Name: Swiss banker to Venezuelan kleptocrats becomes star witness
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Swiss banker to Venezuelan kleptocrats becomes star witness

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AP NEWS https://apnews.com/article/matthias-krull-swiss-banker-venezuela-money-laundering-25162da3fa76e8a0adf2f72e393ffa76Click to copyhttps://apnews.com/article/matthias-krull-swiss-banker-venezuela-money-laundering-25162da3fa76e8a0adf2f72e393ffa76Click to copyRelated topicsMIAMI (AP) — Matthias Krull pulls up his pant leg and slides a gardening shear on the ankle monitor that for two years has been a constant reminder of his crimes. With a court order in hand, and a child’s voice echoing from the next room, the former Swiss banker snips the hard plastic — releasing a torrent of emotion as he contemplates his past mistakes and hopes for rebuilding what, until his arrest, had been a charmed life. “Physically, I got used to it, but psychologically it’s liberating,” Krull said from the living room of his rented home in a leafy Miami suburb. “To be able to wear shorts again is a big thing. I was at my son’s soccer games and everybody was in shorts in 100 degrees. I was in long pants.”ADVERTISEMENTKrull’s troubles stem from his time as a banker in Venezuela, a nation that has been plagued by epic corruption in two decades of socialist rule, first under the populist President Hugo Chávez, then his handpicked successor, Nicolás Maduro. During that time, Krull, who worked for the Julius Baer Group, played a singular role as the go-to private banker for the so-called Bolichicos — the privileged offspring of Venezuela’s Bolivarian revolution — as they looked to offshore. Among his would-be clients: Maduro’s stepsons.But then in 2018, the blond, bespectacled banker was charges at Miami’s international airport while vacationing with his family. Thrust into a spotlight he never sought, the normally discreet European began his second act as the all-star witness to a U.S. federal criminal investigation known as Operation Money Flight, which seeks to untangle how Venezuelan kleptocrats stole billions in oil wealth from their country.By all accounts, Krull’s assistance mapping the shell companies and straw men strung across secretive jurisdictions like Antigua, Malta and Hong Kong where Venezuelans have hidden their ill-gotten wealth has proven decisive. Since , he has helped prosecutors enlist other Swiss bankers as witnesses, pressed Venezuelan money launderers to surrender and assisted numerous European investigations.ADVERTISEMENTIn recognition of those efforts, a judge in September slashed his original 10-year prison sentence by 65%, according to recently unsealed court filings — one of the largest reductions ever in Miami federal court. The judge also relaxed Krull’s probation conditions, allowing him to remove the ankle monitor that kept him confined to his home from 7:30 p.m. to 7:30 a.m. He is scheduled to start his 42-month prison sentence this summer.Hovering over his ordeal is a more vexing question: whether anyone else was responsible in the corruption. To date, Krull is the only banker to have been prosecuted in the U.S. in connection with the corruption even though numerous other white-shoe firms for years competed for a piece of what had been one of the world’s hottest markets for wealth management. And while Julius Baer has dismissed his actions as those of a rogue employee, Swiss regulators last year found that the august money house, in its drive for profits, , much as it did during an earlier financial scandal involving soccer governing body FIFA. “The goal was to bring in new money,” said Krull, who drifts midsentence between fluent Venezuelan Spanish and thick German-accented English. “They really didn’t care about the portfolio’s profitability.” He added: “If I didn’t take a client, someone else surely would have.”In a series of interviews with The Associated Press over the past 10 months, Krull recounted his remarkable journey from the German-born son of a Lutheran pastor to banker of choice to Venezuela’s ruling elite.Julius Baer, based in Zurich, declined to answer detailed questions about any oversight responsibility in Krull’s criminal activities, so this story reflects Krull’s own perspective. Many of the details, however, are backed up by court documents and U.S. officials who’ve spent years investigating corruption in Venezuela.‘ONBOARDING STAR’To Krull’s rivals in Venezuela, it was his unique upbringing that gave him an edge. His father moved the family from the German city of Munster to Venezuela when Krull was just 7. His parents later divorced, but he stayed in Caracas as his mother remarried another member of the church. Shuttling between a private German school and the poverty-stricken downtown parish where his stepfather lived and worked, Krull built a network of contacts among Caracas’ elites while soaking in the playful slang of the hillside slums.“It’s never been difficult for me to adapt to the people around me,” said the 47-year-old. “I can be as formal as required to comply with the standards in Europe or explain complex financial terms in a way regular people understand. It’s one of my strengths.”He went to high school in Mexico City and college in Switzerland before returning to Caracas in 2004.His early years at Julius Baer were something of a bonanza-fueled blur for the then single, 30-something expat. Chávez was at the peak of his power, oil prices surged to a record and rich Venezuelans were scrambling to stash their money abroad before it was seized by the government or vanished by hyperinflation.