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.

8 thoughts on “Derwick Associates wins a round against Otto Reich

  1. William

    You really shouldn’t use tems of legal argot without actually knowing what they mean. It’s embarrassing. It is *not* a summary judgment. This is bad reporting and bad scholarship. If you want to be a reference point for judicial decisions at least call things what they are. This is the judge’s ruling on the motion to dismiss.

    Lawyers understand that there is something called a “heightened pleading standard,” on RICO and that having those claims dismissed is hardly a major win for the defendants inasmuch as the plaintiff had a huge standard to meet. A major win for the defendants would have been a dismissal of the case and all of its claims. That’s been left standing by the judge. There will be a trial–unless there is a settlement.

    The ruling opens the door, from what I read, to depositions and discovery, and the third defendant, Franco D’Agostino, appears the most compromised of all of them. He was found to be subject to jurisdiction in New York. Meanwhile the other defendants now have their New York financial dealings subject to scrutiny: their licenses, real estate, banking activities, and business relationships — all on the table. In the context of a criminal investigation (which I note nobody in the Venezuelan press has actually covered in reporting yesterday’s ruling) this is what you call a disaster for the plaintiffs. In other words, the Derwick Associates crew now has to answer discovery in this case that may complicate their response in the federal and New York investigations. Betancourt and Trebbau are going to have to open up about their business transactions (including their wire transfers) in New York–whether to Panama or Switzerland or Madrid. And if they plead the Fifth, oops…

    It’s amusing that the Venezuelan media has already called the dismissal of 3 claims out of 7 a “ratification” of the “honesty” of Derwick. Who gets paid to write this? And how is it no Venezuelan newspaper can actually read and translate a ruling? Reich neither won or lost. The Derwick Associates crew didn’t win or lose. Several claims denied, several claims stand.

    This appears to be far from over.


    1. Steven/Setty Post author

      Not to beat a dead horse, but I didn’t call this a major win. It’s a minor win by Derwick. Hence my headline. I agree, RICO had a high standard. That’s part of why it looked so dubious to me from the start. Not because these guys are innocent of conspiring across state lines — that I don’t know, and it would be nice to see alleged facts on this get proved or disproved in court — but because I didn’t see how Reich could show he was the victim of the sort of conspiracy that RICO contemplates.

      I agree that the Venezuelan press is “amusing.” Also depressing.

      I am eager to see discovery. One question, since you seem to know about the law. In some courts, it’s possible to defer discovery pending a criminal investigation, because discovery could interfere with the right to avoid self-incrimination. How does US District Court work with that? What do you mean by “oops”?

  2. William

    “I didn’t see how Reich could show he was the victim of the sort of conspiracy that RICO contemplates”

    Can you detail this further?

    “In some courts, it’s possible to defer discovery pending a criminal investigation, because discovery could interfere with the right to avoid self-incrimination.”

    Not exactly. Deferring or “tolling” a civil case usually happens at the request or insistence of U.S. authorities and in order to ensure that justice is swift and that civil proceedings don’t interfere with the defendant’s calendar. There are no current prosecutions or indictments and from what I read there is no indication (or not) of a Grand Jury being impanelled. Until that changes the defendants in the Reich case will not have the mercy of a prosecutor saving them from the horror of a civil case by giving them the prospect of a peachy jury trial that may land them 12 years in the pokey. Obviously, only an idiot would think a criminal trial is preferable to a civil trial.

    Can the Derwick people invoke the Fifth Amendment? of course. But they could have done this anyway, regardless of whether they are under criminal investigation. However, doing so is a huge giveaway and the sort of behavior that indicates that there is smoke and possibly fire. That said, a judge can compel one of them to answer a questions regardless of the Fifth Amendment. Oftentimes people think invoking the Fifth means they can avoid a deposition. Not so.

    Read more here on folks using the Fifth to avoid a proper civil proceeding inquiry:

    and here to read about parallel cases:

    I’m still surprised at the utter lack of accurate reporting on this case inside the Venezuelan media. It’s an alternate universe. If these guys get indicted (and who knows how big an “if” that is) the media there will be a fascinating show in eating crud.

    1. Steven/Setty Post author

      Thank you so much for all the info. Please stick around, there are sure to be more cases that need this level of expertise.

      As far as my impressions of the Reich case, I certainly am not a lawyer, have never spoken with Reich or his lawyers, and I know little about RICO. I guess it just seemed a little bit of a reach to say that interstate defamation was a RICO offense, but what do I know? I’m glad to see discovery going ahead, as I really hope that we can all see more light on this situation.

      As far as the Venezuelan press, it’s really hard to believe. But whatever. The trial goes ahead. I care more about the real world than the media representation thereof.

  3. Boludo Tejano

    Setty,as you have done a lot of analysis of PDSA annual reports, I will ask you: do you know if PDVSA lists gasoline sales by state anywhere? Thanks.

      1. Steven/Setty Post author

        Hi, they list fuel sales by terminal. There are a few terminals around Venezuela (2? 3?) and you can see how much of each type of fuel is sold at each. But by state, no. Never seen that. They have the info, they sometimes refer to it in their various contrabando press releases, but I don’t think it’s routinely released.

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