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Catch of the Week — Former Swiss Bank Executive Helped Launder $1.2 Billion Dollars

Posted  August 27, 2018

Although the conviction of Paul Manafort and plea of Michael Cohen are certainly the highest profile fraud news of late, our Catch of the Week goes to a guilty plea that captured fewer headlines but involved much higher dollars: Matthias Krull, former executive of Swiss bank Julius Baer Group Ltd., pleaded guilty to conspiracy for his involvement in an international scheme to launder more than a billion dollars.

At the center of the scheme was the alleged embezzlement of $1.2 billion from Venezuela’s national oil company, Petroleos de Venezuela SA. PDVSA, as it is commonly known, is the cornerstone of Venezuela’s economy. In his plea, Krull detailed that the conspiracy of which he was a part began in late 2014, when alleged co-conspirators contrived to steal $600 million from PDVSA. They soon doubled that number.

With over a billion dollars in hand, the alleged conspirators faced the stumbling block that so many do: how to clean up and hide the money so they could put it to use. That’s where the Swiss banker came in. Krull, a relationship manager based in Panama, was recruited to the scheme in 2016, and he used his expertise to funnel the funds through Florida real estate and bogus investment schemes.

Notably, Krull’s story points to a larger issue facing law enforcement trying to stop embezzlement and bribery. He admitted in his plea that these schemes depended on what DOJ’s press release called a “network of professional money launderers” that included money managers, banks, and brokerage and real estate investment firms. Taking down this network is the ultimate goal of law enforcement, pursued by teams like the Organized Crime Drug Enforcement Task Force (OCDETF) “Operation Money Flight” that leads this investigation. But the network operates so deep in the shadows that it won’t be an easy task without the assistance of knowledgeable insiders to point them in the right direction.

Krull may be one such insider. While far from a voluntary whistleblower, faced with the threat of up to ten years in prison, he has agreed in his plea to assist prosecutors in developing their case.

Krull’s plea comes a few weeks after his arrest in Miami. Numerous alleged co-conspirators, mostly Venezuelan nationals, were charged at the same time. Gustavo Adolfo Hernandez Frieri was arrested in Sicily and will be subject to extradition proceedings, but the others remain at large. According to current CEO Bernhard Hodler, the bank itself is not being charged, but it has reportedly launched an internal investigation.

Given the vast amounts of money it controls, with assets estimated in the hundreds of billions, it’s not surprising that this is not the first international scheme targeting PDVSA. Previously, as reported by Bloomberg, in 2016, Switzerland froze $118 million in bank assets it determined were linked to bribery that led to PDVSA granting $1 billion in energy supply contracts.

Tagged in: Catch of the Week, Financial and Investment Fraud, Money Laundering,