A Venezuelan financier who ran a massive fraud scheme used investment
funds as personal piggy banks to support a lavish lifestyle, including a
$5 million home on Connecticut's Gold Coast, prosecutors said in a memo
urging a federal judge to sentence him to at least 12 years in prison.
The New Canaan home built by Francisco Illarramendi is so big it was
impossible for him and court officials to arrange for electronic
monitoring that would cover the entire house, prosecutors said in the
filing Monday.
Illarramendi, who ran unregistered hedge funds
in Stamford, faces sentencing Thursday in Bridgeport in a scheme that
exposed mostly foreign investors to more than $300 million in losses,
including more than $100 million from Venezuela's state oil company.
The fraud began as an attempt to cover up the loss of $5 million in a
failed bond transaction and over time, prosecutors say, it ballooned
exponentially as Illarramendi pursued a series of "Hail Mary"
transactions. Prosecutors say he lied repeatedly to investors and
creditors as part of the securities fraud and made up fraudulent
documents to prevent a civil fraud investigation. In 2011, he pleaded
guilty to several counts of fraud and conspiracy to obstruct justice.
Illarramendi has argued he was not motivated by personal gain, but
prosecutors rejected that notion, describing the money for the house as
among more than $20 million that he kept for himself. Even after he
agreed to an asset freeze, prosecutors said, he used $30,000 from a
state tax refund to pay off a loan on his Mercedes Benz, initially lying
by suggesting the money came from friends.
"If Illarramendi were truly interested in closing the hole, it defies
all reason for Illarramendi to personally enrich himself with Fund
assets," prosecutor Richard Schechter wrote in the sentencing memo.
Illarramendi, the 45-year-old son of a Venezuelan diplomat, has lived in
the U.S. for years but developed an expertise in Latin American
financial markets, serving for a time as an adviser to Venezuela's oil
company. After pleading guilty in March 2011, he remained free on bail
for nearly two years, but the judge ordered him detained as he
repeatedly changed attorneys and frequently sought to postpone
sentencing.
The financier has said in court papers that he should receive no more
than six months of home confinement in addition to the time he already
has spent in jail, arguing that he was coerced by corrupt Venezuelan
officials to cover up investment losses. Without providing details of
any threats, he said he was made to fear for his family's safety.
Venezuela's government has declined to comment on the allegations.
Prosecutors said Illarramendi acknowledged paying millions of dollars in
bribes to Venezuelan government officials to reward them for steering
the oil company's money to him for investment — money that Illarramendi
needed to conceal the fraud. But they said Illarramendi chose to do
business in Venezuela, and his allegations of corruption in the South
American country do not justify his own crimes.
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