The fallout from the biggest white-collar federal prosecution in Connecticut is being felt a continent away in Venezuela, where the government had invested hundreds of millions of dollars from a state oil workers' pension fund with a now disgraced financier.

U.S. prosecutors say Francisco Illarramendi, a Venezuelan-American, used unregistered hedge funds in Stamford, Conn., as cover for a massive Ponzi scheme with exclusively overseas clients.

Venezuela's government is taking steps to recover what it can from the employee retirement fund for Petroleos de Venezuela, or PDVSA, which contributed about 90 percent of the total investment. The South American country's oil minister, Rafael Ramirez, said the government is sending lawyers to join proceedings in the U.S.

"Our primary action has to do with salvaging the funds from what is there and supporting our workers," Ramirez said in a TV interview over the weekend.

Authorities have not put a dollar figure on the scale of the fraud, but the federal Securities and Exchange Commission said in its complaint that the gap between the funds' liabilities and assets could reach hundreds of millions of dollars. During the SEC investigation, it said, Illarramendi provided a false letter from an accountant in Venezuela in an attempt to verify $275 million in assets that did not exist.

The attorney assigned to unravel the fraud is still reviewing how much is lost. The court-appointed receiver said in a request for assistance last week that it needs to review 350,000 pages of documents from the computers of Illarramendi's holding company, the Michael Kenwood Group, and 86 boxes of files.

"We are focused on recovering and safeguarding all available assets for the benefit of the stakeholders of the Receivership Estate," said the receiver, John Carney of the New York law firm Baker & Hostetler, who declined to comment further.

Illarramendi, 42, of New Canaan, Conn., faces up to 70 years in prison after pleading guilty on March 7 to criminal charges including several counts of fraud and conspiracy to obstruct justice. Prosecutors say he transferred money among investment accounts without telling clients and falsified documents to deceive investors, creditors and the SEC.

He posted properties in New Canaan, New York City and Bethesda, Md., as collateral for bond and has been ordered to remain under home confinement. A sentencing date has not been scheduled. His attorney, John Gleason, said he could not comment, and Illarramendi did not respond to messages.

In a state with one of the world's highest concentrations of hedge fund managers, Connecticut U.S. Attorney David Fein said the case stands out as the largest white-collar prosecution ever brought by his office.

All the investors were overseas, but the scandal has dealt a blow to startup technology companies inside the U.S. that relied on investments from Illarramendi's group. One of them, NuScale Power Inc. of Corvallis, Ore., which is developing a design for small nuclear reactors, has been forced to reduce its workforce as it seeks new financial backers.

The people who stand to lose the most, however, are in Venezuela, where opponents of President Hugo Chavez have accused PDVSA officials of hiring Illarramendi to speculate on financial markets using the employee retirement fund. Ramirez has rejected those allegations as false and politically motivated.

Ramirez said the government had a contract with Illarramendi as an adviser, but those ties were severed in 2004.

"He's a man who has no relation with PDVSA," Ramirez said in the interview with Venezuela's Televen TV channel.

Jerome Fortinsky and Lindi Beaudreault, attorneys for the PDVSA retirement fund in New York, declined to comment.

Gustavo Coronel, an energy consultant in Venezuela and a former PDVSA executive, said the bad investment reflects disorder at the state oil company that has suffered from production losses, the siphoning of money from the executive branch and rising cases of corruption.

"The crime is that the funds should not have been used for speculation and invested in high-risk projects," Coronel said.

A financial analyst in Caracas, Russ Dallen, said despite the huge sums involved, the outcry over the oil workers' potential losses has been muted.

"It's an incredible amount of money," said Dallen, the head of Caracas capital markets at BBO investment bank in Venezuela. "It's amazing no one in the Venezuelan government is talking about it."

____

Associated Press writer Ian James contributed to this report from Caracas, Venezuela.