Swiss banker to Venezuela's ruling elite turns star witness

By JOSHUA GOODMAN - Associated Press - Monday, March 29, 2021

MIAMI (AP) - Matthias Krull pulls up his pant leg and slides a gardening shear on the ankle monitor that for two years has been a reminder of his crimes.

With a court order in hand, the former Swiss banker snips the hard plastic - releasing a torrent of emotion.

“Physically, I got used to it, but psychologically it’s liberating,” Krull, 47, said from his rented home in Miami. “To be able to wear shorts again is a big thing. I was at my son’s soccer games and everybody was in shorts in 100 degrees.”

Krull’s troubles stem from his work in Venezuela, which has been plagued by corruption in two decades of socialist rule. During that time, Krull, who worked for the Julius Baer Group, was the go-to private banker to government insiders. Among his would-be clients: President Nicolás Maduro’s stepsons.

After he was arrested on money laundering charges at Miami’s airport in 2018, the bespectacled banker began his second act as the all-star witness to U.S. federal investigators seeking to untangle how Venezuelan kleptocrats stole billions in oil wealth.

Krull’s assistance has proven decisive. Since pleading guilty, he has helped prosecutors enlist other Swiss bankers as witnesses, pressed others to surrender and assisted European investigations.

In recognition of those efforts, a judge in September slashed his original 10-year prison sentence by 65% and allowed him to remove the ankle monitor. He is scheduled to start his 42-month sentence this summer.

Hovering over his ordeal is a more vexing question: whether anyone else was responsible. While the Julius Baer Group has dismissed Krull’s actions as those of a rogue employee, Swiss regulators last year found that the money house overlooked red flags and incentivized bad behavior.

“The goal was to bring in new money,” said Krull. “They really didn’t care about the portfolio’s profitability.”

Zurich-based Julius Baer declined to answer detailed questions, so this story reflects Krull’s own perspective as told over several interviews. Many of the details are backed up by court documents and U.S. officials.

To Krull’s rivals in Venezuela, it was his unique upbringing that gave him an edge. His father, a Lutheran pastor, moved the family there from Germany when Krull was 7. At a private German school in Caracas Krull built a network of contacts among the city’s elites while soaking in the slang of the hillside slums.

His early years at Julius Baer were something of a bonanza-fueled blur. Hugo Chávez was at the peak of his power, oil prices surged to a record and rich Venezuelans were scrambling to stash their money abroad.

“The joke among bankers was that the money was lying on the streets, you just had to pick it up,” he said.

Krull estimates that he hauled in over $1 billion in deposits - earning him a spot in Julius Baer’s “President’s Club,” the bank’s top 10% performers.

There was a riskier side, however. Bankers were routinely targeted for kidnapping or extortion and Krull moved around with an armed bodyguard. After a shooting outside his apartment by gunmen who were apparently looking for him, Krull relocated to Panama, but continued to travel to Venezuela for business.

A high-risk currency deal gone awry led to Krull’s arrest, even though his role in the scheme was small and came late in the game, according to U.S. investigators.

One of Krull’s clients in 2014 made a loan to Venezuela’s state-owned oil monopoly, PDVSA, in bolivars. The oil company repaid the loan two months later in dollars at a much higher official exchange rate, allowing the conspirators to make off with 15 times what they originally lent, according to the criminal complaint against Krull.

Two years later, Krull’s client asked him to move $200 million in proceeds from the fake loan into a foreign bank account, according to investigators.

Krull was under orders from his employer to avoid any transactions involving the oil company. So he connected the longtime client to a money manager in Panama who, unbeknownst to the two, was a U.S. government informant.

At a January 2017 meeting in the client’s office, Krull was introduced to the true beneficiaries of the $200 million take: three men clad in gold chains and baseball caps who were introduced as “Los Chamos” - Venezuelan slang for “the kids.” They were President Nicolas Maduro’s stepsons.

“That was the moment when I realized I was over my head,” said Krull, who squirmed his way out of lunch with the men, his heart racing.

Krull insists he is being made the fall guy for a private banking system built on secrecy that facilitated the looting of Venezuela’s state coffers.

Krull filed a wrongful dismissal lawsuit against Julius Baer in Venezuela in which he described a meeting at the start of 2017 where he discussed with managers what to do with several clients whose account information had been handed over to the U.S. Justice Department.

Instead of dropping the clients, Krull alleges, he was instructed to keep open their personal accounts.

“The only purpose was to keep generating income for the bank and not take any real and concrete action to avoid money laundering,” Krull alleges in the complaint.

Swiss regulators last year found many transactions over nearly a decade that point to “systemic failures” by Julius Baer.

Specifically, the audit found that Julius Baer fell “significantly short” in investigating the identities of its Latin American clients and compensated bankers for attracting new wealth while paying scant regard to compliance goals.

Julius Baer said in a statement that the criminal activity to which Krull pleaded guilty occurred outside of his work duties. The bank said it has cooperated with Swiss authorities.

Mark Pieth, a money-laundering expert, said Swiss banks have been involved in several scandals in recent years so there is no excuse for them not knowing the source of the huge sums of money being raked in by their associates in Venezuela.

“With Venezuela, all sorts of alarm bells should’ve gone off,” said Pieth.

He said he is surprised more Swiss financial managers haven’t been charged. In Switzerland, financial markets supervisor FINMA, as part of its investigation of Julius Baer, sent written reprimands to two high-ranking managers - a punishment Pieth likened to “a slap on the knuckles.”

“It’s like asking casinos to identify gambling addicts,” he said.

Today, as he waits to begin serving his sentence, Krull spends his days shuttling his kids to soccer games and connecting with old friends.

“My main regret is that when I got dragged into this situation, I did not have the strength to blow the whistle and take a step forward by talking to the correct people,” Krull said. “That will stay with me for the rest of my life.”