Millions of dollars was transferred from The Bahamas to New Zealand. Luis Carlos de Leon Perez, inset. Photos / 123RF, AP
More than $18 million of alleged bribes from a South American corruption scandal will remain frozen in New Zealand after police were given more time to “untangle the web” of international bank accounts.
Nearly four years ago, the small fortune was restrained by a High Court order after the police asset recovery unit (ARU) was alerted to a wire transfer from the Bahamas into a trust account of a Hamilton accounting firm.
The money was being held on behalf of Andreina Gamez Rodriguez, the wife of a Venezuelan government official working for the state-owned oil company.
The couple were living in their holiday home in Spain when the husband, Luis Carlos de Leon Perez, was arrested in October 2017 and extradited to the United States to face serious corruption charges.
Perez was a lawyer for an oil company called Petroleos de Venezuela SA. He and four others were referred to as the “management team” who allegedly received $180m in bribes.
According to the US Justice Department, more than $24m of bribes were paid into a Swiss bank account controlled by Perez. These funds were then funnelled into other bank accounts in Switzerland, as well as companies, real estate and other investments.
Perez admitted taking millions of dollars in bribes and kickbacks from contractors to win business deals with the oil company, or ensure they paid ahead of other contractors when Venezuela’s financial crisis threatened to put the state-owned oil company into liquidation.
He pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act, and one count of conspiracy to commit money laundering.
The following year, in March 2019, US$11.8m (more than $18m) was transferred from a bank account in The Bahamas to the trust account in New Zealand.
The police successfully sought a restraining order under the Criminal Proceeds Recovery Act; a civil case where a High Court judge can grant the order if there are reasonable grounds to believe someone has profited from “significant criminal activity”.
In this case, the police allege Gamez Rodriguez has committed money laundering by transferring funds which are likely to be the criminal profits of her husband’s corruption.
At the first High Court hearing in 2019, she claimed to be estranged from her husband, saying the funds were legitimate.
Gamez Rodriguez failed in her bid to overturn the initial 12-month restraining order, and the $18m has remained frozen in the custody of the Official Assignee ever since.
This is because of a series of rulings by different High Court judges who have extended the restraining orders, despite nearly four years passing, to give the police more time to look into the source of the funds.
The most recent of these judgments has been obtained by the Herald on Sunday and reveals how the police inquiry has been stymied because of lengthy delays in receiving information from other countries.
Bruce Russell, a veteran ARU investigator, has asked for records from banks in the Bahamas, Switzerland, Venezuela, Panama, Antigua and Barbuda.
In some instances, more than 18 months has passed before Russell received a response. Each time the requested information is received, the records must be translated before Russell can properly analyse it.
The results often lead to Russell needing to ask for more information, often from a different country, as there is a convoluted structure of different bank accounts, trusts and companies.
For example, his analysis of 10 bank accounts in the Bahamas identified 891 transactions - many of them involving people and entities linked to the corruption scandal - which may require further investigation.
Among them are two withdrawals totalling more than US$5m which are referenced as “Andreina Gamez Rodriguez”.
“Mr Russell says that investigation is prolonged largely because of the fact that all of the evidence required is located offshore, and because of the time it takes to untangle the web and use of different entities and people in different jurisdictions,” Justice Paul Davison wrote in his November 2022 judgment.
“He says that the use of different entities and people in different jurisdictions … is consistent with classic internationally recognised methodologies for money laundering, designed to frustrate the tools available to law enforcement agencies in their efforts to trace funds to their source and identify their beneficial owner.”
Crown solicitor Jacinda Hamilton, representing the police in the proceedings, said Gamez Rodriguez could easily hand over the documents which the police seek - but had declined to co-operate so far.
There was also evidence that Gamez Rodriguez had instructed lawyers to appeal against a decision by Swiss authorities to release documents to the New Zealand police, which Hamilton said caused a further delay.
She asked Justice Davison for the restraining order to be extended for a further 12 months to allow the police to complete the investigation.
Kate Cornege, the senior lawyer representing Gamez Rodriguez in New Zealand, did not oppose the extension.
Instead, she asked Justice Davison to require the police to give an undertaking to pay costs and damages to her client if their case was unsuccessful.
This was because Gamez Rodriguez had lost the ability to invest her money (the $18m had accrued interest of between 1.9 and 3.8 per cent while in the control of the Official Assignee) for the past four years.
According to one financial adviser, these lost investment opportunities had cost Gamez Rodriguez around $1m in potential earnings.
“Ms Cornege says that if the case is as strong as Mr Russell says it is, then the Commissioner [of Police] has nothing to fear,” said Justice Davison.
“She says however that the commissioner’s claims ‘ring hollow’ as despite an extensive investigation spanning the past three-and-a-half years, the commissioner is not prepared to even commit to a date by which he will file a forfeiture application in the next 12 months.”
As for the accusation that Gamez Rodriguez had obstructed the police investigation by delaying the release of documents in Switzerland, Cornege said that argument appeared to be a suggestion that it was “inappropriate for a company to exercise its legal rights”.
Justice Davison disagreed and declined the request to require the police to give an undertaking to pay damages.
“Having acted to either cause or contribute significantly to the delay encountered by the commissioner as a result of the [Swiss] appeal, she cannot plausibly claim to be prejudicially affected by it,” the judge said.
While Gamez Rodriguez was not under any legal obligation to assist the police (as she is living outside New Zealand jurisdiction), Justice Davison said she would “obviously have the ability” to provide the requested information if she chose to do so.
“In my view she cannot credibly contend that she is prejudiced by reason of the delays the commissioner is experiencing in progressing his investigation into the source of the suspect funds.”
The High Court judge was satisfied that the delays in the case were not caused by the police and said the evidence gathered so far provided “strong support” for the allegation that the $18m in frozen funds are from Perez’s criminal activity.
He granted the 12-month extension to the restraining order and also ordered Gamez Rodriguez to pay the legal costs incurred by the police for the High Court hearing.
The Labour Government recently passed changes to strengthen the Criminal Proceeds Recovery Act, under which police have restrained more than $1 billion worth of assets from suspected criminals since 2009.
Suspected criminals living overseas will now lose their assets in New Zealand unless they can provide proof within two months that they obtained their property legally, which essentially reverses the onus of proof.
His ratings have probably improved since the CCO reforms, says the mayor.