“The joke among bankers was that the money was lying on the streets, you just had to pick it up,” he said. Krull said Julius Baer assigned 15 bankers to hunt for new clients in Venezuela compared with just three in neighboring Colombia, whose economy has traditionally been similarly sized. Other banks were hungry, too. But Krull outshined them all.He estimates that over the course of his career he hauled in over $1 billion in deposits for Julius Baer — earning him a vaunted spot year after year in the bank’s “President’s Club,” the only Latin American adviser to consistently earn the distinction reserved for its top 10% performers. With a salary, bonus and benefits that sometimes topped $1.5 million a year, Krull says, he was dubbed internally as Julius Baer’s “onboarding star.” He owned two trendy restaurants in Caracas, a condo in Miami and pricey artwork by Venezuela’s modernist maestros. There was a riskier side, however. Bankers were routinely targeted for kidnapping or extorted by government officials. Krull says he was once confronted by an angry client who placed a gun on a table to demand the return of millions of dollars he had lost through another investment adviser. After that, Krull hired an armed bodyguard. The final straw was a shooting outside his apartment in a tony Caracas neighborhood near the U.S. Embassy.Krull and his girlfriend were heading to Europe to get married and had arranged an all-night soiree with friends. But at the last minute, his fiance fell ill with appendicitis and they canceled. During the night, police accosted a car parked outside his bottom-floor apartment. Gunfire erupted, three officers were killed and a chase ensued. One of the men eventually captured said he was waiting for a foreigner — presumably Krull — whom the gunman was expecting would arrive home before dawn. “We took the decision that Venezuela is not the country to raise a family,” said Krull. In 2012, he relocated to Panama, but he still traveled to Venezuela and other countries every two weeks.MEETING MADURO’S ‘KIDS’A high-risk currency deal gone awry led to Krull’s arrest. But contrary to early media reports that he was the conspiracy’s mastermind, Krull’s role in the scheme was small and came late in the game, according to U.S. investigators. In the end, the suspicious transaction that landed him in hot water wasn’t even carried out. The dirty deal started in 2014, when one of his clients together with others made a loan to Venezuela’s state-owned oil monopoly, PDVSA, in bolivars. Krull had no part in the deal. The oil company repaid the loan two months later in dollars at an official, windfall exchange rate. That allowed the conspirators to make off with 510 million euros, or almost 15 times what they had originally lent, according to the against Krull. Along the way, bribes were paid to top oil officials, the complaint said. Two years later, Krull’s client, who is identified in court documents as “Conspirator 7,” asked him to move $200 million in proceeds from the fake loan into a foreign bank account for two friends, according to investigators. In court papers, “Conspirator 7” is identified only as the billionaire owner of a TV network in Venezuela. But two U.S. officials familiar with the case have identified him as Raul Gorrín, who in 2013 purchased the popular network Globovision and softened its anti-government coverage. The officials spoke on the condition of anonymity because of the sensitive nature of the allegations.Krull was under orders from his employer to avoid any transactions involving the oil company, which was already on the radar of U.S. law enforcement. So he says he offered to connect the longtime client to a money manager in Panama. Unbeknownst to the two, the money manager in Panama was a U.S. government informant who had secretly recorded hundreds of meetings, phone conversations and text messages.At a January 2017 meeting in Gorrín’s office, Krull was introduced to the true beneficiaries of the $200 million take. Opening the door to an adjoining conference room, he came face to face with and baseball caps who were introduced as “Los Chamos” — Venezuelan slang for “the kids.” They were the rarely seen sons of Maduro’s wife, “First Combatant” Cilia Flores. “That was the moment when I realized I was over my head,” said Krull, who squirmed his way out of lunch with the men and headed to the airport, his heart racing. “I didn’t want to confront them, or tell them I didn’t agree with their parents’ politics. ... But when I was on the elevator going down, I said to myself, ‘Why me? Why at this moment?’”Krull says Gorrín persisted, eventually persuading him to make the introduction to the government informant. That was enough to get Krull charged as a member of a conspiracy to drain $1.2 billion from PDVSA. Maduro’s stepsons have not been charged. Gorrín was in a separate case for allegedly paying an array of lavish expenses — three jets, a yacht and champion show-jumping horses — on behalf of Venezuela’s national treasurer as part of a scheme to pilfer more than $1 billion from the government. Much of the proceeds were plowed into luxury Miami real estate, federal prosecutors allege. Gorrín remains a fugitive. Howard Srebnick, a Miami-based attorney who has represented Gorrín in the past, did not respond to a request for comment but previously has said the Venezuelan businessman denies any wrongdoing. TURNING A BLIND EYEKrull insists he is being made the fall guy for a private banking system built on secrecy that facilitated the looting of Venezuela’s state coffers.While the bulk of the money flowing into Julius Baer’s vaults from Venezuela was the byproduct of the country’s own instability — hapless leadership, worthless currency and triple-digit inflation — Krull says he believes a good chunk represented the proceeds of corruption to which many banks turned a blind eye. Julius Baer was not the worst offender, he says. While the names of several other Swiss banks including HSBC Private Bank, UBS, Credit Suisse and Geneva-based Compagnie Bancaire Helvetique SA have appeared in investigations relating to Venezuela, including probes on particular clients, money transfers or employees of the banks, the financial institutions are not known to be targets of money laundering investigations in the U.S. or Europe.