Judge dismisses racketeering claims against Hewlett-Packard — for now

14 July-2015. By Mike Swift.

In what may prove a temporary victory for Hewlett-Packard, a federal judge in California has granted the technology giant’s motion to dismiss racketeering allegations brought by Petróleos Mexicanos, while allowing the oil company permission to amend its corruption claims.

As she had hinted last month at a hearing in San Jose, California, US District Judge Beth Labson Freeman said in granting HP’s motion to dismiss on Monday that she is unlikely to terminate the civil lawsuit at an early phase of the litigation. The suit alleges that an employee of H-P’s Mexican subsidiary bribed a key Pemex official in order to get the company to buy $6 million in H-P products and services, violating the Racketeer Influenced and Corrupt Organizations Act, or “RICO.”

“Although Defendants are largely successful on the issues presented in this motion, based upon the presentation made by Pemex in its brief and at the hearing, the Court anticipates that sufficient facts can be pled to support the claims asserted,” Labson Freeman wrote in a 26-page order. “Nothing in the papers submitted to date suggests that this case will terminate at the pleading stage.”

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.”

HP allegedly targeted Manuel Reynaud Aveleyra, Pemex’ Chief Operating Officer, by paying a fee to Intellego, S.C., a Mexican company for which the Pemex executive had formerly been a principal.

H-P had argued that Pemex’ claims failed because RICO has no extraterritorial application, and that the nexus of the alleged illegal acts was outside the United States. Pemex, however, argued that it needed only to plead that “a pattern of racketeering activities” happened in the US, saying, for example, that banks in Silicon Valley had been used to launder money.

However, Labson Freeman wrote in Monday’s order, “the Court determines that Plaintiffs have failed to sufficiently plead a cohesive series of domestic acts that plausibly shows that the pattern of racketeering activity was domestic.” Pemex, she said, has “not yet pled sufficient facts to show plausibly that Defendants engaged in a domestic scheme rather than just peripheral or isolated domestic acts.”

Labson Freeman was also not persuaded by Pemex’ argument that it did not need to allege it suffered a domestic injury from the alleged racketeering as part of a RICO allegation.

Nevertheless, the judge granted Pemex leave to amend its claims in order to allege additional facts that would show a domestic injury.

“Plaintiffs have indicated that they can, if granted leave to amend, allege that Pemex suffered a domestic injury — namely, the value of Reynaud’s services on behalf of the company while he was in the United States,” Labson Freeman wrote.

HP signed a non-prosecution agreement with the US Department of Justice in connection with 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.

	Eliot Gao