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Helsinge and the hacking of the Venezuelan Market

Companies and/or individuals involved: Helsinge Inc. (USA), Helsinge Limited, St. Helier (Geneva branch, Switzerland), Francisco Morillo (co-director), Leonardo Baquero (co-director) & one former employee of Helsinge Inc., PDVSA S.A. (Venezuela), PDVSA Litigation Trust (USA) 

Charges: Bribery of foreign public officials (Article 322septies of the Swiss Criminal Code (SCC)), money laundering (Article 305bis SCC) and unauthorised obtaining of data (Article 143 SCC)

Swiss lawyers used: PDVSA Maduro: Guerric Canonica (Canonica Valticos & Associés, Geneva) vs PDVSA Guaidó: Jean-Pierre Jacquemoud (Jacquemoud Stanislas, Geneva), Helsinge: Jean-Marc Carnicé (BianchiSchwald, now valfor, Geneva), Francisco Morillo: Guglielmo Palumbo (HABEAS Avocats Sàrl, Geneva), Leonardo Baquero: Daniel Tunik (Lenz & Staehelin, Geneva), ex-employee: Giorgio Campà (Etude de Me Giorgio Campà, Geneva)

Countries affected: Venezuela, United States, Switzerland 

Proceedings: United States, Switzerland (Canton of Geneva)

Outcome: Abandonment in the United States; pending in Switzerland

Asset recovery: PDVSA’s case has been dismissed in the United States, pending in Geneva

The case

It’s a small package that could contain evidence proving that Venezuela’s oil revenue was plundered. Arriving from Miami at the Geneva Courthouse on Monday, 12th March 2018, the package weighing barely 23 kilos contained a server that managers from the Helsinge company allegedly used to hack into the IT system of Petróleos de Venezuela SA (PDVSA), the Venezuelan national oil company, and fraudulently track the progress of its files in real time. Helsinge – a Panamanian company that had only a handful of employees but has become, in barely 14 years of operation, a crucial intermediary between Swiss trading houses and Venezuelan officials – is said to have sold information to Glencore, Trafigura, Vitol and Lukoil, allowing them to obtain more than USD 40 billion worth of crude oil between 2004 and 2017. On a more “traditional” note, this company is also accused of having paid bribes to PDVSA employees with a view to obtaining confidential data as well as commercial and market advantages for the trading houses involved and of having organized the holding and movement of illicit funds. 

For Venezuela, which was experiencing a dire economic crisis at the time with the collapse of crude oil prices and uncontrollable inflation, the loss of revenue from these below-market contracts amounted to USD 5.2 billion, according to PDVSA’s 161-page complaint, which described one of the most sophisticated plundering schemes in history. In 2018, the oil company turned to Switzerland and the United States to obtain justice. Two men were arrested in Geneva, where Helsinge had just set up a subsidiary in its lawyers’ office a few months earlier. 

According to Tamedia’s investigation unit, which had access to the criminal file, PDVSA also handed over emails to the Geneva judicial authorities showing that Helsinge passed on confidential information to the trading houses about the state oil company’s tenders, shipments, stocks and strategic plans.

From then on, Helsinge’s lawyers constantly disputed PDVSA’s status as a plaintiff. Given the chaotic situation on the ground, the question is: who is really authorized to represent the state oil company? At one point in the proceedings, the latter had two Geneva lawyers to defend it, each appointed by an opposing political faction. In the United States, the civil action was finally dismissed on the grounds that the beneficiaries of the trust that filed the lawsuit were not authorized to represent the oil company. In Switzerland, PDVSA, on the other hand, has been recognized as a plaintiff on two occasions by the Federal Criminal Court. 

In May 2022, Glencore was convicted in the United States and the United Kingdom for paying more than USD 100 million in bribes to intermediaries, amongst others to sign oil contracts in Venezuela. Of this sum, the Zug-based giant admitted to “conspiring to secure and securing improper business advantages by paying over $1.2 million to an intermediary company that made corrupt payments for the benefit of a Venezuelan official”. 

Both directors at Helsinge dispute the alleged facts. Proceedings are still pending.

Documents related to this affair

Timeline

Date

Event

Source

2004-2017Helsinge Inc. is founded in Panama by two Venezuelans, Francisco Morillo and Leonardo Baquero. Initially operating as a consulting firm, the group’s activities gradually evolve towards a range of “integrated services”: trading in physical commodities, storage, transport and financial solutions. The company establishes itself in Miami, St. Helier, on the island of Jersey, and, in October 2017, sets up a branch in Geneva.

Helsinge is accused of bribing PDVSA employees from 2004 onwards to gain commercial and market advantages, as well as to obtain confidential information, which it then sold on to the trading houses Lukoil Petroleum, Colonial Oil Industries (the only United States-based trader), Glencore, Vitol and Trafigura, in order to help them win USD 40 billion worth of oil contracts. It is also alleged to have organized the holding and movement of illicit funds derived from corruption. 		Le Temps
2013The drop in oil prices (which accounts for 90% of the value of Venezuelan exports) undermines the regime of Nicolás Maduro, who came to power in March 2013 following the death of Hugo Chávez. The country enters a crisis characterized by hyperinflation, growing undernourishment and a surge in the level of violence, linked to both urban delinquency and political repression. Millions of Venezuelans flee the country. U.S. Energy Information Administration
3rd March 2018PDVSA files a lawsuit against Helsinge’s managers in the civil courts in the United States and brings criminal proceedings in Geneva.
The company is accused of being involved in setting up a vast network of corruption within the company from 2004 onwards in order to obtain access to its IT systems. This confidential data on oil sales was allegedly copied continuously for nearly eight years onto a server in Miami.

