Bribery and corruption are rarely used as the basis of civil actions between entities and individuals. It is the exceptional case where a party claims that its refusal to submit to demands for bribes can lead to a claim of civil liability.
Yet that is one of the key basis for a recent lawsuit filed in federal district court in Houston by Harvest Natural Resources, Inc. and an affiliate.
They sued Rafael Ramirez. He had been Venezuela’s oil minister and the former president of Venezuela’s state oil company, PDVSA. Also named were several third parties who allegedly acted for Ramireza.
Harvest came to grief because its Venezuelan subsidiary co-owned a company called Petrodelta with PDVSA.
Harvest attempted several times to sell its portion of Petrodelta. Each time it was allegedly confronted by the demand for a bribe to be paid to PDVSA officials to allow the sale to go through.
In 2012 Harvest had a deal to sell to a state-owned enterprise from Indonesia for $725 million. Harvest alleged that defendant Juan Garcia, an oil and gas consultant, “demanded a $10 million bribe, on behalf of Ramirez and at Ramirez’s request, for final contract approval.”
Harvest refused to pay the bribe and the deal cratered.
In 2013-2014, Harvest secured another purchaser but after the first part of a two-stage closing, PDVSA officials demanded an increase in the purchase price and Harvest alleged this increased amount would be used to pay bribes to PDVSA officials. Moreover, defendant Garcia continued to insist on the $10 million bribe payment to Ramirez. Once again Harvest refused to pay the solicited bribe.
In 2016, Harvest was able to make a sale at true fire sale prices, largely because it believes defendant Ramirez had left PDVSA. The sale amount was $152 million and Harvest alleged the demand for bribes decreased the overall sales price it would have received by some $470 million.
Harvest formally dissolved in 2017 and no longer operates as an oil and gas company. It is required by Delaware law to exist for a period of at least three years “for the purposes of prosecuting lawsuits, liquidating, and closing its business.”
Harvest sued the defendants under four general civil claims. The first is civil RICO for the conspiracy of the defendants to demand that Harvest engage in the illegal conduct of paying bribes. The second is an antitrust claim under the Sherman Act for knowingly engaging conspiracies in restraint of trade, which substantially lessened or eliminated competition. The third is under the Robinson-Patman Act for soliciting unlawful bribe payments from Harvest in order for the sales to be approved by Venezuela.” The fourth and final claim is under Texas state anti-competitive law.
A copy of the complaint is here (pdf).
It will be interesting to watch going forward.
Tom Fox is the Compliance Evangelist™. He leads the social media discussion on compliance with his award-winning blog, The FCPA Compliance and Ethics Blog and eight podcasts; The FCPA Compliance Report, Compliance into the Weeds, Everything Compliance, This Week in FCPA, 12 O’clock High-a Podcast on Business Leadership, Compliance Report-International Edition, Countdown to GDPR and Across the Board.
He’s the author of 12 books on compliance, ethics and leadership, including the international best-selling “Lessons Learned on Compliance and Ethics” and “Best Practices Under the FCPA and Bribery Act” and his series Fox on Compliance. His book “The Complete Compliance Handbook” will be published by Compliance Week in April 2018. It is available for PreSale by clicking here.