Home' Trinidad and Tobago Guardian : March 13th 2014 Contents BG28 | INTERNATIONAL
BUSINESS GUARDIAN www.guardian.co.tt MARCH 2014 • WEEK TWO
The company at the centre of an alleged
fraud that forced Citigroup Inc to cut its
2013 profit won billions of dollars in contracts
from Mexico s state oil monopoly over the
past decade, even after Mexican officials
and private lawsuits raised red flags about
the contractor s activities.
From 2003 to last year, Oceanografia SA,
a provider of engineering and maintenance
services on offshore oil platforms and
pipelines, signed more than 100 contracts
worth nearly US$3 billion with state-owned
Pemex, according to a Reuters review of
Mexican government contracts.
As those deals were being made, Mexico s
Federal Audit Office, known as the ASF,
was raising questions about Pemex s con-
tracting relationship with Oceanografia. It
audited the state-run oil firm in 2006 over
alleged irregularities in several multimil-
lion-dollar contracts with Oceanografia.
The ASF said in a report it found cases
in which Oceanografia appeared to have
received favourable treatment from Pemex.
It urged Pemex s internal control office to
examine whether Pemex officials improperly
changed contracting terms at Oceanografia s
request and favored the firm over competi-
The ASF s power is limited: It can only
investigate government entities and does
not have the authority to sanction them.
A spokesman for Pemex did not reply to
Reuters requests for comment on how it
responded to the ASF report. Oceanografia
said in a statement last month that it had
always acted within the law in its dealings
After the ASF s report appeared in 2006,
Oceanografia went on to win US$2 billion
in contracts. The firm says it receives about
97 per cent of its revenue from government
contracts, almost all of it from Pemex.
Oceanografia found itself in the spotlight
again in 2008 when opposition lawmakers
began calling for a federal investigation into
its Pemex contracts.
Former Congressman Jesus Gonzalez
Schmal said he and fellow legislators raised
allegations that Oceanografia falsified Pemex
receipts to secure loans in 2005 from state-
backed Banco Nacional de Comercio Exte-
rior, known as Bancomext. The allegations
were based on information from someone
inside the bank, he told Reuters.
When the lawmakers asked Bancomext
for more information, they were told
Oceanografia had already paid back the
loans, he said. Nothing came of their request
for the government to investigate the alle-
gations of falsified receipts.
A Bancomext spokeswoman referred all
questions to the attorney general s office,
which did not respond immediately to
requests for comment.
Oceanografia did not reply to a list of
questions sent by Reuters to its investor
Ships, planes and lawsuits
A Reuters review of court documents
found that Oceanografia, based in the Gulf
state of Campeche, has been sued at least
19 times in US federal courts since 1994.
While the number of lawsuits may not
be unusual in the corporate world, most of
them have a common theme - alleged non-
payment of lease agreements for ships and
planes. Some of the cases were settled, some
were dismissed, some resulted in judgments
against Oceanografia, and others are still
McDermott, a Houston, Texas, engineering
company, sued Oceanografia in 2009 in US
district court in Alabama for allegedly failing
to pay more than US$5 million on a leased
vessel, according to court documents.
The Texas company succeeded in repos-
sessing its ship but was never able to collect
on the back payments, said Matthew
McDonald, a lawyer for Jones Walker who
represented McDermott. Oceanografia filed
a countersuit against McDermott to recover
equipment that was on the ship but it was
In a separate case, Louisiana-based oilfield
construction firm Diamond Services Corp
sued Oceanografia in 2010, claiming the
Mexican company fell delinquent on nearly
$1.4 million in rental fees for a charter ves-
Oceanografia has opposed Diamond s
request for a default judgment in the case,
which is still pending in federal district court
Alfred Rufty, a New Orleans-based attorney
who has represented Oceanografia in the
McDermott, Diamond and other cases,
declined to comment on the cases on Fri-
In its 2006 report, the ASF said
Oceanografia requested that Pemex modify
the terms of a 2005 contract worth more
than 385 million pesos (around US$29 million
today). The report alleged that Pemex changed
the specifications of a vessel---reducing the
required speed capacity---and pushed forward
the start date of the work to accommodate
The ASF said changing the terms of the
contract unjustifiably would be against the
law, so it asked Pemex to investigate whether
the contract---which was awarded as an inter-
national public tender---was changed improp-
erly. The audit watchdog said Pemex "must
verify that the modifications to the tenders
were authorised only with just cause and not
as a result of negotiations with the contrac-
The ASF also singled out a 969 million
peso contract (US$73 million today) for oil
platform maintenance granted by Pemex to
Oceanografia in 2005. It found that
Oceanografia failed to turn in records to verify
the job was completed, as required by law.
