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BRIDGEPORT, Conn. (AP) — A Venezuelan-American hedge fund manager was sentenced Thursday to 13 years in prison for running a Connecticut fraud scheme involving hundreds of millions of dollars from Venezuela's state oil company.
Francisco Illarramendi expressed remorse and told the judge he committed his crimes only to cover up investment losses under pressure from corrupt Venezuelan government officials.
"This is certainly not Bernie Madoff," the balding, heavyset 45-year-old Illarramendi said before he was sentenced in federal court in Bridgeport.
Despite the apology and Illarramendi's work to help recover some of the money, Judge Stefan Underhill noted the defendant took $20 million for himself, building a $5 million home in New Canaan. He said Illarramendi, after pleading guilty, also disregarded an asset freeze by using a tax refund to pay off his Mercedes-Benz rather than reporting it to federal authorities.
"What I see is someone who defrauded a lot of victims," the judge told him.
Illarramendi, the son of a Venezuelan diplomat, once had a meteoric career in Latin American financial securities. As an adviser to Venezuela, he devised a currency arbitrage market that, according to him, generated $60 billion for the government in Caracas and prevented it from collapsing.
The scheme began in 2005 as an attempt to cover up the loss of $5 million in a failed bond transaction on behalf of Venezuela's government. Illarramendi said he was threatened in Venezuela with violence against his family if he did not go through with it.
"Over the course of time, as I was trying to resolve the issues I found myself in, I was very clearly threatened on various occasions in Venezuela and outside Venezuela," said Illarramendi, who added that he described the threats to U.S. authorities after he was caught but nothing came of it. "My frame of mind was one of always being under duress."
Over time, the fraud ballooned exponentially as Illarramendi used his Stamford-based hedge funds to try to cover up losses exceeding a half billion dollars. In 2011, he pleaded guilty to several counts of fraud and conspiracy to obstruct justice.
Investigators are still calculating losses from the fraud scheme, but the court-appointed receiver has recovered enough to pay claims totaling more than $345 million to the victims. The receiver, John Carney, said in the fall he had recouped nearly 92 percent of investor losses.
As part of the fraud, prosecutors say, Illarramendi paid millions of dollars in bribes to Venezuelan government officials to reward them for steering the oil company's money to him for investment.
An attorney for the state oil company, Jerome Fortinsky, told the judge that his clients are victims and that anybody at the oil company who took a bribe was a "rogue" employee.
"We emphatically reject the defendant's repeated efforts to slander PDVSA and government of Venezuela by claiming they had unclean hands or were somehow responsible for his criminal conduct," Fortinsky said.
The judge said he would recommend Illarramendi serve his sentence in a low-security facility as close as possible to Connecticut to make it easier for him to see his family.
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