US court axes Pemex bribery suit against Siemens, SK Engineering

01 August 2013 02:27  [Source: ICIS news]

HOUSTON (ICIS)--A US court on Wednesday dismissed a lawsuit filed by Mexican state energy producer Pemex, which accused two engineering firms of bribery in a refinery project.

Siemens and SK Engineering were partners in a joint venture called Conproca, which won a contract in 1997 to expand the Cadereyta Jimenez refinery in Mexico.

Disputes about cost overruns and delays bedeviled the project.

In 2012, Pemex sued Siemens and SK Engineering in US District Court, Southern New York District, alleging that the companies manufactured the cost overruns.

To induce Pemex to approve payment for the overruns, Conproca allegedly bribed executives through an intermediary in late 2004, Pemex said in the lawsuit.

Pemex faced a challenge in litigating the dispute in a US court, since the bribes were paid to a foreign state energy producer by foreign engineering firms for a foreign refinery.

Pemex had to prove that it had standing to litigate such a dispute in a US court when so many of the players and actions of the lawsuit took place on foreign soil.

Nonetheless, Pemex argued that it had standing. The allegedly fraudulent invoices for the cost overruns were directed from Mexico to a Pemex account in New York, it said. The payments were then transferred to the engineering firms' accounts, which were also in the US.

The court ruled that such a US link was insufficient, and it threw out the lawsuit.

The US dismissal is the latest among a string of failures for Pemex in its dispute with the engineering firms. 

The two sides mostly fought about the cost overruns and not the bribery allegations.  

In 2001, Pemex and the engineering firms initiated arbitration proceedings over the cost overruns, which lasted for a decade. Conproca prevailed, and Pemex owed the joint venture more than $500m (€375m), according to court documents.

Pemex later filed a petition in Mexico to annul the $500m arbitration award. A Mexican court threw out Pemex's petition, and subsequent appeals have so far been unsuccessful.

The bribery allegations did not appear until December 2008, when the Securities and Exchange Commission (SEC) sued Siemens. The SEC accused the company of using bribes for projects around the world – including refinery projects in Mexico.

The SEC said that in late 2004, Siemens allegedly paid $2.6m to a politically connected business consultant to help the company settle cost overruns at the Mexican projects.

Some of these payments were allegedly routed to a Pemex senior executive, who was in a position to influence the settlement of the cost overruns, the SEC said.

In December 2008, Siemens settled the Pemex bribery allegations as well as several others by agreeing to pay a total of $800m to the US government.

In reaching the settlement, Siemens neither admitted to nor denied the allegations made by the SEC.

($1 = €0.75)


By: Al Greenwood
+1 713 525 2645



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