Pemex "did not ensure compliance of all
obligations by the supplier (Oceanografia),"
the report said.
The ASF urged Pemex s internal control
office to also investigate whether company
officials favoured Oceanografia over other
companies in awarding a service contract
worth US$15 million in 2003.
Mexican authorities began looking into
Oceanografia s business practices after local
media reports about the firm s alleged con-
nections with the administration of President
Vicente Fox, in power from 2000 to 2006.
"This case is extraordinary. The facts are many
and sometimes complex. They include things that
normally come only out of Hollywood."
So wrote Lewis Kaplan, a federal judge, in a gripping,
John Grisham-esque 485-page verdict on March 4.
He found that a controversial, multibillion-dollar
judgment against the oil giant Chevron in an Ecuado-
ran court had been "obtained by corrupt means,"
lambasting Steven Donziger, the prominent New York
lawyer who had brought the case against the oil com-
The ruling, in a civil case brought by Chevron,
provides a large measure of vindication for the firm,
which had opted to fight rather than bow to the usual
pressure on big businesses to minimise bad publicity
by accepting an out-of-court settlement.
In 2011 an Ecuadoran court had ordered Chevron
to pay US$19 billion---later reduced to US$9.5 bil-
lion---to clean up environmental damage in the Lago
Agrio oil field in the Amazon region. This damage
was allegedly caused, more than 20 years ago, by an
arm of Texaco, a smaller firm that Chevron bought
in 2001. Its supposed responsibility for miserable
conditions experienced by rainforest dwellers has
become a pet cause of environmental groups and
celebrities such as Mia Farrow and Trudie Styler.
President Rafael Correa of Ecuador has also taken
an interest. An earlier Ecuadorean government had
declared that Texaco had shed its legal responsibility
by cleaning up the affected areas. Last October Correa
accused The Economist of "barefaced lies" and of
acting on behalf of Chevron because of its reporting
of the case.
Kaplan delivered an eviscerating commentary on
the actions of Donziger and two of his Ecuadoran
clients. The three, he ruled, will not be allowed to
benefit in any way from the verdict that they obtained
"by corrupt means" in Ecuador. Among other things,
the judge found that fraudulent evidence had been
submitted to the Ecuadoran court, that the main
"independent" expert advising it was secretly in the
pay of Donziger s team, that one Ecuadoran judge
had been coerced and another bribed, that American
judges had been intimidated and that Donziger and
his clients controlled the body to which the damages
were ordered to be paid.
The judge described Donziger as in "ultimate com-
mand" of a criminal enterprise that also included
environmental groups and public-relations, law and
consulting firms, an enterprise that sought to use a
high-profile campaign of false allegations to extort
money from Chevron.
Donziger plans to appeal against the ruling, which
he claims relied on evidence from an Ecuadoran judge
who has admitted being paid by Chevron. Kaplan s
ruling accepts that there are credibility issues with
that testimony, but says that the other evidence is
sufficient to support his conclusions. Ironically, some
of the evidence considered most damning by Kaplan
came in outtakes from "Crude," a documentary about
the Lago Agria case made at Donziger s behest.
The ruling does not undo the decision of the
Ecuadoran court. Chevron hopes, however, that it
will at least persuade judges in other countries, includ-
ing Argentina, Brazil and Canada, that they should
not use the Ecuadoran court decision to enforce
claims against the oil firm s assets there.
Kaplan reached no conclusion on whether Chevron
had a case to answer regarding the environmental
damage. Instead, he noted, the behaviour of Donziger
and his clients meant that now the truth of that
matter probably will never be known.
As Kaplan hints, this case seems made for Hol-
lywood, with one big difference: This time the victim
is not the plucky lawyer, but the big oil company.
@2014 The Economist Newspaper Ltd. Distrib-
uted by the New York Times Syndicate
Sticking up for
the big guy
Troubled past haunts Mexico oil
company at centre of Citi scandal
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