Indictment Alleges International Scheme Involving Bribes Touching NY Correspondent Bank Accounts
The U.S. Department of Justice announced last week that U.K. law enforcement officials arrested, at its request, an Austrian national, Peter Weinzierl, for his alleged participation in a wide-ranging money laundering scheme involving Brazilian construction conglomerate Odebrecht S.A. Odebrecht previously pleaded guilty in December 2016 to a one-count criminal information charging violation of the Foreign Corrupt Practices Act (“FCPA”) anti-bribery provisions.
This arrest comes with the unsealing of a federal grand jury indictment in the Eastern District of New York, charging Weinzierl and Alexander Waldstein, who is still at large, for their alleged complementary roles in the scheme. Specifically, each man was charged with one count of conspiracy to commit money laundering and two counts of international promotional money laundering; Weinzierl was charged with an additional count of engaging in a transaction in criminally derived property.
According to the indictment, Weinzierl and Waldstein worked together as executives at an Austrian bank (identified in press reports as Meinl Bank, subsequently renamed Anglo Austrian AAB), and as board members for an affiliated bank in Antigua. In that capacity, they engineered “back-to-back” transactions which moved more than $170 million from Odebrecht-held New York bank accounts to Meinl Bank. The funds then moved from Meinl Bank back through correspondent New York bank accounts into offshore bank accounts at the Antiguan bank. Those accounts were held by shell companies secretly controlled by Odebrecht. These transfers were papered with a) fraudulent “guarantee agreements” promising that Meinl Bank would provide particular financial services to Odebrecht subsidiaries, and b) equally fraudulent “transfer certificates” transferring this relationship to a purportedly unrelated third party (actually the shell company accounts).
Odebrecht allegedly used those off-book funds to pay bribes to domestic and foreign officials in countries where it had operations; the indictment specifically references government officials in Panama, Mexico, and Brazil, with the implication that this is the tip of the iceberg. In a feat of further institutional hubris, Odebrecht then recorded the transfers to Meinl Bank as “legitimate business expenses” and deducted them from the profits it reported to the Brazilian government, thereby reducing its overall tax liability and committing tax evasion to the tune of over $100 million. Additionally, some of the funds were sent back to New York from the Antiguan bank to a brokerage account, with Weinzierl and Waldstein’s approval, in order to purchase Treasury securities, corporate stocks, and bonds on the U.S. markets. On each of the transactions described, Weinzierl and Waldstein charged and collected substantial fees for the benefit of their Austrian and Antiguan banks.
The indictment of Weinzierl and Waldstein is just the latest example of a DOJ tactic about which we have blogged for several years: DOJ’s increasing use of the money laundering statutes as a gap-filling measure to address cases beyond the technical reach of the FCPA. While Weinzierl and Waldstein did not themselves pay bribes to foreign officials, they allegedly functioned as integral players in the process of funneling Odebrecht’s profits to its off-book slush funds, which they knew to be the cash reserves for an international bribery scheme. The money laundering statutes allow the DOJ to go after individuals like Weinzierl and Waldstein who allegedly provide crucial logistical support to massive schemes of this nature.
While Odebrecht’s previous plea means that Weinzierl’s cooperation in prosecuting the company is unnecessary, past practice may indicate a likelihood that the DOJ may attempt to leverage Weinzierl’s cooperation to build money laundering cases against corrupt foreign officials whose coffers Odebrecht lined over the years – as well as to bring Waldstein to the U.S. to face charges.