On June 12, 2013, the U.S. District Court for the Southern District of New York, at the request of the U.S. Department of Justice (“DOJ”), unsealed a second round of criminal charges in the prosecution of employees, managers and others affiliated with New York broker-dealer Direct Access Partners LLC (“DAP”) in connection with an alleged bribery scheme also implicating a Vice President for Finance of the Economic and Social Development Bank of Venezuela (Banco de Desarrollo Económico y Social de Venezuela (“BANDES”)), an entity of the Venezuelan state.1
The new defendant is Ernesto Lujan, a Managing Partner of the Global Markets Group at DAP, who was charged with criminal violations of the FCPA, the Travel Act, and anti-money laundering statutes as well as conspiracy to violate these laws.2
Like his co-defendants, Lujan was arrested in the Southern District of Florida and has been remanded to the Southern District of New York for further criminal law proceedings.3 Also like his codefendants, on the same day that criminal charges were unsealed against him Lujan was named as a defendant by the New York Regional Office of the U.S. Securities and Exchange Commission (“SEC”), which charged Lujan with violating Section 10(b) of the Securities Exchange Act of 1934 (“1934 Act”) and related rules, aiding and abetting those violations, and related violations of the broker registration mandates.4 As DAP is not an “issuer” under the 1934 Act, neither it nor its employees could be charged by the SEC with civil FCPA violations, though criminal and civil FCPA charges could be lodged by the DOJ against the company under the FCPA’s provisions that relate to “domestic concerns.” 5
No charges against DAP have been brought, however, and the SEC has stated the investigation “is continuing.” 6
The criminal complaint against Lujan implicates him in the scheme outlined in the DOJ’s March 12, 2013 complaint against DAP co-employees Tomas Alberto Clarke Bethancourt (“Clarke”) and Jose Alejandro Hurtado (“Hurtado”).7 The SEC action, proceeding by way of an amended complaint in the original DAP matter, alleges Lujan actively participated in the matters outlined in the SEC’s original May 7, 2013 complaint.8 The original complaint named Clarke and Hurtado, as well as Hurtado’s wife, Haydee Leticia Pabon (“Pabon”), and Iuri Rodolfo Bethancourt (“Bethancourt”), an alleged resident of Panama and apparent relative of Clarke.9 The brazen scheme alleged in the original and new filings involved the alleged payment of millions of dollars to Maria Gonzalez, a senior BANDES official, in exchange for her conniving with the charged DAP employees to create inflated bond trading profits with little or no economic risk to DAP, with millions more ending up in the pockets of Clarke, Hurtado, their family members and Lujan.10
Perhaps the most intriguing element of the new filings is the statement, in the Lujan criminal complaint, that one of the original defendants in the criminal matter, identified only as “CS-1,” has decided to cooperate with the government “in the hope of entering into a cooperation agreement.” 11 For managers such as Lujan, this case highlights the considerable difficulty faced by individual defendants given the benefits that can be obtained by alleged co-conspirators who decide to cooperate, as did Swiss attorney Hans Bodmer in the Bourke prosecution.12
Also worthy of note is the fact that Lujan (as well as his criminal codefendants) have been charged not only as officers, employees, directors or agents of a “domestic concern,” but also as “stock holders” acting on DAP’s behalf, under a little-used sub-provision of the “domestic concern” provisions of the FCPA.13 Given the detailed allegations against Lujan and the other alleged co-conspirators, including those arising from alleged emails indicating Lujan approved corrupt payments, the “stock holder” allegations would appear to have been unnecessary. They may reflect a new line of DOJ attack against active (and knowing) equity investors in both issuers and domestic concerns. The BANDES case, as it unfolds, could provide clarification of the circumstances in which so-called stockholder liability may attach under the FCPA.