Jan-Michael Simon

Versión en español aquí.

In a notorious, internationally known context of widespread public corruption in Venezuela, the justice systems of foreign states are expected to respond effectively when their territory is used to launder money gained from corrupt practices in Venezuelan territory. In the first part of a series of blogs, the author analyzes two criminal cases in progress before the US courts (the Housing case and the Food for Venezuela case). The author concludes that, in the event of a conviction, the custodial sentences will probably be for long terms and the total amount of money involved in laundering will be confiscated. In a second part of the blog series, it will be analyzed how the Mexican courts have dealt with the ramification of the Food for Venezuela case in Mexican territory.

Introduction

A criminal proceeding against a self-proclaimed Venezuelan «anti-blockade agent» is currently underway before the U.S. justice system. This process represents another step in the search for accountability abroad for Venezuela state corruption. The individual’s image as a «Venezuelan ambassador, [who] has provided basic foodstuffs… to meet the needs of social welfare programs in Venezuela,» contrasts with legal actions in the U.S. brought against him and his associates.

U.S. authorities have charged the defendants with conspiracy to commit international money laundering and laundering of monetary instruments worth hundreds of millions of U.S. dollars. These would come from their transnational businesses, linked to acts of corruption of the Venezuelan State in investing in the welfare of its population, particularly public corruption related to the importation of basic foodstuffs.

Corruption of the Venezuelan State

The self-appointed «anti-blockade agent» is a businessman originally from Colombia, named Alex Nain Saab Morán. According to investigative journalists, Alex Saab –together with his compatriot, Alvaro Enrique Pulido Vargas– went from medium-sized trader to international businessman in a short period of time. Saab executed a variety of contracts with the Venezuelan State worldwide that reached amounts in millions of U.S. dollars of very high digits. This happened, according to investigative journalists, particularly under the administration of Nicolás Maduro.

Alex Saab’s partner, Álvaro Pulido, is also known as Germán Enrique Rubio Salas. Rubio Salas was convicted in 1997 in Italy for drug trafficking. After being captured in 2000 in Colombia, and requested for extradition by Italy, Rubio Salas allegedly collaborated with the Colombian justice in a process for money laundering and drug trafficking, and changed his identity to that of a deceased person named Álvaro Enrique Pulido.

Because of fraudulent practices and public corruption, Alex Saab and Álvaro Pulido have been sanctioned by the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department –pursuant to executive order number 13,850, as amended by order number 13,857– and by the Secretary of the Treasury of the United Kingdom. In addition to several of their family members and multiple companies in numerous countries around the world under their ownership or control, or for their participation in the fraudulent/corrupt practices, the U.S. sanctions include other Venezuelan nationals, in particular, three stepchildren of Nicolás Maduro.

Maduro’s stepchildren are alleged to have received kickbacks from Alex Saab in exchange for facilitating his access to Venezuelan officials and in the corrupt awarding of public contracts. The kickbacks allegedly came from Alex Saab’s profiting from the execution of corrupt contracts with Nicolás Maduro’s administration to supply food to public social welfare programs. Saab allegedly met in 2016 with Nicolás Maduro and his stepchildren to discuss the importation of food on behalf of the Maduro administration, and since then Alex Saab and Álvaro Pulido have allegedly earned hundreds of millions of U.S. dollars from these schemes.

The relationship between Alex Saab and the administration of Nicolás Maduro became public, mainly due to the measures adopted to shield Saab internationally against actions of the U.S. justice system. After his capture in the territory of the Republic of Cape Verde in June 2020 and the extradition request from the U.S., the administration of Nicolás Maduro announced that Alex Saab had acquired Venezuelan nationality, designating him as «Alternate Permanent Representative of Venezuela to the African Union.»

His relationship with the Maduro administration became especially notorious when, after more than a year of litigation, and once the last judicial appeal against his extradition to the U.S. was exhausted before the Constitutional Court of Cape Verde, the Maduro administration appointed Alex Saab as a full member of its delegation in the so-called «process of dialogue and integral negotiation» in Mexico with Venezuelan opponents. Following the surrender of Alex Saab to the U.S. by Cape Verdean authorities in October 2021, the Maduro administration suspended the negotiation process, denouncing Saab’s extradition as the «kidnapping of Venezuelan diplomat Alex Saab by the U.S.»

