MANHATTAN (CN) - Venezuelan energy principals need not face a former U.S. ambassador's RICO claims but the lesser allegations will advance, a federal judge ruled.
Central to the case is the attention that the media and the FBI have given in recent years to bribes that the administration of the late Venezuelan President Hugo Chavez allegedly received from executives of Venezuelan energy company Derwick Associates in return for kickbacks.
Though Derwick is not a party to the federal complaint against three of its principals - Leopoldo Alejandro Betancourt Lopez, Pedro Jose Trebbau Lopez and Francisco D'Agostino Casado - the company's U.S. affiliates, including one based in Missouri, loom heavily in the allegations.
Otto Reich, who served as U.S. ambassador to Venezuela as an appointee of President George W. Bush between 2001 and 2004, filed the federal complaint
last year in Manhattan alongside his consultancy firm.
He claimed that the bribery scheme earned the men "enormous fortunes."
Derwick tried to avoid scrutiny by intimidating one critic, Banco Venezolano, with defamation lawsuits in New York and Florida, Reich said.
He claimed that Derwick's "outrageous" $300 million signaled "a clear effort to bully the bank into quiescence, prevent others from threatening to expose their scheme."
The bank allegedly turned to Reich and his consultant firm for help fighting off Derwick's action.
Fearing the bank and Reich "posed too great a threat to [their] scheme," Reich said that the defendants "conspired to discredit Ambassador Reich in the eyes of Banco Venezolano in the most effective way they knew how - tying Ambassador Reich to Derwick Associates."
The bank ultimately withdrew from negotiations with Reich's firm based on "blatantly false" claims from the contractors and their agents that Reich was working for Derwick Associates, according to the complaint. Reich said the bank had been ready to pay his firm at least $20,000 a month.
In dismissing Reich's claims under federal anti-racketeering law Monday, U.S. District Judge Paul Oetken said that the allegations do not rise to the level of RICO.
While the alleged scheme may have harmed Reich, there is no allegation that Derwick's principals stood to gain the ex-ambassador's lost profits, the court found.
"Consequently, while there may be intent to harm, there is no intent to obtain money from [Reich and his firm], and there is no scheme to defraud within the wire fraud statute," the 42-page opinion states.
Oetken dismissed two counts of RICO and one count of civil conspiracy, but he did not touch the other counts of tortious interference with prospective economic advantage, trade libel, injurious falsehood, and defamation in this decision.
The judge ordered jurisdictional discovery before attending to the remaining counts.
Trebbau's lawyer Joseph DeMaria, a partner at the Miami office of Fox Rothschild, said in a statement that the court found there was "no scheme to defraud Reich, which was fatal to the RICO claims."
Betancourt, one of the Derwick principals Reich is suing, said in a statement that he was "pleased that these racketeering claims are gone."
Reich's counsel also declared victory over the survival of the remaining claims.
"We are pleased that the court is allowing Ambassador Reich's lawsuit to move forward against all the defendants," Reich's attorney Mark Smith, of the New York-based firm Smith Valliere, said in a statment. "The court agreed with many of our arguments and granted our request for certain discovery to commence almost immediately. The decision reflects the start of an ongoing process in which we fully expect Ambassador Reich's rights to be vindicated."