By Luc Cohen and Brian Ellsworth
CARACAS (Reuters) - Venezuelan intelligence services monitored six U.S.-based executives of state-owned refiner Citgo Petroleum for a year on U.S. soil to determine their involvement in a deal the government deemed fraudulent, leading to their 2017 arrest in Caracas on corruption charges, according to court testimony.
The executives, known as the Citgo Six, were sentenced by a Venezuelan court in November to between eight and 13 years in prison for corruption in a procedure the U.S. State Department labeled a "kangaroo court". Five of the men are naturalized U.S. citizens.
The trial documents reviewed by Reuters include testimony provided by a senior Venezuelan military official, Ramon Balza, about the monitoring. The testimony has not been previously reported.
Balza, who was serving in 2017 as director of operations for Venezuela's military counter-intelligence directorate (DGCIM), said intelligence services sent information collected over the course of a year to Public Prosecutor Tarek William Saab, whose office used it to open a criminal investigation.
Reuters was unable to contact Balza. The DGCIM did not respond to a request for comment.
Saab's office and Venezuela's information ministry also declined to respond to questions from Reuters.
"Ever since that company (Citgo) became Venezuelan, the company and its board members have been monitored by this country's intelligence services," Balza said in Aug. 11 testimony at a Caracas appeals court.
Balza, who conducted the arrests, signed a criminal investigation report entered into evidence at the trial and reviewed by Reuters. The document stated the six men signed a July 2017 refinancing contract by Citgo that prosecutors alleged was unfavorable to Venezuela's interests.
When asked by a defense attorney for one of the men how he obtained the information, Balza said intelligence services had "telephony" and "things that follow these people", without providing specific details.
"That is how intelligence agencies function," he said. "Everyone knows that and every country does it."
The United States brands Venezuelan President Nicolas Maduro a dictator and has imposed sanctions on state oil company Petroleos de Venezuela (PDVSA). It has also indicted senior Venezuelan officials on charges of corruption and drug trafficking.
In December, it imposed sanctions on the judge and prosecutor in the Citgo case, saying that media and rights groups were denied access to the trials.
Benjamin Gedan, deputy director of the Wilson Center's Latin America program and a former South America director at the White House National Security Council, said any violation of U.S. laws by Venezuelan intelligence services could provide an opportunity for Washington to "crack down."
"If they're violating U.S. laws then they're justifiably at risk of U.S. prosecution and we're always looking for excuses to investigate members of this regime," Gedan said.
U.S. federal law prohibits wiretapping of telephone calls without a warrant and requires any non-diplomatic foreign agents to register with the Department of Justice, according to Steven Cash, counsel at the Day Pitney law firm and a former prosecutor.
"If they were intercepting and wiretapping in the United States, that would be a crime," Cash said.
It was not clear from the testimony if Venezuelan intelligence services violated either of those laws. The Department of Justice declined to comment on whether the monitoring would trigger any action.
U.S. intelligence services also routinely gather "human intelligence" on countries where the United States has strategic interests, four former CIA officers told Reuters https://reut.rs/2OcdhIA in a 2019 story. [https://reut.rs/2OcdhIA]
The trial documents show that defense attorneys repeatedly said the prosecution presented no evidence linking the Citgo executives - Jose Pereira, Jose Luis Zambrano, Alirio Jose Zambrano, Jorge Toledo, Tomeu Vadell and Gustavo Cardenas -to the refinancing transaction.
"Once we heard (Balza) confessed what they did, we requested a mistrial and a criminal investigation against those responsible," a defense attorney for Vadell said in a statement, referring to both the intelligence services' monitoring and testimony by Balza that the men were arrested before a warrant was issued by a court, potentially violating their right to due process.
Defense attorneys for the other detainees declined to comment.
The men are widely viewed by U.S. analysts and U.S. officials as potential bargaining chips for Venezuela to extract concessions from the United States. Last month, Maduro alleged the men were CIA agents, without providing evidence, and excluded the possibility of their release as a concession to the administration of President Joe Biden.
"Maduro's latest allegation is nothing but a callous attempt to leverage the lives of American citizens as political currency," a State Department spokesperson said at the time.
In the testimony, Balza and Rafael Franco - who in 2017 served as the DGCIM's special director for criminal investigations - said military counterintelligence detained the Citgo Six on orders from prosecutors even though the DGCIM was not in physical possession of a warrant.
However, Balza and Franco gave divergent testimony on the crucial question of whether a judge had approved a warrant before the men were arrested – without which the detentions potentially would have been illegal.
Balza said prosecutors requested an arrest warrant from a judge after the group was detained. Franco testified that the prosecutor who instructed him to detain the men said a judge had issued an arrest warrant already, even though the DGCIM had not yet received it.
Franco was the DGCIM official responsible for liaising with the judicial system but did not carry out the arrests himself.
Reuters was unable to reach Franco for comment.
In his testimony, Balza said the DGCIM believed the six men were due to fly out of Venezuela that afternoon.
"What we did was detain them preventatively, without it rising to the level of illegal detention," Balza said in his testimony.
Magaly Vasquez, a Venezuelan criminal procedure expert at Andres Bello Catholic University, said Venezuelan law would allow officers to detain suspects on orders from prosecutors in cases of "exceptional need and urgency" if an arrest warrant already exists, and the prosecutor informed officers of the warrant.
Detaining suspects before such a warrant exists would be illegal, she said.
Washington imposed sanctions on Franco in July 2019 for alleged involvement in the torture and death of Venezuelan Navy Captain Rafael Acosta Arevalo.
(Reporting by Luc Cohen in New York and Brian Ellsworth in Caracas; Additional reporting by Matt Spetalnick in Washington; Editing by Angus MacSwan)