As Venezuela spiraled into impoverished hellscape, rich expats cashed in, records reveal
A few years ago, Venezuelan money maven Martin Lustgarten was stuck in a federal lockup on charges of laundering millions of dollars for Latin American drug traffickers as he confronted the grim reality of spending the rest of his life in prison.
Today, Lustgarten is a free man living in a $1 million Miami high-rise unit overlooking Biscayne Bay in a building aptly called Blue Condo — his criminal case dismissed because federal prosecutors mishandled it and couldn’t even take him to trial.
Lustgarten continues to count the money he amassed as a currency broker for Venezuelan business elites suspected of stealing billions and moving their fortunes to bank accounts in Switzerland, Hong Kong, Panama and Miami, according to sources familiar with his history. But behind the scenes, he has also been helping the federal government build criminal cases against his former compatriots.
Since pleading guilty to a minor visa violation in late 2015, Lustgarten has been assisting federal investigators and prosecutors in a sprawling Miami money-laundering probe targeting a former Swiss banker, a handful of connected Venezuelan businessmen and high-ranking government officials. They are suspected of paying hefty bribes while enriching themselves off the regimes of President Nicolás Maduro and his predecessor, Hugo Chávez, the late leader of the country’s socialist revolution.
In his cooperating role, Lustgarten’s value has been in pointing U.S. authorities in the right direction. He gave them a computer hard drive that he had obtained from a former Swiss banker, Charles De Beaumont, who became a business partner with Lustgarten after he left his bank, Compagnie Bancaire Helvetique, at the end of 2012, several sources familiar with his assistance said.
The hard drive, which De Beaumont shared with Lustgarten, detailed the money manager’s and the Swiss banker’s dealings with Venezuelan TV mogul Raul Gorrín and Venezuelan brothers Luis and Ignacio Oberto, both suspected kleptocrats close to the Venezuelan presidents, those sources said. The cadre of people close to Chávez and Maduro who have gotten rich under their regimes have their own class label: boliburgueses, a variation of bourgeoisie.
According to a “Suspicious Activity Report,” or SAR, filed by HSBC Bank USA with the Treasury Department, Lustgarten’s various companies transmitted and received at least $402 million through banking accounts for Venezuelan and other business clients around the world between 2010 and 2016. Another SAR filed by Standard Chartered Bank shows that Lustgarten’s businesses did at least $346 million in transactions with global customers, including in Miami, between 2007 and 2015.
The amounts, reported by just two of the banks used by Lustgarten, are striking. They represent seven times as much money as the $100 million he was accused of laundering through U.S. bank accounts for Colombian and Mexican drug cartels in his criminal case, which was originally filed by federal prosecutors in Boston where Lustgarten had been an informant for the Drug Enforcement Administration. Their case was eventually transferred to Miami, where most of the alleged laundering took place, but it was eventually dismissed because Boston prosecutors were unable to obtain Swiss bank evidence in a timely way to go to trial.
The full panorama of Lustgarten’s machinations is highlighted in a massive leak of documents consisting of SARs — documents filed mostly by bank compliance officers when it appears transactions show a pattern of potential money laundering or other possible illegality. By offering drug cartels and kleptocrats the means to clean their profits through shell companies and legitimate banks, money launderers prop up corruption and facilitate the criminal underworld, U.S. authorities say.
In the case of Venezuela, money laundering has allowed elites to drain the country of its wealth, turning it into a hellscape of hyperinflation, malnutrition and rampant violence despite vast oil reserves. Millions of Venezuelans have fled the country to neighboring Colombia, South Florida and elsewhere.
The leaked documents — the financial equivalent of unverified intelligence reports — were obtained by the online news site BuzzFeed News and shared with the International Consortium of Investigative Journalists. ICIJ assembled a global team of news organizations to analyze the records, including, in the United States, the Miami Herald, el Nuevo Herald and their parent, McClatchy. Their stories are being published as part of a series called The FinCEN Files.
The project is based on more than 2,100 unique SARs, involving flagged transactions exceeding $2 trillion in total. Some 110 news outlets from 88 countries pored over the documents, which include reports sent not just by banks, but other financial companies to the Treasury Department’s intelligence unit and the Financial Crime Enforcement Network, or FinCEN.
About the FinCEN Files investigation
FinCEN has declined to comment on any of the specifics in the leaked documents. It has, however, posted a notice on its website warning about any further leaks.
“The unauthorized disclosure of SARs is a crime that can impact the national security of the United States, compromise law enforcement investigations, and threaten the safety and security of the institutions and individuals who file such reports,” the warning says in part. “FinCEN has referred this matter to the U.S. Department of Justice and the U.S. Department of the Treasury’s Office of Inspector General.”
