U.S. Federal Judge Authorizes Seizure of CITGO

Jacob Maslow  |

Image via Wikimedia

A U.S. federal judge has authorized the seizure of CITGO Petroleum Corp., the U.S. refiner, to satisfy debt owed by the Venezuelan government, according to the Wall Street Journal.

The legal action was filed by Crystallex International Corp., a Toronto-based gold mining company that is now defunct. The company is attempting to collect on a judgement over lost mining rights and is pursuing $1.2 billion in debt.

The Venezuelan government in 2011 seized a mine that had been awarded to Crystallex. A settlement was reached through an arbitration panel, but the company has yet to receive repayment.

Judge Leonard Stark of the U.S. District Court in Wilmington, Delaware, said in 2016 in an opinion on the case, “Venezuela, aware of the possibility of a large award against it in a World Bank arbitration, orchestrated a scheme to monetize its American assets and pull the proceeds out of the United States in order to evade potential arbitration creditors.”

According to the court document, the plaintiff also claimed that Petroleos, another state-owned Venezuelan company, was “the alter ego of the Venezuelan government.”

Stark’s ruling was issued on August 9, but his full opinion was sealed. A redacted version will likely be available at a later date.

The court’s order makes it more likely that the state-run oil company, Petroleos de Venezuela SA (PDVSA), will lose control of the asset as it faces a deepening political and economic crisis.

Sanctions have already been imposed against PDVSA and Venezuela over civil rights abuses. Last month, the U.S. State Department also ordered the CEO and president of the company to surrender his U.S. visa. In January, the former head of PDVSA, Rafael Ramirez, was arrested on suspicion of embezzlement and money laundering.

Five former Venezuelan government officials were also indicted for alleged roles in an international money laundering scheme.

CITGO’s three refineries account for 4% of domestic fuel capacity and serve as major suppliers of diesel, jet fuel and gasoline in the United States. Independent CITGO retail marketers also sell gasoline through 6,000 gas stations and convenience stores throughout the U.S.

Losing control of CITGO would put one of Venezuela’s last sources of oil revenue – the United States – at risk.

PDVSA says it will appeal the U.S. court’s ruling.

Any sales of CITGO stock will need to be approved by the U.S. Treasury Department. Crystallex still has other legal hurdles to overcome before shares could be sold, according to the report.

DISCLOSURE: The author does not own any stake in the listed equities


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