A new conflict has emerged in the protracted litigation surrounding the sale of Citgo, as creditors dispute who should bear a $3.1 million legal bill incurred by special master Robert Pincus while defending against an unsuccessful disqualification motion. The disagreement adds another layer of tension to proceedings aimed at liquidating Venezuelan assets to satisfy billions in debt.
Letters filed Tuesday in Delaware federal court show that Crystallex International Corp., ConocoPhillips, and ACL1 Investments Ltd.—all creditors of Venezuela—asked U.S. Circuit Judge Leonard P. Stark to order Venezuela, its state-owned oil company Petróleos de Venezuela SA (PDVSA), and Gold Reserve Ltd. to cover the costs. Pincus’ legal fees, largely billed by Weil Gotshal & Manges LLP, arose as he defended against four disqualification motions filed by the Venezuela parties, PDVSA, PDV Holding, Citgo, and Gold Reserve, all of which Judge Stark rejected last November.
The creditors contend it is unfair for them to shoulder expenses related to a disqualification effort they argue was tactical and meritless. “The Venezuela parties have made it clear throughout that their goal was to prevent the sale of Citgo, filing an inordinate number of motions,” ConocoPhillips said, urging that Pincus’ fees be reallocated to Venezuela. Crystallex and ACL1 Investments echoed these sentiments, noting that the financial burden disproportionately affects smaller creditors like ACL1, which is owed $119 million compared to Crystallex’s $1 billion claim.
Venezuela maintains it should not be required to cover the fees, arguing that the disqualification motions were not deemed frivolous or unreasonable. The motions questioned Pincus’ ties to Elliott Investment Management, the hedge fund whose bid ultimately won approval after Pincus recommended it over Gold Reserve’s higher offer. Gold Reserve also filed a motion to disqualify Judge Stark for alleged bias, which was denied.
The dispute centers on the sale of shares in PDVSA subsidiary PDV Holding Inc., the indirect parent of Citgo. Pincus initially favored Gold Reserve’s $7.4 billion bid but later endorsed Elliott affiliate Amber Energy Inc.’s $5.892 billion offer as offering the “best combination of price and certainty.” Judge Stark approved the Amber bid in November, which satisfied the judgments of 10 creditors and addressed roughly $3 billion in additional Venezuelan debt. Venezuela and Gold Reserve have appealed the sales order, and the case remains pending at the Third Circuit.
The legal teams for the parties are extensive, with representation from top U.S. law firms including Gibson Dunn, Munger Tolles & Olson LLP, Cooley LLP, Curtis Mallet-Prevost, and Womble Bond Dickinson, among others. Judge Stark, now a Federal Circuit judge, continues to oversee the Delaware proceedings despite his elevation in 2022.
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.