The SARs underscore how four years after publication of the Panama Papers, the groundbreaking journalistic series that exposed the full scope of dirty money hopscotching around the globe through offshore shell companies, money laundering still flourishes — with Miami an essential outpost.
Lustgarten, who before owning a residence in Miami had bought an Aventura high-rise apartment in 2010, is recognized as a financial wizard by his allies and enemies alike. He grew wealthy by earning millions in fees as a broker in thousands of global financial transactions — many described as suspicious money-laundering activity in federal court records and in reports by the banks that handled his accounts.
Once a confidential informant for the DEA, court records show, Lustgarten was able to curry favor with the feds because of his extraordinary insider knowledge. His field of expertise was collecting U.S. dollars from various global sources and transferring the money through shell companies to all sorts of clients — including Venezuelan business people who needed the valuable currency to operate their companies or capitalize on the country’s bolivar exchange system. That system allows a privileged few to trade bolivars for dollars at a highly favorable rate.
In his own words, Lustgarten described his relationship with business clients and federal investigators in electronic messages that were filed as evidence in his original money-laundering case.
“Not [many] people can do what I do and how I do it,” Lustgarten told the Swiss banker De Beaumont in a series of April 2014 email chats, a year before Lustgarten was arrested on money-laundering charges linked to cocaine traffickers. “And I enjoy a very high level of protection because I have delivered already a couple of drug dealers and a guy ... trading with Iran. The drug dealers because I had no choice, the Iran guy just for fun.”
De Beaumont took note of the “giving up people just for fun” language, and asked: “Do you realize what you wrote for one second?”
The FinCEN Files: Money laundering is a dirty, even deadly business. Miami plays a huge role
Lustgarten responded: “I told you in Feb they asked me about the Obertos and about Gorrín. And I have kept my mouth shut. … And last time I told you I don’t feel like protecting the Obertos anymore. What has that to do with you?”
At one point, De Beaumont urged Lustgarten not to talk with the federal investigators: “I really think as a FRIEND you should stop talking to those people, Martin.”
Lustgarten wrote that he appreciated the “friendly advice,” but “sometimes you are between a rock and a hard place. ... When I got into a relationship with them, they had seized all of our money and would only release it in exchange for information on a client who ... was money laundering thru our accounts. ... Every 3 months they meet with me and give me a list of people who they deemed of interest. I just have to be alert.”
After his arrest in April 2015, Lustgarten would turn on De Beaumont, the Oberto brothers and Gorrín in an effort to regain his freedom and the millions that the feds had frozen in his U.S. and Swiss bank accounts, according to sources familiar with the money broker’s assistance to federal authorities.
Gorrín was eventually indicted in 2018 on foreign corruption and money-laundering charges stemming from hundreds of millions of dollars that prosecutors say he paid in bribes to former Venezuelan national treasurer Alejandro Andrade, who pleaded guilty in South Florida and is serving a 10-year sentence. Authorities froze all of Gorrín’s U.S. assets, including 24 luxury properties in Miami and New York. His lawyer, Howard Srebnick, did not respond to a request for comment.
De Beaumont, who worked for CBH bank in Switzerland and later as an independent financial broker, has not been charged. His attorney, George Yoss, did not respond to a request for comment, either.
While living in their waterfront Miami Beach condos the past four years, Luis and Ignacio Oberto turned over their Venezuelan passports to U.S. authorities to demonstrate that they would not leave the country during the U.S. investigation into their business affairs, according to sources familiar with the probe. Their purpose was to show that if they ever were charged with money laundering in Miami, the brothers would qualify for a bond because they stayed put during the probe.
But in July, they requested and obtained their passports from U.S. authorities in order to visit the Dominican Republic and possibly other countries. Still under investigation, the brothers are not expected to return to South Florida, said sources familiar with the Obertos’ movements. The sources questioned why federal authorities did not try to persuade the brothers, the scions of a prominent Venezuelan banker, to stay in the United States.
Asked why authorities returned the Obertos’ passports, the U.S. Attorney’s Office in Miami declined to comment. Legally, prosecutors did not have a basis for keeping their passports, sources said, despite the ongoing investigation.
The Obertos’ defense attorneys, Ed Shohat and David O. Markus, issued a statement condemning the Miami Herald and el Nuevo Herald for engaging in “a sustained effort to portray them as unethical persons involved in criminal activities, bending and stretching the truth and facts in a totally unsubstantiated fashion.” The lawyers added: “The Obertos have been charged with nothing and are not cooperating with U.S. authorities. Your articles have only served to feed the political screed against them in their native country.”
According to a Suspicious Activity Report filed by HSBC Bank USA with the Treasury Department, Lustgarten’s companies conducted hundreds of millions of dollars in global transactions with business customers — including several with Panamanian companies owned by Gorrín and the Oberto brothers.
