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Pensioners facing losses in massive Connecticut-based fraud scheme

December 1st, 2012 6:32 pm by MICHAEL MELIA, Associated Press

HARTFORD, Connecticut -- Some Venezuelan pensioners are telling U.S. prosecutors they have not been able to get back money put at risk by a massive Connecticut-based fraud scheme, which has exposed investors to losses totaling potentially hundreds of millions of dollars.


The biggest investment client of Venezuelan-American financier Francisco Illarramendi was a pension fund for state oil workers in the South American country.


In a statement sent to federal prosecutors in October, a number of people wrote that they have not been compensated for their losses by their former employer or the Venezuelan government, according to a court filing.


Illarramendi, who ran unregistered hedge funds out of offices in Stamford, Connecticut, pleaded guilty last year to several counts of fraud and conspiracy to obstruct justice in a scheme to conceal huge losses. He is under house arrest in New Canaan while awaiting sentencing in January.


Authorities have said losses in the case could exceed $500 million.


Receiver John Carney, who is seeking to recover the payments for fraud victims, said in his last update to the court in July that the funds associated with the fraud had estimated liabilities of nearly $2.2 billion and estimated assets of only $760 million, the vast majority of them in potential litigation claims. Carney did not respond to a request for comment.


Venezuela's government also has said it is trying to recover what it can from the retirement fund for the oil company, Petroleos de Venezuela SA, or PDVSA.


The pensioners' statement was described in a motion asking the court to forbid Illarramendi from disclosing the identities of the people who signed it. The motion noted that Illarramendi was found to have paid bribes and kickbacks to people managing the pension fund's investments, and it said the victims expressed concern about retaliation by the Venezuelan company.


"The government takes seriously victims' concerns about potential reprisals," prosecutors wrote in the filing.


Carney has filed lawsuits in Connecticut seeking the return of tens of millions of dollars in what he calls bribes and kickbacks. The Venezuelan defendants accused of taking payoffs to help Illarramendi include a former pension fund manager at the oil company and a businessman described as having extensive government connections in Caracas.

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