Judge signals she won’t issue final dismissal of Pemex suit alleging bribery by Hewlett-Packard at early stage of litigation

31 January 2017 9:54am

25 June 2015. By Mike Swift.

A federal judge in California signaled Thursday that she is not prepared to terminate in its prelimary stages a civil lawsuit filed by a Mexican oil company alleging an employee of Hewlett-Packard’s Mexican subsidiary bribed the oil company’s officials to get them to buy $6 million in products and services.

Petróleos Mexicanos and a subsidiary, Pemex Explóracion y Produccion, filed a complaint against Hewlett-Packard in December, accusing the company of violations under the Racketeer Influenced and Corrupt Organizations Act, or RICO, and deriving a net benefit of about $2.5 million from those ill-gotten contracts.

During 2008 and 2009, according to Pemex, HP and its Mexican subsidiary, Hewlett-Packard Mexico, “secured valuable contracts to sell Plaintiffs business technology optimization (‘BTO’) products and services by causing the corruption of officials who worked for Pemex through payments of an ‘influencer fee’ to entities with ties to these officials.”

At a hearing Thursday in San Jose, California, after listening to more than an hour of arguments from lawyers for the two sides about whether RICO applies to conduct outside the United States in which non-US companies are injured, US District Judge Beth Labson Freeman hinted that while she might grant H-P’s motion to dismiss, she would allow Pemex to amend its complaint.*

“The case is not going away at this stage,” Labson Freeman told George T. Conway III, a lawyer representing HP, at the conclusion of Thursday’s hearing. “I’m sure that wasn’t the expectation today.”

Labson Freeman said she wants to hear more evidence about what executives at Pemex knew about the actions of a former executive who allegedly received the bribe in exchange for the contracts, but she said she was not prepared to toss claims from Pemex at this stage of the litigation, suggesting the case might be decided on summary judgment or at trial.

Richard D. Bernstein, a lawyer representing Pemex, said there is evidence that money laundering and other criminal activity did happen within the US, including activity that involved several bank accounts in Silicon Valley, near HP’s global headquarters in Palo Alto, California.

“Money laundering is bringing money into the United States for an improper purpose,” said Bernstein, describing an operation in which Mexican currency was converted into dollars in the US before it was conveyed back through intermediaries in Mexico and Miami. “You turn your foreign money into dollars, because criminals like to be paid in dollars.”

HP signed a non-prosecution agreement with the US Department of Justice in connection to criminal charges in the matter. The computer giant paid a $34 million settlement and admitted to making bribes and that, had the matter proceeded to trial, the DOJ would have proven those allegations, according to court filings in the civil case. The Securities and Exchange Commission also issued a cease and desist order finding that HP broke the law by falsely recording bribes in its books and records.

During Thursday’s hearing, Conway said that under US law, the “focus” of a racketeering injury can’t be outside the United States.

But Labson Freeman said she was troubled by that argument. “That would lead to the conclusion that Congress wanted the United States to be the safe harbor for hatching racketeering plans that had their focus on the harming of foreign parties,” she said.

The allegations in the case are keyed to Manuel Reynaud Aveleyra, formerly Pemex’s chief operating officer, the person who Pemex says was “targeted” for the bribes paid by HP Mexico. Labson Freeman warned lawyers for Pemex Thursday that she will need to see evidence that Reynaud Aveleyra was operating as an “adverse agent” without the knowledge of his company.

“I really need some factual pleading about how you were in the dark on this,” she told Bernstein.

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