By Kejal Vyas
CARACAS — Venezuelan authorities late Thursday raided the home and office of what they say is a local representative of Oppenheimer & Co. Inc., the brokerage subsidiary of Oppenheimer Holdings Inc., (NYSE: OPY, down 1.19%) for allegedly violating foreign-exchange regulations.
Venezuela's national intelligence agency, or Sebin, seized documents from Caracas brokerage Brisbane, Mendes de Leon, Pettus & Asociados that it says point to alleged buying and selling of dollars, according to a statement Friday from the Attorney General's office. Such activity would be prohibited in the South American country unless done through the government. The statement identified the company as a local representative of Oppenheimer & Co.
New York-based Oppenheimer did not respond to calls seeking comment.
The move comes as interim President Nicolas Maduro increases his calls for combating currency speculation in Venezuela, where a shortage of hard currency filtering through government channels has led to a spike in dollar demand on the black market. In recent speeches, Mr. Maduro has talked of cracking down on the illegal trade, which he says is run by "bourgeois" opponents engaged in economic sabotage against the ruling socialist party.
Authorities also "seized dollars, euros and firearms" from the house of brokerage owner John Gayle Pettus, the statement said. Calls to the office of Brisbane, Mendes de Leon, Pettus & Asociados and to employees went unanswered Friday, and they couldn't be reached for comment.
The Venezuelan government said it began a probe into the local brokerage on March 23 after it was notified of alleged "irregularities" at the company. The Attorney General's office said it found evidence allegedly linked to dollar exchanges at the site.
An Information Ministry statement Friday indicated that Mr. Pettus, a Venezuelan and U.S. citizen, had been detained.
Mr. Pettus couldn't be reached for comment. Spokesmen at the Information Ministry, as well as the Interior and Justice Ministry, said they had no further comment.
The U.S. Financial Industry Regulatory Authority lists Mr. Pettus as a broker registered with Oppenheimer & Co. Inc.'s Venezuela office since 1993. A 2012 edition of Standard & Poor's directory shows Oppenheimer as the only U.S. broker listed with a Venezuelan affiliate.
Russ Dallen, a managing partner at Caracas Capital Markets, who was a partner at Mr. Pettus' brokerage until 2007, said he received calls from employees informing him of the raid Thursday afternoon.
Many economists blame the leftist regime's currency controls, implemented by the late president Hugo Chavez in 2003 to prevent capital flight, for the lack of dollars in the economy which has led to a sharp depreciation of the bolivar on the black market. The government has set a fixed exchange rate of 6.3 Venezuela bolivar per dollar, but dollars are traded at nearly 23 bolivar on the black market.
A scarcity of dollars has also led to widespread shortages of food and consumer goods, as companies in this import-heavy economy complain taccess to the dollars they need to purchase products from abroad.
In 2010, Venezuela's government cracked down on a large parallel currency market and imprisoned several brokerage directors for allegedly violating currency controls. Four former directors of Econoinvest Casa de Bolsa CA, which was once Venezuela's biggest brokerage firm, were released in December after spending more than two years in prison. The directors have said they never violated exchange laws. Their trial is continuing. Dow Jones