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U.S. Hits Venezuela Food ‘Corruption Network’ With Sanctions

U.S. Targets Venezuela Food ‘Corruption Network’ With Sanctions

(Bloomberg) -- The U.S. sanctioned a Colombian businessman it said corruptly helped the regime of Venezuela’s Nicolas Maduro and others make hundreds of millions of dollars from a food-distribution network that’s supposed to serve starving people.

Alex Nain Saab Moran paid bribes and kickbacks to government officials to win no-bid, overpriced contracts to import food ration boxes for poor Venezuelans, the U.S. Treasury Department said on Thursday. Rather than distribute the food to the needy, the Maduro regime often used it to reward supporters and punish political critics, the U.S. said. At the same time, Saab laundered hundreds of millions of dollars out of Venezuela, the Treasury said.

“Alex Saab engaged with Maduro insiders to run a wide scale corruption network they callously used to exploit Venezuela’s starving population,” Treasury Secretary Steven Mnuchin said in a statement. “They use food as a form of social control, to reward political supporters and punish opponents, all while pocketing hundreds of millions of dollars.”

The food-aid program, known as CLAP, has become a key source of official embezzlement through overcharging for low-cost products, including Mexican and Turkish food staples, marked up more than 100% before being sold to near-starving Venezuelans. The deliveries have become so crucial that when they fail to arrive, violent protests erupt.

Saab and a business partner ran a network of shell companies that bought, assembled and shipped food to Venezuela for CLAP deals at highly profitable rates, bribing government officials to maintain access to the contracts, the U.S. said.

The Treasury Department also sanctioned Maduro’s three stepsons, Walter, Yosser, and Yoswal, saying the trio received kickbacks from Saab. Maduro’s son, Nicolas Maduro Guerra, was also sanctioned last month.

Saab’s relationship with the Venezuelan government turned him into one of the region’s most powerful men. In 2018, as Venezuela’s shortage of foreign exchange became acute, Saab worked with members of the government to sell Venezuelan gold to Turkey, the U.S. said.

This gold-for-food system is a multicountry, many-company scheme intended to obscure the flow of money and goods, Bloomberg Businessweek reported in April. Maduro was weathering extensive U.S. sanctions -- mostly targeting individuals in his government accused of corruption, human-rights violations and other crimes -- even as he risked further U.S. punishment over his dealings in gold.

Venezuela had been shipping freshly mined gold abroad for processing, primarily to Switzerland. Last year, Maduro began sending it to Turkey. He’d already shipped at least $900 million in gold there by the time the U.S. last fall banned American individuals, banks and corporations from doing business with anyone connected to Venezuelan gold sales.

Saab is at the center of sweeping criminal investigations by the U.S. Justice Department and agents from Homeland Security Investigations, four people familiar with the probes told Bloomberg. One focus is whether the food and gold trade with Turkey is being used to launder the proceeds of corruption and to evade U.S. sanctions, these people said. He’s also under investigation by Colombian authorities.

Aside from Saab, the Treasury Department sanctioned nine other people, including two of his sons, and 13 related companies and entities. They are located in Hong Kong, the United Arab Emirates, Mexico, Turkey, Panama, Colombia and Delaware.

--With assistance from Michael Smith and Monte Reel.

To contact the reporters on this story: Patricia Laya in Caracas at playa2@bloomberg.net;Ben Bartenstein in New York at bbartenstei3@bloomberg.net;David Voreacos in New York at dvoreacos@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Justin Blum, Matthew Bristow

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