For those of you who thought what happened in the TransPerfect case in the Delaware Chancery Court was an isolated incident – Pincus ran the auction process for that company – you’d be wrong! It’s so bad in this case, folks, that one of the Good Old Boys Club members, Morris Nichols, has sought his disqualification.
But, in my view, despite the most serious allegations of wrongdoing in the history of all Custodianships, somehow the establishment is still silent on this. Multiple fouls in multiple cases? Where is the investigation? How is he unscathed after all of this??
In my book, if it smells rotten, it IS rotten. I’ve been saying this for years. Here he is corroding and corrupting yet another case, as I see it.
Read the Law360 story below and tell me what you think. Your opinion is always welcome and appreciated.
JUDSON Bennett–Coastal Network
By Caleb Symons
Law360 (March 30, 2023, 1:36 PM EDT) — A federal judge on Thursday found no evidence that the special master coordinating a high-profile auction for control of Citgo pressured the U.S. government to change its sanctions policy, rejecting an effort by Venezuela to disqualify the court-appointed master.
The disqualification dispute arose from a Jan. 12 meeting at which special master Robert B. Pincus spoke to representatives from the U.S. Department of Justice, among other federal agencies, about the sale of shares in Citgo parent PDV Holding Inc., a subsidiary of the state-owned oil giant Petróleos de Venezuela SA.
In a ruling given from the bench, U.S. Circuit Judge Leonard P. Stark said Venezuela and the oil companies put forth no evidence that Pincus – a retired partner at Skadden Arps Slate Meagher & Flom LLP tried to convince the government to license that sale.
Rather, the special master seems to have wanted clarity on whether the Office of Foreign Assets Control, a division of the U.S. Department of the Treasury, would approve the Citgo auction, according to Judge Stark. That inquiry, he told the parties Thursday, is entirely reasonable.
“The government’s position could change at any time,” Judge Stark said, adding that he and Pincus “entirely respect and understand” that the Biden administration will have the final word on whether to license the Citgo sale.
Judge Stark was elevated to the Federal Circuit last year but continues to oversee cases brought in the Delaware district court involving Venezuela’s creditors.
The ruling came after Venezuela on Thursday morning pressed him to boot Pincus from the case, saying the court-appointed master appeared to have crossed a line by advocating for a change in U.S. sanctions policy earlier this year.
Details on the Jan. 12 meeting remain unclear – a lack of transparency that counsel for the Venezuelan government said suggests Pincus sought to convince federal authorities to license the sale, despite U.S. sanctions on the South American nation.
Advocacy of that kind is clearly inappropriate conduct for a judicial officer, according to Donald B. Verrilli Jr., of Munger Tolles & Olson LLP, representing Venezuela. Acknowledging that Venezuela can only infer what took place at the closed-door meeting, Verrilli told Judge Stark that urging a shift in U.S. foreign policy is “over the line.”
“That is not impartial administration or enforcement of the law,” he said at Thursday’s hearing.
Venezuela’s push to disqualify Pincus, who was appointed special master in May 2021, threatened to disrupt an auction process that has already proved languid at times.
The sale of shares in PDV Holding would go toward satisfying a $1.2 billion arbitral judgment for Crystallex International Corp., a Canadian mining firm that Venezuela expelled from the country more than a decade ago.
But an auction needs OFAC’s approval due to U.S. sanctions on Caracas. That agency, under the Trump and Biden administrations, has been reluctant to issue a license for selling off control of Citgo – often referred to as the “crown jewel” of Venezuelan assets.
To that end, a lawyer for Pincus told the court Thursday that the special master met with federal officials in January merely to request clarity from OFAC on the government’s position.
Pincus certainly didn’t seek to “subordinate” American foreign policy to his plans for the PDVH auction, according to Ray C. Schrock, of Weil Gotshal & Manges LLP. Instead, the special master was executing his responsibilities by soliciting guidance on whether the auction will go forward.
“We needed clarity about what the U.S. government’s position would be,” Schrock told Judge Stark. “That is, in no way, disqualifying conduct.”
OFAC officials did not attend the Jan. 12 meeting, according to Schrock. In addition to Pincus and the Justice Department representatives, it included lawyers from the Treasury Department and the U.S. Department of State, he said.
Verrilli contended, however, that Pincus never directly denied asking for a policy change.
There is a “categorical difference,” he told Judge Stark, between seeking clarity on a government policy and pressing federal officials to adopt a certain view. Pincus, if he asked OFAC to approve the Citgo sale, is “advocating that the executive branch change its foreign policy judgment,” Verrilli said.
“That is really our core concern here,” he added.
Venezuela had raised concerns over the Jan. 12 meeting just three days prior, asking Judge Stark to allow its representatives to attend the session.
The judge denied the request on Jan. 11, saying Venezuelan officials didn’t give him enough time to consider the issue.
Citgo, along with PDVSA and PDV Holding, subsequently filed a motion to disqualify Pincus from overseeing the auction process. Venezuela joined that effort in late January.
But the timeliness issue still proved problematic.
Judge Stark noted on Thursday that the parties have known for nearly two years that Pincus was engaged in ex parte communication with OFAC. Moreover, he said, they knew in late December that Pincus would meet with federal officials early this year. Still, the movants waited until Jan. 9 to request court intervention.
“I just don’t think you can sit on that kind of an issue for that many days without even contacting the court,” Judge Stark said.
That delay seemed to be “strategic,” he added, since disqualifying Pincus from the Citgo auction would prolong the case even more.
“I do believe it has, at least, a substantial element of being tactical and designed with … a partial goal of further delaying these proceedings,” he said.
Attorneys for Pincus and Petróleos de Venezuela each declined to comment on Thursday. Counsel for the other parties did not immediately respond to requests for comment.
Venezuela is represented by A. Thompson Bayliss and Stephen C. Childs of Abrams & Bayliss LLP, and Donald B. Verrilli Jr., Elaine J. Goldenberg, Ginger Anders and George M. Garvey of Munger Tolles & Olson LLP.
PDV Holding and Citgo are represented by Kenneth J. Nachbar and Alexandra M. Cumings of Morris Nichols Arsht & Tunnell LLP, and Nathan P. Eimer, Lisa S. Meyer, Daniel D. Birk, Gregory M. Schweizer and Emily E. Sullivan of Eimer Stahl LLP.
Petróleos de Venezuela is represented by Samuel Taylor Hirzel II of Heyman Enerio Gattuso & Hirzel LLP, and Joseph D. Pizzurro, Kevin A. Meehan and Juan O. Perla of Curtis Mallet-Prevost Colt & Mosle LLP.
Pincus is represented by Myron T. Steele, Matthew F. Davis, Bindu A. Palapura and Abraham Schneider of Potter Anderson & Corroon LLP, and Ray C. Schrock, Alexander W. Welch and Chase A. Bentley of Weil Gotshal & Manges LLP.
Crystallex is represented by Raymond J. DiCamillo, Jeffrey L. Moyer and Travis S. Hunter of Richards Layton & Finger PA, and Robert L. Weigel, Jason W. Myatt, Rahim Moloo, Miguel A. Estrada, Lucas C. Townsend and Adam M. Smith of Gibson Dunn & Crutcher LLP.
The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, case number 1:17-mc-00151, in the U.S. District Court for the District of Delaware.
–Additional reporting by Peter McGuire. Editing by Robert Rudinger.
Update: This story has been updated with more information from Judge Stark’s ruling.