The extradition of Alex Saab takes place in a context which has been described by the U.S. Treasury Department (see Notice FIN-2017-A006, updated by FIN-2019-A002 in 2019) as «widespread public corruption in Venezuela» pointing out, in particular, corruption of the Venezuelan State’s sector for indirect food subsidies.

A series of journalistic investigations by the Armando.info portal, dubbed «the Alex Saab case», pointed to public corruption –especially in the food subsidies sector–, transnational money laundering involving multiple jurisdictions, and the use of professional stratagems of creating a variety of front and shell companies and opening dozens of personal and corporate bank accounts, spread across three continents.

Accountability in the U.S.

A Grand Jury indictment in the U.S. District Court for the Southern District of Florida, issued in July 2019, charges Alex Saab and Alvaro Pulido with the crimes of conspiracy to commit international money laundering and laundering of monetary instruments derived from corrupt practices abroad. Alex Saab has pleaded not guilty. A status conference to select a trial date is scheduled for January 7, 2022. In parallel, in another trial before the U.S. Court of Appeals for the Eleventh Circuit, Saab is challenging the indictment in the Southern District of Florida and the U.S. jurisdiction, claiming immunity derived from his status as a diplomat appointed by the Nicolás Maduro administration.

Meanwhile, Alvaro Pulido remains a fugitive. U.S. authorities believe he resides in Venezuela. The State Department’s Transnational Organized Crime Reward Program is offering up to US$10 million for information leading to the arrest and/or conviction of Alvaro Pulido.

Housing for Venezuela case 

Although he was indicted under eight counts, Alex Saab now faces a single count of conspiracy to commit international money laundering of proceeds from corrupt practices abroad (18 USC §§1956(h), 1956(a)(2)(A), 1956(c)(7)(B)(iv), 1957(a) and 15 USC §78dd-3) at trial in the Southern District Court of Florida. The conspiracy allegedly involves bank accounts in the Southern District of Florida to launder approximately US$350 million to/from and through a location outside of the U.S. These funds would be derived from crimes against a foreign nation, specifically, Venezuela. The offenses allegedly consist of corruption schemes in the State’s social housing construction sector.

The U.S. District Court for the Southern District of Florida, pursuant to 18 USC App Rule 48(a), had authorized the prosecution to dismiss seven counts of the indictment against Alex Saab for international laundering of monetary instruments, without affecting the eight counts against Alvaro Pulido. According to the prosecution, this action was necessary to comply with a diplomatic assurance given by the U.S. to the Republic of Cape Verde during the extradition process, not to expose Alex Saab in the U.S. to a penalty that does not exist in Cape Verde, in particular, life imprisonment (prohibited under Article 32 of its Constitution).

Food for Venezuela case 

In a separate indictment from a Grand Jury in the jurisdiction of the Southern District of Florida, issued just a week before his extradition to the U.S., Alex Saab is listed –without being formally charged–  as «co-conspirator 1» with Alvaro Pulido and others. The defendants are charged with conspiracy to commit money laundering and laundering of monetary instruments totaling approximately US$180 million to/from and through a location outside the U.S., from July 2015 through at least 2020 (mainly, between the years 2016 and 2019). These funds allegedly stemmed from crimes against Venezuela, specifically, from corruption schemes in the Venezuelan state’s indirect food subsidy sector, from which those involved allegedly received nearly US$1.6 billion from the state, a value subject to forfeiture in the event of a conviction (18 USC §982(a)(1)), according to the indictment.

As for the manner and means of the conspirators in the Food for Venezuela case, the indictment points to a Mexican offshoot of the case. Those involved are deemed to have «used numerous companies, which they controlled, to enter into contracts with the Venezuelan government to manufacture and export boxes of food from Mexico… to import the boxes… and distribute them within Venezuela, to receive money pursuant to the contracts awarded by the Venezuelan government, to make bribe payments to the Venezuelan government officials, including those officials in charge of awarding the contracts… distribute the proceeds of the corruptly obtained contracts… and to conceal the nature and purpose of the proceeds of the illegal bribery scheme».

