MIAMI -- Juan Carlos Horna Napolitano, 40, a Venezuelan citizen residing in Pembroke Pines, Florida, pleaded guilty today before United States District Judge Stefan R. Underhill in Bridgeport, Connecticut to one count of conspiracy to obstruct an official proceeding of the U.S. Securities and Exchange Commission (SEC), in relation to the ongoing SEC investigation of a $500 million ponzi scheme relating to Venezuela's PDVSA Worker Retirement Funds. Horna becomes the third person to plead guilty in the case.
“The U.S. Attorney’s Office, FBI, and our Connecticut Securities, Commodities, and Investor Fraud Task Force partners are committed to investigating and prosecuting those who attempt to deceive and mislead the SEC and defeat its critical mission of protecting investors and the integrity of American capital markets,” stated U.S. Attorney Fein.
According to SEC, Francisco Illarramendi of New Canaan, acted as an investment adviser to certain hedge funds. In 2006, one hedge fund he advised lost millions of dollars of the money he was charged with investing. Rather than disclose to his investors the truth about the losses incurred, Illarramendi intentionally chose to conceal this information by engaging in a long-running scheme to defraud and mislead his investors, creditors, and the SEC to prevent the truth about the losses from being discovered. As part of the scheme, Illarramendi and others created fraudulent documents, including a fictitious asset verification letter falsely representing that one of the hedge funds, the Short Term Liquidity Fund (“STLF”), had at least $275 million in credits as a result of outstanding loans, when Illarramendi and others knew it did not have any such credits.
In exchange for at least $3 million, Horna and Juan Carlos Guillen Zerpa -- the head of BDO's accounting firm in Venezuela -- assisted Illarramendi in creating a fictitious asset verification letter for $275 million and misleading and deceiving investors and the SEC into believing that there was adequate capital and credit to protect the investors of the STLF.
Guillen is a resident and citizen of Venezuela who was the managing partner of the Venezuelan office of BDO, the world's fifth largest accounting and consulting firm. In late 2010, Guillen agreed to prepare the asset verification letter that would falsely indicate that the STLF had made outstanding loans to Venezuelan companies. BDO accounting head Guillen expected to receive approximately $1 million for his willingness to sign the fake $275 million asset verification letter.
In January 2011, Guillen executed the false asset verification letter and sent it by e-mail to Illarramendi, which was then supplied to the U.S. SEC after the SEC had initiated a civil action against Illarramendi and his firm.
In an effort to deceive and mislead the SEC and to prevent the SEC from learning during the civil action that the asset verification letter was false, Illarramendi, Guillen and Horna sought to create fraudulent documentation to falsely support the information contained in the letter. Guillen also participated in a telephone call with representatives of the SEC in which he intentionally misrepresented that the assertions in the asset verification letter about the existence of the hedge funds’ assets were true, when he knew they were false.
Horna maintained control of a Florida bank account in the name of Jeislo Real Estate Investments, LLC. To pay-off Horna and Guillen for faking the asset accounting, Illarramendi transferred $1.25 million to Jeislo's bank account. Horna then transferred $250,000 of this money to a third party for the benefit of Guillen, as part of his $1 million payoff.
Judge Underhill has scheduled sentencing for August 5, 2011, at which time Horna faces a maximum term of imprisonment of 20 years and a fine of up to approximately $2.5 million. Horna also has agreed to forfeit $1.25 million to the government.
Horna has been detained since his arrest by FBI special agents on March 3, 2011, in Florida. Following his guilty plea today, Horna was released into home confinement under electronic monitoring after he posted a bond in the amount of $650,000, which is secured by $181,000 in cash and real property.
On March 7, 2011, Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment advisor fraud, and one count of conspiracy to obstruct justice, to obstruct an official proceeding, and to defraud the SEC. On May 4, 2011, BDO accounting head Guillen pleaded guilty to one count of conspiracy to obstruct an official proceeding of the U.S. SEC. Both await sentencing.
According to Interpol, Horna is also wanted in Venezuela for fraud, in relation to BanInvest, one of a series of Venezuela banks that were robbed of their capital by owners and had to be taken over by the Venezuela government. Horna fled to Florida, where he was apparently living in Pembroke Pines, outside of Miami, with his wife. US SEC Charges Highview Point Partners in Venezuela's PDVSA Ponzi Scam
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