“There was such an appetite to make money and to grow that many transactions didn’t get the proper review,” he says. Krull cited the example of a Julius Baer office in Europe that he claims opened an account for a Venezuelan client even after he alerted his colleagues the businessman was under intense media scrutiny for possibly corrupt ties to Maduro. On another occasion, Krull said, a manager signed up a former oil official despite having closed an account belonging to the same man years earlier when both bankers were at Credit Suisse.Krull filed a $34 million wrongful termination lawsuit against Julius Baer in Venezuela in which he described a meeting at the start of 2017 where he, a manager and a senior compliance officer discussed what to do with several clients whose account information had been handed over to the U.S. Justice Department as part of a money laundering probe. Instead of dropping the clients, Krull alleges, he was instructed by the compliance team to close only the corporate accounts while allowing the clients to keep their personal accounts, where the majority of their wealth was deposited. “The only purpose was to keep generating income for the bank and not take any real and concrete action to avoid money laundering or any other suspicious criminal activity,” Krull alleges in the complaint.Krull said that in his 14 years on the job, no compliance managers ever visited Venezuela even though they made the rounds of other offices in the region. He said two executives were hired in 2016 and 2017 despite having been fired from another bank due to Venezuela compliance problems.Swiss regulators last year found many transactions over nearly a decade that point to “systemic failures” by Julius Baer in its obligations to combat money laundering. Specifically, the audit found that Julius Baer fell “significantly short” in investigating the identities of its Latin American clients and compensated bankers for attracting new wealth while paying scant regard to compliance and risk management goals. Julius Baer didn’t respond to a request for an interview or provide answers to detailed questions about Krull’s allegations, citing ongoing litigation.However, the bank pointed out in a statement that the criminal activity to which Krull pleaded guilty occurred outside of his work duties. The bank said it has cooperated with Swiss authorities, closed its offices in Panama and Venezuela and has tried to claw back the bonuses of employees in its Latin American group whose actions triggered the regulatory probe. Krull’s actions are “not compatible with the risk culture that we are seeking to achieve,” Romeo Lacher, chairman of the Julius Baer Group, said of the Swiss regulator’s findings last year. “Julius Baer has invested substantially over the past few years in strengthening our compliance and risk management processes to make them fit for the challenges of the future.” Mark Pieth, a money-laundering expert, said Swiss banks have been involved in several scandals in recent years so there is no excuse for them not knowing the source of the huge sums of money being raked in by their associates in Venezuela.That’s especially true for Julius Baer, he said, because it was one of a few Swiss banks criminally charged in a U.S. tax dodging case for helping Americans hide billions in offshore accounts. In 2016, it agreed to pay a $547 million fine.“With Venezuela, all sorts of alarm bells should’ve gone off,” said Pieth, who recently retired from the University of Basel law school. Pieth said he is surprised more Swiss financial institutions and their senior executives haven’t been charged in the U.S. In Switzerland, financial markets supervisor FINMA, as part of its investigation of Julius Baer, sent written reprimands to two high-ranking managers — a punishment Pieth likened to “a slap on the knuckles.” “It’s like asking casinos to identify gambling addicts,” he said. “The bankers’ job is to make money — not regulate themselves.”FINMA the two bankers but noted that proceedings against a third banker were dropped after he pledged not to work in finance management ever again, while an investigation into a fourth person continues.One of the four is former CEO Boris Collardi, who quit Julius Baer in 2017 to join another Swiss private bank, Pictet, as a partner. “We took note of FINMA’s decision early this year,” Pictet said in a statement standing by Collardi, whose reprimand has no legal effect. “We have full confidence in his work.”For his part, Krull is hoping to get his life back on track. He’s scheduled to start his 42-month prison sentence in July. In the meantime, he spends his days shuttling his kids to soccer games, connecting with old friends and lunching with his attorney.“My main regret is that when I got dragged into this situation, I did not have the strength to blow the whistle and take a step forward by talking to the correct people,” Krull said. “That will stay with me for the rest of my life.”—-CLARIFICATION: This story was first published on March 29, 2021. It was updated on April 8, 2021 to make clear that the banks whose names appear in investigations relating to Venezuela, including investigations that focus on particular clients, money transfers or employees of the banks, are not themselves known to be targets of money laundering investigations in the U.S. or Europe.___Associated Press writer Jamey Keaten in Geneva contributed to this report.___Follow Goodman on Twitter: @APJoshGoodmanContact AP’s investigative team at investigative@ap.org.

AP NEWS https://apnews.com/article/matthias-krull-swiss-banker-venezuela-money-laundering-25162da3fa76e8a0adf2f72e393ffa76Click to copyhttps://apnews.com/article/matthias-krull-swiss-banker-venezuela-money-laundering-25162da3fa76e8a0adf2f72e393ffa76Click to copyRelated topicsMIAMI (AP) — Matthias Krull pulls up his pant leg and slides a gardening shear on the ankle monitor that for two years has been a constant reminder of his crimes. With a court order in hand, and a child’s voice echoing from the next room, the former Swiss banker snips the hard plastic — releasing a torrent of emotion as...

Swiss banker to Venezuelan kleptocrats becomes star witness

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