U.S. SEC charges PDVSA pension fund manager with running a Ponzi scheme
Petroleumworld.com, Mar 09, 2011
Francisco Illarramendi a Conn.-based investment adviser and its principal and Venezuelan oil company pension fund manager pleaded guilty to five criminal counts including securities fraud, wire fraud and conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission, U.S. Attorney David Fein in Connecticut said, in conection with a $540 million dollars from Venezuelan oil company PDVSA pension fund.
Illarramendi was charge by the Securities and Exchange Commission (SEC) last month with misappropriated at least $53 million in investor assets, on Monday, The SEC amended its complaint against Illarramendi, to additionally charge him with engaging in a multi-year Ponzi scheme involving more than $ 540 million dollars from Venezuelan oil company PDVDA pension fund.
Two other men, venezuelans citizens Juan Carlos Guillen Zerpa and Juan Carlos Horna Napolitano, are being detained following their arrests Thursday on conspiracy and obstruction charges, Fein added.
The SEC previously charged Illarramendi and his firm MK Capital Management LLC in January and obtained an asset freeze against them, alleging that they had misappropriated at least $53 million in investor assets.
Today, the U.S. Attorney's Office of the District of Connecticut unsealed criminal charges against Illarramendi for the same misconduct as well as for obstruction of justice for deliberately misleading the SEC staff during its investigation.
“Illarramendi knew that the SEC was onto his scheme and compounded his fraud by attempting to mislead the Commission's staff,” said David P. Bergers, Director of the SEC's Boston Regional Office.
The SEC alleges that Illarramendi and MK Capital Management – which is not registered with the SEC – have misappropriated investor assets and misused two hedge funds they manage for Ponzi-like activity in which they used new investor money to pay off earlier investors. During the SEC's investigation in December 2010 and January 2011, Illarramendi attempted to hide the fact that his hedge funds were missing assets by providing the SEC staff with a false letter from
Juan Carlos Guillen Zerpa
an accountant in Venezuela conected with an international accounting firm that purported to verify the existence of approximately $275 million in assets held by one of the funds. Those assets do not exist.
Illarramendi agreed to pay Guillen and Juan Carlos Horna Napolitano an ex venezuelan banking executive with an Interpol warrant, more than $3 million to fabricate the letter and evidence of the $275 million and pay off to venezuelan executives that were covering up the scheme.
According to the SEC's amended complaint filed in U.S. District Court for the District of Connecticut, Illarramendi is the majority owner of the Michael Kenwood Group LLC – a holding company for investment adviser Michael Kenwood Capital Management LLC among other entities. Through this adviser entity, Illarramendi manages several hedge funds, including the PDVSA pension fund, its principal fund. The SEC's complaint alleges that due to Illarramendi's misappropriation and his Ponzi activity, the funds hold assets worth substantially much less than the espected amount.
PDVSA's pension rip off
PDVSA's pension fund
Story by Elio Ohep, editor of Petroleumworld, firstname.lastname@example.org, 58 412 996 3730, Caracas
Petroleumworld / Wed Mar 9, 2011
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