US judge denies motions to disqualify officers, advisers involved in Citgo auction

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By Marianna Parraga

HOUSTON (Reuters) -A U.S. judge has denied motions filed by Venezuela and Gold Reserve to disqualify him, a court officer and two advising firms overseeing an auction of shares in the parent of refiner Citgo Petroleum, a court filing showed on Thursday, clearing the way to complete the bids’ evaluation.

Toronto-listed miner Gold Reserve, which competed with an offer in the auction, and Citgo’s owner, Venezuela, accused firms advising the court of receiving some $170 million in fees from affiliates of Elliott Investment Management, whose bid was recommended as the auction’s winner, and bondholders that would obtain proceeds as a result.

But their motions over alleged conflicts of interest were denied, allowing the complex court-organized sale process of Citgo’s parent PDV Holding, which has suffered multiple delays since a first bidding round was launched in late 2023, to move forward for now.

“The motions are procedurally defective because they are untimely and because they are based on waived arguments,” Delaware Judge Leonard Stark said in his decision. He also said the motions “lack merit.”

Gold Reserve’s request for a stay of the sale process, including the court’s evaluation of the $5.9 billion bid from Elliott’s Amber Energy recommended by officer Robert Pincus, was also denied.

Other legal actions by Gold Reserve at separate U.S. courts seeking to pause the auction, including one before a court of appeals and a lawsuit against consortium partner Rusoro Mining, remain pending.

However, Judge Stark said on Thursday that he plans to rule on the objections to the recommended winner by the end of November.

The objections emerged after Pincus in August switched his recommendation to Amber Energy from Gold Reserve’s subsidiary Dalinar Energy. The Venezuela parties, Gold Reserve and some consortium partners rejected the change, saying Dalinar’s $7.9 billion bid was superior.

Gold Reserve, boards supervising Citgo and Amber Energy did not immediately reply to requests for comment.

“The Delaware District court’s auction of PDV Holding has entered its decisive stage, though a final sale order must still clear several procedural hurdles,” said lawyer Jose Ignacio Hernandez in a report from consultancy Aurora Macro Strategies.

“The sequencing underscores the court’s effort to advance the sale process while weighing the procedural and substantive challenges that followed the shift from Dalinar to Amber,” he added.

The auction aims to pay up to $19 billion to 15 creditors seeking compensation in Delaware for debt defaults and expropriations in Venezuela.

(Reporting by Marianna Parraga, editing by Deepa Babington and Nia Williams)