The Citgo conspiracy: Opposition figures accuse Guaidó officials of ‘scam’ to liquidate Venezuela’s most prized international asset
Venezuela’s opposition has long accused the Bolivarian government of corruption and mismanagement. But with Citgo on the verge of liquidation, Guaidó’s officials are too incompetent — or too devious — to save it.
by Anya Parampil
Part 3 - Jose Ignacio Hernández’s alter ego
To win its lawsuit against the Venezuelan government, Crystallex had to persuade a judge it had the right to seize Citgo’s shares through a legal concept known as “alter ego.”
In business law, alter ego is described as “lifting the corporate veil,” or proving the “instrumentality” of a company. It is the doctrine through which a court determines that a private corporation, such as Citgo, merely serves as cover for an individual or group, in this case the Venezuelan government.
In business law, alter ego is described as “lifting the corporate veil,” or proving the “instrumentality” of a company. It is the doctrine through which a court determines that a private corporation, such as Citgo, merely serves as cover for an individual or group, in this case the Venezuelan government.
Only by “lifting the corporate veil” and proving Citgo to be an “instrument” of the Venezuelan state could Crystallex justify seizing assets belonging to the private, US-based corporation as compensation for money owed by the government in Caracas.
In the Crystallex case, that task was left up to a 43-year old Venezuelan lawyer and professor of administrative law. He filed a sworn declaration in US court in April 2017, arguing his country’s government had used PDVSA, Citgo’s majority shareholder, “as a political tool to achieve its domestic and international objectives.”
In the Crystallex case, that task was left up to a 43-year old Venezuelan lawyer and professor of administrative law. He filed a sworn declaration in US court in April 2017, arguing his country’s government had used PDVSA, Citgo’s majority shareholder, “as a political tool to achieve its domestic and international objectives.”
That expert testimony was delivered by none other than Guaidó’s future prosecutor, José Ignacio Hernández.
At the time of Hernández’s testimony, Citgo was shielded from accusations of instrumentality by several layers of separation between Venezuela’s government and the management of the company’s day-to-day operations.
Under Venezuelan regulations, the president of the republic only appointed the board of PDVSA. Members of the board in turn selected the board of the company’s Delaware subsidiary, PDVSA Holding, which then chose the board of Citgo Holding. Finally, this subsidiary appointed the board of Citgo Petroleum.
At the time of Hernández’s testimony, Citgo was shielded from accusations of instrumentality by several layers of separation between Venezuela’s government and the management of the company’s day-to-day operations.
Under Venezuelan regulations, the president of the republic only appointed the board of PDVSA. Members of the board in turn selected the board of the company’s Delaware subsidiary, PDVSA Holding, which then chose the board of Citgo Holding. Finally, this subsidiary appointed the board of Citgo Petroleum.
That whole chain of command was upended in February of this year when Venezuela’s National Assembly directly appointed not only an ad-hoc PDVSA board, but the top executives of all three subsidiaries as well.
Under Guaidó’s leadership, the National Assembly placed a government hand smack in the middle of three private US-based corporations, essentially proving Crystallex’s alter ego case for them.
Critics like Rodríguez say that, as Guaidó’s attorney general, it was up to Hernández to prevent the National Assembly from appointing Citgo’s board and thereby jeopardizing Venezuela’s defense in the Crystallex case.
Under Guaidó’s leadership, the National Assembly placed a government hand smack in the middle of three private US-based corporations, essentially proving Crystallex’s alter ego case for them.
Critics like Rodríguez say that, as Guaidó’s attorney general, it was up to Hernández to prevent the National Assembly from appointing Citgo’s board and thereby jeopardizing Venezuela’s defense in the Crystallex case.
“It was absolutely unacceptable for him to proceed with the appointment, no matter what the National Assembly would have said,” Rodríguez contended. “You are the attorney general. You have duties. You can’t do something that goes against the [rules] of the nation… If somebody in the whole world knew that that was wrong, it was him.”
Crystallex capitalized on the error within a matter of weeks, introducing a court filing which lambasted “the Guaidó-led National Assembly’s complete disregard for corporate formalities in reappointing the boards of PDVSA’s subsidiary” arguing its failure to follow procedure was “hardly a sign of [the subsidiaries] independence from government control.”
Crystallex capitalized on the error within a matter of weeks, introducing a court filing which lambasted “the Guaidó-led National Assembly’s complete disregard for corporate formalities in reappointing the boards of PDVSA’s subsidiary” arguing its failure to follow procedure was “hardly a sign of [the subsidiaries] independence from government control.”
By allowing Venezuela’s National Assembly to illegally appoint the board of PDVSA’s subsidiaries, Hernández helped prove a crucial aspect of Crystallex’s case against the Venezuelan government.
“It was not until Hernández did what he did, or allowed the Assembly to do what it did, that it became so clear for the Delaware courts to say: ‘Ok, it makes no sense to keep Crystallex waiting,” Rodríguez explained.
“It was not until Hernández did what he did, or allowed the Assembly to do what it did, that it became so clear for the Delaware courts to say: ‘Ok, it makes no sense to keep Crystallex waiting,” Rodríguez explained.
Source, links:
https://thegrayzone.com/2019/09/03/the-citgo-conspiracy-opposition-figures-accuse-guaido-officials-of-scam-to-liquidate-venezuelas-most-prized-international-asset/
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