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PdV vulnerable to indictment: US officials

19 May 2017 23:25 (+01:00 GMT)
PdV vulnerable to indictment: US officials

Caracas, 19 May (Argus) — The US government is weighing federal indictments against current and past senior officials of Venezuela's state-owned PdV, and the oil company itself, for corruption, a top US official and a former senior US official tell Argus.

The US is the top destination for PdV's crude exports, with much of the supply absorbed by Citgo, PdV's US downstream subsidiary and remaining prize asset.

Current Venezuelan ambassador to the UN Rafael Ramirez, who served as energy minister in 2002-2014 and simultaneously as PdV chief executive in 2004-2014, is one of the senior Venezuelan nationals under scrutiny, the current and former US officials said.

US attorneys are also "seriously considering" whether to seek criminal indictments against PdV, as a corporation, under the Foreign Corrupt Practices Act (FCPA) and the Racketeer Influenced and Corrupt Organizations Act (RICO), they said separately.

US federal courts in Texas and Florida have already successfully prosecuted several Venezuelan nationals since 2015 on bribery and money-laundering charges totaling well over $1bn in corruption under the FCPA. At least some of the cases involve irregular procurement for PdV.

Until now, PdV as a corporation has not appeared vulnerable to potential federal indictments.

PdV chief executive Eulogio Del Pino has insisted that any corrupt practices involving foreign equipment and services contracts with PdV were entirely the work of corrupt individuals who left the company before their corruption was exposed.

But both the FCPA and RICO explicitly give federal prosecutors ample leeway to seek indictments on criminal conspiracy and racketeering charges against PdV, including the parent company in Caracas and any of its subsidiaries incorporated in the US or other countries, a US corporate attorney tells Argus.

The US Treasury Department already plans to review a decision by Venezuela's state-owned PdV to pledge part of Citgo as collateral for a loan from Russia's state-controlled Rosneft. The Treasury's foreign investment committee reviews transactions that could pose national security risks by turning over control of US companies to foreigners.

A US federal indictment of PdV itself or any of its subsidiaries under the FCPA and/or RICO laws would create new hardships for the company as it struggles to sustain its deteriorating oil production and downstream infrastructure.

Potential lenders with financial or corporate interests involving US-based or US-owned institutions and corporations would not make new loans or sign joint venture deals with PdV if the company is indicted for enterprise corruption, the attorney said.

"Venezuela's credit, both the government's and PdV's, already has dried up completely," the attorney said. "Before the latest chaos in Venezuela only China and Russia appeared willing to extend the Maduro government and PdV more credit. But even the Chinese and Russians are now leery about increasing their Venezuelan exposure due to the national assembly's oft-stated warnings that any deals signed without the legislature's prior approval are illegal and therefore null and unenforceable legally under Venezuelan law."

One of the current and former US officials who spoke separately with Argus also said that the targeted sanctions imposed earlier this week against eight Venezuelan supreme court judges for illegally and unconstitutionally nullifying the legislature in March and emasculating its constitutional authority since the start of 2015 are "just the beginning."

Proponents of tougher sanctions against the now openly authoritarian regime of president Nicolas Maduro "are going to be very happy going forward," one of the US officials said.

The sanctions slapped on the high court justices this week freeze their US assets, bar them from traveling to the US or any of its territories, and prohibit US citizens and companies from doing business with them.

The energy ministry and PdV declined to comment. The foreign ministry did not respond to requests for comment. But foreign minister Delcy Rodriguez yesterday condemned the sanctions on the eight justices as "outrageous and unacceptable."

At a press conference with Colombian president Juan Manuel Santos yesterday, US president Donald Trump called the Venezuelan situation a "disgrace."

The growing US scrutiny of PdV and PdV officials coincides with violent clashes between anti-government protesters and security forces, backed by paramilitary gangs. Shortages and food and medicine are acute, sowing a humanitarian crisis that has alarmed the region, particularly neighboring Colombia where many Venezuelans have fled.

Around 50 people have died in the confrontations since early April.