The secret bank documents often draw a straight line between the failure of financial institutions to stop the illicit flow of money and often-unchecked criminal activity on a global scale. In Lustgarten’s case, a handful of major banks that did transactions with his companies filed their Suspicious Activity Reports with the Treasury Department’s FinCEN division after he was indicted on money-laundering charges in 2015, confidential records show.
Among the reports filed by HSBC and other international banks with FinCEN:
▪ Gorrín’s Panamanian company, Bellsite Overseas S.A., originated nine “suspicious” wire transfers totaling $55.5 million to Lustgarten’s company, ANL Services Ltd., from 2010 to 2012, according to HSBC. Its report noted that the Bellsite transfers to ANL Services were for either “purchase order financing” or “repayment of loan.”
The report also related that “Bellsite was found to be a Mossack Fonseca/Panama Papers registered entity,” a reference to the now-defunct Panamanian law firm that set up offshore shell companies in South Florida, Switzerland and other parts of the world for wealthy clients in order to hide their bank transactions and investments. Mossack Fonseca specialized in establishing offshores for the world’s rich and powerful — including some of Lusgarten’s companies. The Miami Herald, el Nuevo Herald, McClatchy and the International Consortium of Investigative Journalists, among scores of others, reported on Mossack Fonseca in the Panama Papers in April 2016.
▪ The Oberto brothers’ Panamanian company, Violet Advisors S.A., transferred $6 million in one wire transaction to Lustgarten’s AL Services Ltd., which had a similar name to his other business ANL Services, between 2010 and 2016. The HSBC report notes the following: “A review of the counterparties found that Violet Advisors S.A. is linked to PDVSA, a state-owned Venezuelan petroleum company, scheme to assign U.S. dollars to entities wanting to offload Venezuelan Bolivares — Violet Advisors was noted as one of these entities.”
▪ The Obertos’ Violet Advisors transferred $4 million in one wire transaction to Lustgarten’s AL Services Ltd. on March 22, 2012, using an account at UBS AG branch in Stamford, Connecticut, according to a report filed by Standard Chartered Bank.
HSBC officials said in a 2017 report filed with FinCEN that the “suspicious transactions” by Lustgarten’s businesses appeared to match the scheme detailed in the indictment” brought against him in 2015.
Lustgarten, 55, who was born in Venezuela and has citizenship in that country and Austria, declined to be interviewed for this story. His defense attorney, Nathan Diamond, also declined to comment.
Diamond was successful in getting his client’s money-laundering case dismissed in late 2015 after he persuaded a federal judge in Miami to order Boston prosecutors to go to trial under a “speedy trial” rule. But because those prosecutors had not obtained critical banking evidence from Swiss authorities, they left themselves unprepared to make their case against Lustgarten at trial — so they were forced to drop the money-laundering charges.
Before his arrest that year, Lustgarten was known as a go-to financial expert during the Chávez presidency when the socialist leader implemented strict foreign currency controls. Lustgarten advised business clients on the highly lucrative “permuta” market, where dollar-denominated bonds were purchased in bolivars and oftentimes sold abroad in dollars. These instruments became a useful source of hard currency for multinationals and large Venezuelan companies finding it difficult to exchange their bolivars for dollars inside Venezuela.
The permuta market, however, also became an ideal money-laundering instrument, according to U.S. investigators, allowing kleptocrats and drug traffickers to clean their dirty dollars by selling them for bolivars in the Venezuelan black market and then using those bolivars to purchase government-issued bonds that could later be swapped in Panama or other countries for clean dollars.
Lustgarten excelled at these complex international transactions. But he also generated his share of enemies in bad financial dealings, and he became a one-time suspect in the murders of two business associates in Venezuela, according to news accounts and police investigators in the South American country.
A decade ago, Lustgarten expanded his financial enterprise when he became partners with a Venezuelan money broker, Eduardo Enrique Soto Wannoni. Together, they set up a network of companies in Panama under ANL Services, which handled hundreds of millions of dollars in transactions — including with businesses controlled by Gorrín and the Obertos, according to Suspicious Activity Reports filed with FinCEN.
In an interview, Soto said he had a 50-50 partnership with Lustgarten in ANL Services until early 2013, when Soto’s family bought out the entire company and its similarly named affiliates. Soto has also owned a business called Arbitrage and Lending Services Corp. in Boca Raton, but said it’s unrelated to his other companies in Panama.
The pair’s businesses flourished from 2010 through 2012, as Lustgarten, the rainmaker, developed relationships with CBH’s De Beaumont, Gorrín and the Oberto brothers, said sources familiar with the money broker’s history. Lustgarten’s success with Soto was built on their access to U.S. dollars that were exchanged for Venezuelan bolivars.
