Derwick Associates wins a round against Otto Reich

In case you’re a wonk, here is the partial summary judgment decision on the motion to dismiss:

Long story short:

Defendants’ [that is, the Derwick Associates guys] motion to dismiss is GRANTED in part and DENIED in part. Claims I and II (RICO) and VII (civil conspiracy) are dismissed.

Defendant D’Agostino’s motion for leave to file a sur-reply is granted.

And yes, this is the part where I note that my initial reaction to Reich’s case was that it was a bit of a reach. Full of interesting claims, ones that I would really like to see demonstrated in court, but boy. He set himself some high legal hurdles.

Update: One reader mails to say I have it all wrong, that the case is going ahead. That is another way to see things. Take it all how you will.

Proenergy fails upward

Proenergy Services had quite the adventure in Ghana a couple years ago. It, along with other US companies, left behind an inoperable power barge, at least one dead employee, and years of lawsuits.

Now Proenergy is partnering on a African power consortium, based in part on its experience in Ghana.

Proenergy, as regular readers will know, has also been building power plants in Venezuela as a contractor for Derwick Associates. I know that PDVSA records can be inaccurate, but for what it’s worth, it says here that none are yet complete, more than four years after the work was expedited under Venezuela’s electricity industry state of emergency.

Now, I read that Proenergy used its Venezuelan experience to land a $100 million gig installing 100 MW of turbines in Newfoundland and Labrador, Canada. According to the local paper, 11 of 13 examples of prior work on Proenergy’s application were jobs in Venezuela.

PDVSA Wins Another One, Lucky Igbinedion Not So Lucky

 

Enrique Arrundell, former Venezuelan ambassador to Nigeria

Enrique Arrundell, former Venezuelan ambassador to Nigeria (Source: Venezuela foreign ministry, via Flickr)

PDVSA has won dismissal of a case in US federal district court in which a podunk front company in Nigeria was trying to put the Venezuelan state oil company on the hook for as much as $600 million.

140315 skanga-arevenca-pdvsa questions

Francisco Javier González, head of Arevenca, with Suriname President Desi Bouterse (Source: Arevenca.com)

The case is long and contorted and I’m not going to spend all day trying to sum it up. I wrote it up here and then I wrote another note here when I found out that the Nigerian company was actually a front for Lucky Igbinedion, the former governor of Edo state who since leaving office has spent most of his time fighting off corruption charges and pleading guilty to money laundering. I also gave you a little window into Enrique Arrundell, the one-time Venezuelan ambassador to Nigeria who, from the looks of it, was a dick to his employees when not busy telling his Nigerian friend Igbinedion to give money to Arevenca, the world’s foremost supplier of nonexistent petroleum.

Lucky Igbinedion. Source: pointblanknews.com

Chief Lucky Igbinedion, former governor of Edo state, Nigeria. (Source: pointblanknews.com)

But yours for no extra charge, here’s the judge’s decision. It’s a pulp novel all by itself. If you, like me, enjoy a good narrative, you might want to download this and give it a read. The word that jumps out at me throughout is “not.” As in, things are “not” as they seem.

Skanga’s primary shareholder was Chief Lucky N. Igbinedion (“Igbinedion”). Igbinedion was the Governor of Nigeria’s Edo State at that time.… Skanga had not engaged in any commercial transactions with any entity before the alleged transactions that led to this litigation.… The website does not describe Arevenca as an oil company, or disclose any relationship with PDVSA.… Imoukhuede does not suggest that there was any discussion of Arevenca at the meeting.… The letter does not refer to Arevenca. PDVSA did not respond.… The purported agreement was not documented.… The Certificate of Quality is likewise a fabricated document. Skanga does not argue otherwise.… The wire receipts, however, do not reflect a payment of $1.4 million, but instead reflect two transactions of November 10, 2006, of $580,000 and $470,000, respectively, for a total of $1.05 million. The owner of the numbered account listed on the wire transfers has not been identified.… because he did not have the funds to pay the $2.8 million in freight charges, he obtained a “loan” from a Nigerian company named “M.R.S. Oil & Gas Ltd.” (“M.R.S.”) to make the December 2006 freight payment. The 2006 and 2007 annual corporate filings for M.R.S. reported that the company had not commenced business and had current assets of less than $12,000.… The two purported shipments did not arrive in Nigeria.… “Venezuelan diplomats [are not] empowered in any way to speak on behalf of PDVSA or its affiliates.”

And the key paragraph, dismissing all claims against PDVSA, Arevenca and Francisco Javier González Álvarez:

PDVSA’s April 17, 2014 motion to dismiss Skanga’s claims against PDVSA is granted. The claims against defendants Arevenca and González are dismissed for failure to prosecute. The Clerk of Court shall close the case.

