UK, U.S. Courts Hand Down Sentences in Prosecutions of Former Afren, Julius Baer Executives

On October 29, two significant sentencings took place in the United Kingdom and the United States for former corporate executives with Afren and Julius Baer, respectively.  In the United Kingdom, the Southwark Criminal Court (Judge Michael Gledhill QC) sentenced Osman Shahenshah, former co-founder and Chief Executive Officer of Afren, was sentenced to 6 years’ imprisonment to be served (16 years’ total imprisonment), as follows according to the Serious Fraud Office:

• “6 years jail for one count of fraud, contrary to section 1 of the Fraud Act 2006”;
• “6 years concurrent for one count of money laundering, contrary to section 329 of the Proceeds of Crime Act 2002”; and
• “4 years concurrent for one count of money laundering, contrary to section 328 of the Proceeds of Crime Act 2002.”

In sentencing Shahenshah, Judge Gledhill reportedly stated in part: “You believed that you were above the law, you believed that you were so clever that no one would ever discover your offending.”

Shahid Ullah, former Chief Operating Officer of Afren, was sentenced to a total of five years’ imprisonment to be served (ten years’ total imprisonment), as follows:

• “5 years jail for one count of fraud, contrary to section 1 of the Fraud Act 2006”;
• “5 years concurrent for one count of money laundering, contrary to section 329 of the Proceeds of Crime Act 2002”; and
• “4 years concurrent for one count of money laundering, contrary to section 328 of the Proceeds of Crime Act 2002.”

Both men had been involved in making a secret side deal, undisclosed to their own board, with a Nigerian oil field partner of Afren that enabled them to divert $45 million from a $300 million payment to the partner.

In the United States, the United States District Court for the Southern District of Florida (Judge Cecilia M. Altonaga) sentenced Matthias Krull, a former managing director and vice chairman of the Swiss bank Julius Baer, to ten years’ imprisonment, a $50,000 fine, and a $600,000 forfeiture money judgment, on his guilty plea to conspiracy to commit money laundering.  Krull admitted his participation in a conspiracy to launder $1.2 billion worth of funds that were embezzled from the Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PDVSA).

Note:  If one ignores the SFO’s literally true but misleading headline that Shahenshah and Ullah were “sentenced to 30 years,” the two men’s sentences are respectable, if hardly draconian.  Under the revised Sentencing Council Guidelines for fraud, bribery, and money laundering that have been in effect since 2014, each Fraud Act section 1 offense has a maximum of 10 years’ custody and an offence range from discharge to eight years’ custody, while each section 328 or 329 Proceeds of Crime Act offense has a maximum of 14 years’ custody and an offence range from a Band B fine (the second lowest of the Sentencing Council’s fine categories) to 13 years’ custody.

Krull’s sentence, though substantially higher, bears watching, given his reported cooperation with U.S. investigators.  That cooperation could implicate a wider circle of participants in the conspiracy, including former PDVSA officials, professional third-party money launderers, and members of the Venezuelan elite that may include Venezuelan President Nicolas Maduro, his three stepsons, and Raul Gorrin, owner of the Venezuelan television network Globovision.

Under section 5K1.1 of the U.S. Sentencing Guidelines, a federal prosecutor may move, prior to sentencing, for a reduction of a convicted defendant’s sentence if the defendant “has provided substantial assistance in the investigation or prosecution of another person who has committed an offense.”  Because Krull was arrested on July 24 and pleaded guilty on August 22, he likely did not have enough time to earn a so-called “5K motion” if he has information on criminal involvement by high-ranking members of Venezuela’s economic and political elite.

Under Rule 35 of the Federal Rules of Criminal Procedure, however, a defendant who has been sentenced may still be eligible for a sentence reduction “if the defendant, after sentencing, provided substantial assistance in investigating or prosecuting another person.”  Although Rule 35 generally limits to one year the time within which the government would have to move for a sentence reduction, the Rule permits Rule 35 motions to be made more than one year after sentencing if, for example, the defendant’s substantial assistance involved “information provided by the defendant to the government within one year of sentencing, but which did not become useful to the government until more than one year after sentencing.”  Krull’s ten-year sentence would seem to provide ample motivation for him to cooperate fully with U.S. agents and prosecutors in the ongoing investigation.