Venezuela is seeing an increase in lawsuits and payment judgments, including one from Siemens Energy INC., which is seeking to collect USD 200 million from PDV Holding INC., the owner of CITGO Petroleum Corporation, claiming that PDVH is an alter ego of Petróleos de Venezuela S.A.
The court has not yet determined whether PDVH is indeed the alter ego of PDVSA. Until proven otherwise, PDVSA will be considered the sole foreign state in this action. This is because PDVH is simply a subsidiary of an instrumentality, which cannot claim the same status on its own.
However, the court has allowed Siemens to refer the case to the Commercial Court Division of the Eleventh District of Harris County, Texas.
On December 9, 2021, Siemens won a judgment against PDVSA in the Southern District of New York for USD 166,082,240.21 due to a breach of promissory note. With accumulated interest, the debt now exceeds USD 200 million.
The plaintiff alleges that PDVSA is refusing to pay this judgment and has consequently filed a lawsuit in the Commercial Court Division of the Eleventh District of Harris County, Texas, to enforce the court’s decision in its favor.
Siemens’ Case Against PDVH
Siemens Energy, Inc. is attempting to enforce a judgment exceeding USD 200 million previously obtained against Petróleos de Venezuela S.A. via PDV Holding INC., arguing that the latter serves as PDVSA’s alter ego.
Siemens claims that PDVSA uses PDVH as a facade to defraud creditors through fraudulent transfers and complete corporate control. In response, PDV Holding has denied these allegations, asserting that the claims lack legal and factual basis.
PDVH’s Motion to Dismiss argues that the alter ego claim and the request for reverse corporate veil piercing should be dismissed as Siemens has not alleged the fraud or exclusive control required under Delaware law, and because the action does not serve the public interest.
Additionally, PDVSA has filed a motion to intervene to protect its own interests, including the integrity of its corporate veil with PDVH and any sovereign immunity protections under the Foreign Sovereign Immunities Act. The litigation is inherently linked to the Crystallex litigation in Delaware, which involves the auction of CITGO, where a forced sale of PDVH’s shares is ongoing to satisfy debts owed to multiple creditors.
Basis of the Alter Ego Claim
The lawsuit by Siemens is based on the theory that PDVH is the alter ego of PDVSA and thus should be liable for its debts. It alleges that PDVSA exercises “complete control and dominion” over PDVH, using it not as a separate entity, but as a “tool to divert funds to avoid paying its debts.”
The key points of the claim are:
- PDVH is a sham used to defraud creditors.
- PDVSA treats PDVH’s assets as its own.
- Funds from PDVH were diverted to PDVSA with the intent to defraud.
- PDVSA disregards corporate formalities and distinctions.
- PDVSA intentionally leaves PDVH insolvent or severely undercapitalized.
Siemens Energy INC. cites three main examples to demonstrate the alter ego relationship:
2015: PDVSA allegedly forced CITGO to issue USD 2.8 billion in debt and diverted the proceeds through PDVH to shield them from U.S. creditors. It reports that Horacio Medina, chairman of PDVSA’s ad hoc board, admitted this “dividend” was “fictitious” and “non-existent,” being nearly 300% of CITGO’s net income.
2016: PDVSA issued over USD 3 billion in new bonds and to incentivize bondholders, pledged 50.1% of PDVH’s shares without PDVH receiving any consideration.
2019: PDVSA, acting as “PDVH,” forced CITGO to issue another USD 1.3 billion in debt, which was diverted through PDVH. It is noted that Luisa Palacios, then a board member of PDVH, admitted that the funds were used to pay Venezuela’s debts.
Legal Actions Requested
Siemens requests that the court:
- Issue a declaratory judgment stating that PDVSA and PDVH are alter egos.
- Enforce the New York judgment against PDVH for the total amount plus accumulated interest and attorney’s fees.
- Provide arguments and defenses from PDV Holding Inc.
On December 9, 2024, PDVH filed a Motion to Dismiss under Rule 91a of the Texas Civil Procedure, claiming the lawsuit lacks legal and factual foundation.
PDVH claims, and Siemens agrees, that Delaware substantive law governs the issue of piercing the corporate veil, as PDVH is a Delaware corporation.
PDVH argues that the transactions of 2015 and 2016 occurred before D-R (Siemens’s predecessor) signed the promissory note with PDVSA in 2017. It adds that transferring funds from a non-debtor subsidiary (PDVH) to a debtor parent (PDVSA) does not constitute fraud in using corporate form under Delaware law.
PDVH insists that the claim regarding the transfer of USD 1.3 billion in 2019 is implausible, since a U.S. Executive Order from 2017 prohibited such dividend payments without a specific license, and PDVH’s shares were already under seizure by the Crystallex court.
Moreover, PDVH asserts that Siemens’s allegations of control are vague, conclusory, and do not meet Delaware law’s requirements.
Furthermore, PDVH emphasizes that Siemens seeks to hold the subsidiary accountable for the parent’s debts, an extraordinary remedy requiring an even higher standard of equitable analysis.
PDVH argues that it is fundamentally inequitable for Siemens to assert in Crystallex that PDVH is a separate entity with substantial value while claiming in Texas that it is a sham without its own existence.
• Harm to Innocent Third Parties: Allowing SEI to “jump the line” would harm higher-priority creditors in the Crystallex process, as well as potential buyers of PDVH’s shares who rely on its separate corporate existence.
PDVSA’s Intervention
On January 13, 2025, PDVSA requested to join the litigation as a defendant, arguing it has a direct justiciable interest in the case’s outcome.
PDVSA seeks to intervene to protect its corporate veil and argues that as an “agency or instrumentality of a foreign state,” it has entitlement to protections under the Foreign Sovereign Immunities Act (FSIA), especially in judgment enforcement proceedings.
PDVSA maintains that PDVH cannot adequately represent its interests since they are distinct entities with potentially different defenses. Importantly, PDVH, as it is not a sovereign instrument, cannot assert the FSIA protections that belong to PDVSA.
Court Order
On April 23, 2025, Judge Andrew S. Hanen of the United States District Court for the Southern District of Texas granted Siemens Energy INC. a Motion to Remand, ordering that the case against PDV Holding INC. be referred to the Commercial Court Division of Harris County, Texas.
The key issue remains pending, as the court has yet to determine whether PDVH qualifies as the alter ego of PDVSA. Until proven otherwise, Petróleos de Venezuela S.A. will continue to be regarded as the sole foreign state in this action, since PDVH is merely a subsidiary of an instrumentality that cannot claim instrumentality status by itself.
Additionally, the court denied Siemens’s request for attorney fees.