Until Venezuela’s collapse, it was a lucrative trade in which officials with the national treasury and the state-controlled oil company, PDVSA, dominated the economy. Senior government officials collaborated with a circle of Venezuelan businessmen who paid bribes in schemes involving bonds, contracts, loans and currency exchanges, said sources familiar with the money-laundering investigations in Miami.
“They initially began doing business with legitimate companies,” said one source familiar with the partners’ history. “But Lustgarten is very ambitious and wanted more. … [Lustgarten] is a pioneer in what later became the regular usage of the Venezuelan foreign exchange market to launder drug and corruption proceeds.”
In addition to the ANL Services holding company, Lustgarten owned dozens of other financial businesses unrelated to his partnership with Soto, several SARs filed with FinCEN indicate.
Soto, who owns a home in Boca Raton, said he committed no wrongdoing and that he spoke with federal investigators in Boston in 2013 and with prosecutors in Miami two years later. The Miami prosecutors were starting to develop their Venezuelan money-laundering investigations into Lustgarten’s network of clients.
“At all times we did things by the book,” Soto told the Miami Herald and el Nuevo Herald, adding that he saw himself as a “facilitator” in helping clients move money to and from their companies through international and U.S. bank accounts. Soto said he never paid any money to Venezuelan government officials or third parties in any of his dealings with Lustgarten, Gorrín and the Oberto brothers.
Soto said ANL Services was involved in hundreds of millions of dollars in transactions with the Oberto brothers and their Swiss banks, EFG Bank AG and Compagnie Helvetique Bancaire, some of which are cited in Suspicious Activity Reports. Soto added that he traveled to Geneva in 2012 to meet with CBH’s banker, De Beaumont, and that Luis Oberto made the introductions.
A CBH spokesman declined to comment on whether it had a banking relationship with Lustgarten or any of his associates, but the bank denied any wrongdoing and said it has cooperated with both Swiss and U.S. authorities. The spokesman also said De Beaumont left the bank at the end of 2012.
What is striking about the SARs filed by HSBC and other global banks and reviewed by the Miami Herald and el Nuevo Herald is that they cite several companies that Lusgarten owned with Soto — but they don’t mention Soto by name.
The reason: The banks that did business with their companies before Lustgarten was indicted in April 2015 were focused on Lustgarten — not Soto. Even after his money-laundering case was dismissed that December, global banks continued to file reports of suspicious activity on Lustgarten, his companies and his clients.
The federal investigation in Miami has taken years to develop in part because prosecutors needed to obtain records from their Swiss counterparts on various accounts held by the Oberto brothers and a handful of other Venezuelans at EFG, CBH and seven other banks, according to Justice Department lawyers’ correspondence with Swiss authorities.
In January of this year, Switzerland’s highest court ordered the banks to turn over the evidence. Now — with the coronavirus pandemic halting the federal grand jury through the end of the year — prosecutors must decide whether to file a long-planned indictment charging the Obertos and other members of Venezuela’s young business elite and former high-ranking officials in the government’s oil sector, along with the ex-Swiss banker at the center of the alleged $4.5 billion money-laundering racket, De Beaumont. De Beaumont, a French citizen believed to be living in Portugal, also owns luxury residences in the Dominican Republic and Miami Beach.
The Venezuelan business elites are suspected of paying substantial bribes to government officials in exchange for making loans in bolivars to PDVSA and then receiving repayments in dollars — with the proceeds washed through the government’s favorable currency-exchange system to magnify profits. The majority of that tainted money was allegedly transferred into accounts held in shell companies by the Obertos at CBH, and the rest into their accounts at EFG and seven other Swiss financial institutions in the massive fraud scheme, U.S. authorities say in official correspondence with their Swiss counterparts.
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The Justice Department’s money-laundering case is the largest of three distinct Miami-based probes by Homeland Security Investigations targeting suspected Venezuelan kleptocrats and their associates. So far, more than a dozen defendants have been charged in South Florida.
The reports that banks file with FinCEN cannot be used as evidence before a federal grand jury or at trial — they are not criminal reports and they do not require probable cause. However, they can provide critical data for investigators zeroing in on customers suspected of moving money from suspected illicit activity, such as corruption or drug trafficking, that lacks a credible, logical explanation.
“Suspicious Activity Reports are the most important data point in the anti-money-laundering world,” said John Byrne, vice chairman of AML RightSources, a national consulting firm. “You’re getting information of some note to law enforcement as quickly as possible, so they can slice and dice the data to see where it fits and might not fit. It enhances investigations and overall anti-money laundering programs.”
Byrne said SARs can play an important part in stopping the outward flow of a foreign country’s wealth.
“The fact they are taking money and food and resources out of the mouths of the poor is heartbreaking,” Byrne said. “Whether it’s Venezuela or Eastern Europe, it’s something that our community can do more to stop.”
McClatchy Washington Bureau’s Shirsho Dasgupta and Kevin G. Hall contributed to this story.
