Hp Loses Bid to Knock Out Mexican Foreign Corruption Lawsuit

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Hp Loses Bid to Knock Out Mexican Foreign Corruption Lawsuit

 news 2015-06-30 at 12:59:35 pm Views: 251
  • #42885

    Hp Loses Bid to Knock Out Mexican Foreign Corruption Lawsuit
    HP Loses Bid to Knock Out Pemex Corruption Suit
    By Ross Todd, The Recorder

    SAN JOSE — Hewlett-Packard Co. won't be able to duck a civil RICO suit tied to violations of the Foreign Corrupt Practices Act simply by arguing the case doesn't belong in U.S. court.

    HP made an aggressive push to knock out the suit filed in the Northern District of California by Mexican state oil and gas company Petróleos Mexicanos, or Pemex, on jurisdictional grounds. But at the end of a one-hour hearing Thursday morning, U.S. District Judge Beth Labson Freeman said she'll be allowing Pemex to amend its complaint and that she didn't expect that the claims could be fully extinguished with a motion to dismiss.

    "The case is not going away at this stage," Freeman said.

    Thursday's hearing put a spotlight on the legal firepower both companies have deployed on the matter. Wachtell, Lipton, Rosen & Katz's George Conway III, from New York, argued for HP and Willkie Farr & Gallagher's Richard Bernstein, from Washington, D.C., argued for Pemex.

    Pemex sued HP and its Mexican subsidiary in December, alleging that in 2008 and 2009 HP won valuable contracts to supply technology products and services by paying an "influencer fee" to entities with ties to corrupt Pemex officials.

    The suit, which relies heavily on HP's 2014 settlement with the U.S. government, claims that HP's faulty internal controls enabled the bribes and corruption, which routed about $6 million in business to HP.

    Wachtell's Conway stressed the foreign nature of the underlying allegations and argued that the civil RICO statute doesn't expressly apply to such claims. Conway used the words "Mexico" or "Mexican" more than a half a dozen times in the opening moments of his argument to describe the underlying allegations: Mexican employees of HP's Mexican subsidiary used Mexican intermediaries to bribe Mexican officials at Pemex to win Mexican contracts to deliver services in Mexico. Under the civil RICO statute, Conway said, "there has to be domestic injury to domestic business or domestic property. There's no alternative to that."

    But Freeman said the case law isn't completely clear. "You make it so obvious in your argument, that I thought it must have been discussed in the courts long ago," she said. "But it's not. This would be new law."

    She also said that she worried that HP's reading of the civil RICO statute would make the U.S. a safe haven for anyone "hatching and executing racketeering activities that have their effective harm in foreign, offshore places." That, she said, couldn't have been the intent of Congress in drafting the civil RICO statute.

    Arguing for Pemex, Willkie's Bernstein said the company isn't required to show that every aspect of its RICO claim is domestic, only that the "focus" of the claim is domestic. To that end, he said that Pemex has cited 18 specific acts that tie the underlying conspiracy to the U.S., including multiple trips to the U.S. gifted to the Pemex official who helped seal the underlying $6 million software-services deal.

    "I've had foreign clients, your honor," Bernstein said, "but none of them have treated me to this." Bernstein also maintained that it's the location of the underlying conduct, rather than the place the injury was suffered, that gives Pemex standing to sue in the U.S.

    HP agreed to pay $108 million last April to settle the government's Foreign Corrupt Practices Act charges stemming from bribery allegations related to its operations in Mexico, Poland and Russia.

    Freeman pointed out Thursday that Pemex's civil claims are "not limited to what happened in the criminal case." Still, she said the case would "rise or fall" on the evidence Pemex submits and that the company would need to amend its complaint to better explain why it didn't discover the underlying bribery allegations regarding two of its own employees until HP's FCPA settlement became public.

    Freeman also said that Pemex would need to show that there was a continued threat of racketeering activity in order to overcome the civil RICO law's four-year statute of limitations. The last of the 18 actions cited by Pemex in its complaint took place in June 2009, about 5 1/2 years before the complaint was filed.