As highlighted in this prior post, in May 2019 Jose Manuel Gonzalez Testino pleaded guilty to, among other charges, one count of conspiracy to violate the Foreign Corrupt Practices Act and one count of violating the FCPA for providing things of value to Citgo Petroleum Corp. (a subsidiary of Petroleos de Venezuela S.A. – the Venezuelan state-owned oil company).
Recently, Citgo turned plaintiff and sued Testino and his associated company Petroleum Logistics Service Corp. (PLS) for bribing its employees.
In summary fashion, this civil complaint alleges:
“This action for breach of contract, fraud, and civil claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) arises from a conspiracy of illegal bribery and other criminal acts perpetrated by Gonzalez Testino, other individuals, PLS, and other entities under the control and indirect ownership of Gonzalez Testino.
On or about March 5, 2014, CITGO entered into a Service Contract Agreement with PLS (the “Agreement”), pursuant to which PLS would provide procurement and logistics services in order to facilitate the sale and transportation of equipment, goods and/or materials to CITGO’s parent corporation, Petróleos de Venezuela, S.A. (“PDVSA”), the state-owned oil and natural gas company of the Bolivarian Republic of Venezuela.
As part of the Agreement, PLS represented that it would comply with all applicable laws in the provision of its services under the Agreement. PLS also agreed not to make any payments, give any gifts, or dispense any favors to CITGO’s employees or their families. Finally, PLS agreed to immediately disclose to CITGO any common ownership between PLS and any vendor or service provider through which PLS performed its procurement and/or logistics services.
From 2014 to 2018, pursuant to the Agreement, CITGO entered into many transactions in which PLS served as a procurement and logistics vendor. For such work, PLS was paid a commission of 5.75 percent of the total purchase price of the goods, equipment, or material, as well as reimbursement of any expenses and/or costs, including costs from PLS subcontractors handling shipping and transportation services.
Starting at least as early as 2012, Gonzalez Testino took part in a conspiracy to enrich himself by improperly obtaining and retaining lucrative contracts with CITGO through corrupt and fraudulent means, including paying bribes to CITGO employees, who are considered, by virtue of being employees of a subsidiary of an instrumentality of the Bolivarian Republic of Venezuela (namely PDVSA), to be foreign officials under the U.S. Foreign Corrupt Practices Act (“FCPA”). This included, upon information and belief, the payment of bribes to (1) induce CITGO to enter into the Agreement with PLS, and (2) to induce CITGO to use PLS in particular procurement transactions conducted under the terms of that Agreement.
Such conduct constituted a violation of the anti-bribery provisions of the FCPA and hence a violation of U.S. law.
On July 31, 2018, Gonzalez Testino was arrested at Miami International Airport on charges of conspiracy to violate the FCPA and of violating the anti-bribery provisions of the FCPA.
On May 29, 2019, Gonzalez Testino pled guilty to one count each of conspiracy to violate the FCPA, violation of the anti-bribery provisions of the FCPA, and failure to file a foreign bank account report. The criminal information to which Gonzalez Testino pled guilty described bribes to five CITGO employees.
The Criminal Information further stated that these bribes were made in order to “help[] GONZALEZ’s companies win PDVSA contracts to supply equipment and services, including logistics services.”
[…]
Upon information and belief, Defendants paid bribes to CITGO employees, in violation of U.S. law and CITGO policies, in order to secure the Agreement between CITGO and PLS.
Furthermore, upon information and belief, Defendants paid bribes to CITGO employees, in violation of U.S. law and CITGO policies, in order to win contracts for the purchase of goods and/or services under the Agreement, including the purchase of goods and/or services at grossly inflated prices.
[…]
Accordingly, CITGO brings this action to recover the fees it has already paid to Defendants, to release CITGO from any further payment under the Agreement, and to recover any other compensatory damages in an amount to be addressed at trial, as well as all expenses, court costs, and attorneys’ fees associated with investigating and remediating these matters and bringing this action.”
Willkie Farr & Gallagher (a firm with a vibrant FCPA defense practice) is representing Citgo.