Enjoy! That link again.

PS (updating): PDVSA’s vigorous, successful defense in this case comes in contrast to some other cases I could mention.

WSJ says Proenergy, Derwick Associates face corruption investigation

The Wall Street Journal says US authorities are pursuing a preliminary investigation of Derwick Associates and Proenergy Services for possible banking and overseas corruption violations. No charges have been brought and Derwick denies everything.

Derwick is an exceptionally lucky electricity industry middleman in Venezuela and Proenergy Services is the ultimate recipient of its contracts. Derwick has in the past claimed that I am part of a defamation campaign against it. I’m not. The WSJ story starts thus. I am quoting at greater length than usual, sorry:

NEW YORK—Federal and New York City prosecutors have opened preliminary investigations into a Venezuelan company that became one of that country’s leading builders of power plants during the administration of President Hugo Chávez, as well as into a Missouri-based company which played a key role in its success, people familiar with the matter say.

The U.S. Department of Justice and the Manhattan District Attorneys’ office are probing Derwick Associates, a Venezuelan company that was awarded hundreds of millions of dollars in contracts in little more than a year to build power plants in Venezuela shortly after the country’s power grid began to sputter in 2009, the people familiar with the matter said.

ProEnergy Services, a Sedalia, Mo.-based engineering, procurement and construction company which sold dozens of turbines to Derwick and helped build the plants, is also under investigation, these people say.

The probes are in their initial phases, these people say, and it is possible that both investigations could be closed without criminal charges being brought. Continue reading

State oil companies: Who pays for US lobbying?

Ecopetrol (Colombia)
No lobbying

Petrobras (Brazil)
No lobbying

Pemex (Mexico)
No lobbying

CNPC (China)

Source: Opensecrets.org

Statoil (Norway)

Source: Opensecrets.org

CNOOC (China)

Source: Opensecrets.org

PDVSA (Venezuela)

Source: Opensecrets.org

Source: Opensecrets.org

It looks like some lousy record-keeping. But even if these last two tables have to be added together, 2014 is turning out to be the biggest year for PDVSA lobbying since at least 1998. Not likely to exceed Statoil’s 2007 record, but still, pretty healthy spending.

I guess those possible sanctions on alleged human rights violators were going to pose some sort of threat to Citgo.

Of course, none of these state oil companies can compete with ExxonMobil:

Source: Opensecrets.org

Gosh, Peru may fine state oil company big bux for oil spill

Venezuela and Ecuador, especially, could learn from this. Peru fines Petroperú for spilling oil. Real fines, too — max fine could be over US$50 million.

The Environmental Evaluation and Investigation Organization (OEFA) says it has started an administrative sanction proceeding against Petroperú for the 30 June 2014 oil spill in Segment I of the Oleoducto Norperuano, near where it crosses the Cuninico river, in the Urarinas district, province and region of Loreto.

It says the possible infractions that took place include spilling oil, which can be fined as much as 10,000 tax units, or about 38 million soles ($13.5 million).

The state oil company also may have failed to comply with its environmental management instrument, first by failing to maintain the pipeline, which can be fined as much as 57 million soles ($20.3 million) and second by not having detected and controlled the leak promptly, which can also be fined as much as 57 million soles.

More here, in Spanish.

No wonder the government wants to strip the OEFA of its power.

Revisiting: Will and should Venezuela sell Citgo?

Argus is reporting that PDVSA is entertaining offers of $10 billion to $15 billion for Citgo Petroleum Corp. and is marketing its stake in the Chalmette refinery in Louisiana:

Venezuelan state-owned PdV has retained Deutsche Bank to find a buyer for its 50pc stake in the 184,000 b/d Chalmette refinery in Louisiana, a US-based PdV official told Argus… The energy ministry in Caracas confirmed today that Deutsche Bank is leading the search to find a buyer for PdV’s interest in the Chalmette refinery “as soon as possible.” …

Venezuelan officials told Argus yesterday that PdV is weighing offers in the range of $10bn-$15bn to buy its downstream subsidiary Citgo. The planned sale of Citgo is aimed at raising cash for upstream projects at home, redirecting more crude supply to China in exchange for oil-backed loans, and reducing the government´s potential exposure to international litigation.…

I don’t know if this will all be feasible from a legal standpoint, as the sale of assets that are subject to attachment in an arbitration claim could be frozen by the courts so that a potential winner can grab the assets. But assuming there’s a way to sell this stuff, does it make financial sense for PDVSA to do it? Continue reading