It should be noted that Alex Saab’s status as an unindicted co-conspirator in the Food for Venezuela case raises complex questions about the prosecution’s tactics. Beyond reasons that could be related to Alex Saab’s extradition process and evidentiary reasons regarding the sentencing in the Housing case (see below), they could respond to a litigation tactic specific to the case. According to Department of Justice guidelines (JM Guideline 9-11.130), the practice of naming «unindicted co-conspirators» is exceptionally permitted where there is «some significant justification». It’s possible objectives in the present case cannot be delved into as such an assessment would be purely speculative, for lack of substantive information due to confidentiality (per JM Guideline 9-27.760) and other sufficiently strong indicia. In any event, the prosecution’s objective will likely be revealed in the course of the trial.

Probable penalties in the U.S.

Before the U.S. District Court for the Southern District of Florida, Alex Saab is only charged in the Housing case and not in the Food for Venezuela case. He faces a single count of conspiracy to commit international money laundering, for which the maximum term of imprisonment is 20 years under 18 U.S.C. §1956. It should be noted, however, in light of Part S of the United States Sentencing Guidelines (USSG Part S), a possible involvement of Alex Saab in the predicate offense –including on more than one occasion; the possible high value of the funds involved in the predicate offense and/or the loss to the State of Venezuela due to the predicate offense; and the possible involvement in the predicate offense of an elected Venezuelan public official in a sensitive or high-level decision-making position.

In addition, the prosecution has announced that it may, pursuant to 28 USC App Rule 404(b), incorporate the facts of the seven dismissed counts into the body of evidence in the Housing case, as well as of Alex Saab’s «past bad acts» in other cases – in particular, in the Food for Venezuela case – even though they are not charged in the indictment. They would be «extrinsic act evidence», that is, acts that are not part of the facts that are the subject of the charge of the indictment being tried. This could be a tactic of seeking to indicate to the jury that the crime with which the prosecution charges Alex Saab was committed as part of a pattern of criminal conduct as a livelihood, in terms of USSG §4B1.3, which could increase the penalty beyond the maximum specified in 18 USC §1956 of 20 years imprisonment, if the jury were to find it proven beyond a reasonable doubt (Apprendix v. New Jersey, 530 U.S. 466 (2000)).

Accordingly, the possible penalties in the proceeding against Alex Saab would be calculated as follows. In the event that the basis for sentencing would be (i) the conspiracy to launder US$350 million by means of a sophisticated scheme; (ii) the fact of having committed the predicate offense –of corrupt practices abroad– although without defining it for punitive purposes; or (iii) the fact that the foregoing is part of a pattern of criminal conduct as a livelihood; this would entail, pursuant to USSG §2S1. 1, a term of imprisonment of 292 up to 365 months, unless (i) the laundering could not be established by means of a sophisticated scheme; or (ii) Saab would accept his responsibility (USSG §3E1.1), in which case the term of imprisonment would be 235 up to 293 months.

If for punitive purposes, in addition to the above, to include –as a predicate offense for conspiracy to commit international money laundering– corrupt practices abroad that would involve (i) a value of payment, a benefit received or to be received in exchange for payment, a value of any asset obtained or intended to be obtained by a public official or other persons acting with a public official, or a loss to the government from the offense, of at least the same value of the laundered funds; (ii) more than one act of bribery; and (iii) to an elected public official or any public official in a sensitive or high-level decision-making position; pursuant to USSG §2S1. 1, the penalty would be life imprisonment, without the possibility that an eventual acceptance of responsibility could result in a reduction of the amount of the penalty.

To this is added, in addition to a fine of US$500,000 (USSG §8C3.1), according to the indictment, the forfeiture of approximately US$350 million, on top of a total of US$13 million previously seized.

Conclusion

The justice system of the United States prosecutes acts of money laundering committed via corruption of the Venezuelan State, when the perpetrators use the United States territory. In the event of a conviction, it is probable that Alex Saab will receive a long prison sentence and that the total amount of money involved in money laundering will be confiscated. The second part of this blog series will demonstrate the flagrant disparity between the approach to corruption of the Venezuelan State by the US justice system and the way in which the Mexican authorities treat such conduct in their territory.

Continued to Part 2.

Updated on Jan 26th, 2022 at 5:33 PM (EST).
Picture of Alex Saab via United States Department of the Treasury.