A New York federal judge on Tuesday tossed a $1.5 billion racketeering suit accusing Siemens AG of bribing government officials to secure a refinery construction contract as part of a criminal scheme because the conduct occurred outside of the country.
U.S. District Judge Louis Stanton ruled that Mexico's state-owned oil company Petroleos Mexicanos, or Pemex, failed to state a claim because the Racketeer Influenced and Corrupt Organizations Act does not clearly state that it applies outside of U.S. borders.
“The RICO claims here are extraterritorial: they allege a foreign conspiracy against a foreign victim conducted by foreign defendants participating in foreign enterprises,” Judge Stanton said.
Pemex argued that the claims were domestic because U.S. entities helped finance the project, but that conduct was not enough to focus the shift of the claim from Mexico to the U.S., the judge held.
The court did not rule on the oil company's claim for common-law fraud, which is still pending.
Pemex originally sued in December. Its complaint stemmed from Siemens' $1.6 billion settlement with U.S. regulators in 2008 to resolve civil and criminal allegations that it bribed public officials around the world, including in Mexico.
According to the suit, a deeper investigation of those claims revealed that individuals associated with Siemens bribed Pemex officials to curry favor in a bidding process for a refinery construction project in Mexico. The contract was awarded in 1997 to Conproca SA de CV, a joint venture between Siemens and SK Engineering & Construction Co. Ltd., a Korean conglomerate also named as a defendant in the suit.
During the course of the project, the joint venture repeatedly exceeded its budget, prompting SK employees to pay additional bribes to stay in Pemex's good graces, the suit alleges.
The suit marks only the latest salvo in a complicated, long-running dispute over the project.
Siemens' $1.6 billion settlement in December 2008 with the U.S. Securities and Exchange Commission and U.S. Department of Justice contained a confidentiality provision that kept many of the specific allegations out of the public record, according to the suit. Pemex, concerned that its dealings with Siemens had been tainted by bribery, soon began its own investigation and discovered new information about the alleged bribes, it said.
For instance, Pemex learned that before the refinery project contract was awarded, a now-defunct company that had a stake in the joint venture paid bribes to top-level Pemex officials, the suit contended. The bribes were paid “with the full knowledge and agreement of each of the joint venture participants,” including Siemens and SK, the complaint said.
Representativs for the parties could not immediately be reached for comment Tuesday.
The plaintiffs are represented by Gary Davidson, Carlos F. Gonzalez, Marta Colomar Garcia and Michael Diaz Jr. of Diaz Reus & Targ LLP, Thomas C. Goldstein of Goldstein & Russell PC and Eliyahu Z. Kaploun.
Siemens is represented by Brant Bishop, Ragan Naresh, Christopher Posteraro and Thomas David Yannucci of Kirkland & Ellis LLP. SK is represented by Laura A. Brevetti of K&L Gates LLP and David Hille, Melissa Laferriere, Owen Pell and Robert Tiedemann III of White & Case LLP.
The case is Petroleos Mexicanos et al. v. SK Engineering & Construction Co. Ltd. et al., case number 1:12-cv-09070, in the U.S. District Court for the Southern District of New York.
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