Defunct Direct Access Partners Scuttled by Shady Practices
Every day we hear about companies committing fraud in the world of finance. Regulatory agencies are inundated by the number of complaints from investors or the dirty laundry that their investigations turn up. Often it’s the big boys of finance who get caught committing acts of fraud, and they are sanctioned, fined, and then back at their devious practices the next day with “neither admitting or denying” any wrong-doing. For some investment firms, it all seems to be just the cost of doing business and the investors they scam pay the price. Sometimes though a company just can’t seem to keep its hand out of the cookie jar, and the weight of their illicit activities comes crushing down upon them. Such was the case with New York-based broker/dealer firm Direct Access Partners (DAP). After a long, and on-going, investigation by the Securities and Exchange Commission, DAP finally closed up shop in May of 2013. This came on the heels of the SEC’s initial investigation into a scheme that involved tens of millions of dollars in bribes paid to a finance officer at Banco de Desarrollo Economico y Social de Venezuela (BANDES), a state-owned Venezuelan bank.
That didn’t end the troubles for DAP. In an second SEC press release that was issued earlier this week, it was reported that in addition to the previous number of DAP’s employees involved in this large-scale kickback scheme that was focused on wooing the business of BANDES, two high-ranking DAP executives were also implicated in the scandal. The SEC statement claimed that DAP co-founder and CEO Benito Chinea, and managing partner of global strategy Joseph DeMeneses plotted and promoted a cover-up to hide the millions of dollars in payments that were made to the Venezuelan finance officer of the bank. In one example of DeMeneses’ culpability in the matter, he used monies that were under his control to make kickback payments to a shell company that was controlled by the Venezuelan bank official. Chinea then had the firm reimburse DeMeneses.
This second amended complaint by the SEC has filed in federal court which is pending court approval. The previous allegations include charges that the SEC brought last year against four other people associated with DAP, as well as the head of the firm’s Miami office.
The multiple acts of fraud and shady dealings of DAP and many of its employees eventually led to a bankruptcy action being filed against it by a creditor in May, 2013. This ultimately contributed to the company’s failure.
“The corruption at Direct Access Partners reached the very top,” said Andrew M. Calamari, director of the SEC’s New York Regional Office. “The schemers depended on Chinea as CEO to authorize outsized payments from the firm to be funneled as kickbacks to Venezuela.”
The SEC hopes that this investigation will result in disgorgement of ill-gotten gains, including interest, as well as the assessment of financial penalties against Chinea, a resident of N.J., and DeMeneses, a resident of CT. They are also seeking financial penalties against Tomas Alberto Clarke Bethancourt, Jose Alejandro Hurtado, Haydee Leticia Pabon, and Iuri Rodolfo Bethancourt, all of who were affiliated with DAP. They were named as defendants in the SEC’s action last year due to their participation in fraudulent trades that resulted in more than $66 million in revenue.
The SEC press release also stated that the U.S. Attorney’s Office for the Southern District of New York and the U.S. Department of Justice’s Criminal Division have also announced criminal charges against Chinea and DeMeneses.
The Blum Law Group specializes in helping people who have been victimized by brokers or investment firms. If you feel that you have suffered financial losses as a result of the actions of Direct Access Partners, LLC, please give us a call at 877-STOCK-LAW for a free consultation.
Resources: Whistleblowertoday.com; SEC; WSJ