosecutor Michael Berger and John-Alex Romano, a trial attorney in the Foreign Corrupt Practices Act unit in Main Justice, are listed as handling the cases against Orsoni, Rangel, Urbano and Santilli.

 

US investigators are also looking into potential bribery of PDVSA officials by commodity companies such as Glencore.

 

Meanwhile, federal prosecutors in Texas have teamed up with the FCPA unit to uncover more bribery at PDVSA, including at its US subsidiary Citgo.

 

Orsoni, incidentally, also held a senior role at Citgo from 2016 (after his alleged misconduct), and was one of a handful of executives at the Houston-based company who were summoned to PDVSA headquarters in Caracas in November 2017. The other executives were subsequently detained on corruption charges, and remain in Venezuela. But Orsoni wasn’t one of them and he managed to leave the country. He’s now in the US. In the complaint against Santilli, the description of cooperating witness five matches with Orsoni.

 

A US Department of Justice criminal division spokesperson declined to comment.

 

The Wall Street Journal reported on 22 March that the latest PDVSA-related charges were planned as part of a larger volley of enforcement actions tied to Venezuelan corruption. But some of those actions have been held back because of the coronavirus pandemic, the report said.