These practices have resulted in a loss of revenue for the public coffers estimated at USD 5.2 billion by the Venezuelan state.		Courthouse News Service
12th March 2018Two Helsinge executives are arrested in Geneva, where the firm set up its branch barely five months previously. The Geneva Public Prosecutor’s Office confirms “that it has opened criminal proceedings against some of the [managers] of a trading company based in Geneva, who are suspected of bribery of foreign public officials and money laundering.” A searchof the offices is carried out.

The server that Helsinge Limited managers allegedly used to hack into PDVSA’s IT system is sent by post from Miami. It is now in the hands of the Geneva judicial authorities.		AP (via Swissinfo)
March 2019Political turmoil continues in Venezuela, where Nicolás Maduro’s power is increasingly challenged. The day after his re-election for a second term, Venezuela’s National Assembly (ANV) calls for a show of “disobedience”. President of the parliament, Juan Guaidó, proclaims himself “effective president”.

The ANV then appoints a new “ad hoc” board of directors for the PDVSA. This board is opposed to the council appointed by Nicolás Maduro’s National Constituent Assembly of Venezuela (ANCV). Both the board and the council consider themselves to be operational.
This chaos is ruthlessly exploited by the defence counsel representing Helsinge and its managers. 		BBC News Mundo
10th March 2020The Swiss judicial authorities are forced, following various appeals by the defence, to look into the ongoing power struggle in Venezuela.
The defendants challenge the status as a Private Claimant granted to PDVSA by the Geneva Public Prosecutor’s Office, which allows the Venezuelan company broad access to the investigation documents. The Criminal Appeals Chamber of the Geneva Court of Justice had dismissed the defendants’ arguments in December 2018. The Federal Supreme Court has upheld this decision twice. 

In the eyes of the country’s highest court, the Maduro clan, which brought the initial lawsuit, is authorized to represent PDVSA. Assuming the role as a Private Claimantdoes not require the prior authorization of the board of directors, according to PDVSA’s statutes.		Tribune de Genève
24th February 2022The Federal Criminal Court authorizes the transfer to the United States of the wealth of information stored on the server in the hands of the Geneva judicial authorities. Both of Helsinge’s owners opposed this transmission.Gotham City
24th May 2022Glencore is convicted in the United States and the United Kingdom for having paid more than USD 100 million to intermediaries to obtain access to oil markets in Venezuela, but also in Nigeria, Cameroon, Côte d’Ivoire, Equatorial Guinea, Brazil and the Democratic Republic of Congo.

At PDVSA, officials Rene Hecker, Marco Malave, Edgar Garcia and Ysmel Serrano received between USD 15,000 and USD 150,000 in bribes each month, plus compensation of USD 0.05 to USD 0.22 per barrel of petroleum products bought or sold to PDVSA by Glencore. These backhanders were paid by local intermediaries, i.e. Francisco Morillo and Leonardo Baquero, Helsinge’s two directors, who are now under investigation in Geneva.

Glencore admits to conspiring to secure and securing improper business advantages by paying over USD 1.2 million to an intermediary company that made corrupt payments for the benefit of a Venezuelan official.		US Department of Justice
13th March 2023To avoid the blocking of any damages that the Venezuelan company could have been awarded by the U.S. courts, PDVSA is represented by a trust, which is, on its face, not subject to the sanctions imposed on the Maduro regime.

But the validity of this arrangement is not recognized by the Florida federal court. The US judicial authorities declare themselves incompetent to determine “who can properly represent the interests of [Petróleos de Venezuela] in light of the complex and constantly evolving political situation in Venezuela”. This marks a victory for Helsinge’s defence.		US Department of Justice
14th February 2024Three rulings by the Federal Criminal Court weaken PDVSA’s position.

In particular, they confirm the lifting of the sequestration of Helsinge’s and the defendants’ bank accounts, which hold no less than USD 80 million. In addition, after six years of proceedings, the prosecutor’s office has still not examined the data from the famous computer recovered in 2018 in Miami from Helsinge’s accountant.		Gotham City

Legislative loopholes

  • Concealment of liability by using intermediaries to pay bribes
  • Lack of cooperationfrom the local justice authority. Difficult for the case to advance in the Swiss justice system
  • Great difficulty for prosecutors to prove corruption in this kind of case unless there is self-disclosure or a corrupt agreement is discovered on paper
  • Problem with some Geneva business lawyers wearing two hats: being responsible for establishing foreign companies in their office and then defending them in criminal proceedings
  • No specific supervisory authority in the commodities sector and no appropriate due diligence obligations for traders