Tuesday, May 26, 2020

Federal Judge declines to dismiss suit against Vitol in Rico Act lawsuit

By on August 26, 2016

SAN JUAN – U.S. District Court Judge Jay García Gregory again refused to dismiss a lawsuit filed against Vitol Inc. and Vitol S.A., which have been linked to the so-called “oil cartel” in a Racketeer Influenced and Corrupt Organizations Act, or RICO Act, class-action suit brought against the Puerto Rico Electric Power Authority, Prepa employees, several oil suppliers and laboratories.

The judge made his ruling involving a complaint brought under the RICO Act that has been amended three times by the plaintiffs, a group of citizens who claimed they paid more than what they should have in electric power rates as a result of a scheme involving the so-called oil cartel. It was also the third time Vitol has sought a dismissal of the complaint.

“This court sees no reason to revisit its prior ruling,” the judge said ordering Vitol to submit an answer to the lawsuit on Sept. 1.

The RICO Act is a federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization.

The plaintiffs allege that Prepa employees, suppliers of fuel oil to Prepa and laboratories that tested the fuel oil upon delivery to Prepa facilities participated in a decade-long scheme that resulted in higher power prices.  

Puerto Rico Electric Power Authority headquarters in Santurce.

Puerto Rico Electric Power Authority headquarters in Santurce.

They contend that fuel oil suppliers provided Prepa with oil that did not meet the quality specifications in their contracts with Prepa, but charged Prepa the contract price for “Compliant Fuel Oil.”  They argued that the fuel suppliers had two allies in the purported scheme. These were certain laboratories, who allegedly submitted false inspection reports, and  Prepa workers who allegedly accepted the non-compliant fuel oil in exchange for “undisclosed kickbacks or commissions.

Vitol has objected to its inclusion in the lawsuit, contending that the plaintiffs have not brought any evidence against Vitol that can state a RICO Act claim.

“Plaintiffs have had three chances to amend their complaint in the nearly 18 months since they filed this case, but they still have not made any specific factual allegations that can adequately state a RICO claim against Vitol. Instead, Plaintiffs continue to evade compliance with the governing pleading standards by trying to hide Vitol within amorphous and conclusory allegations involving unspecified ‘Defendants’ or the ominous-sounding ‘Fuel Oil Cartel Enterprise,’ which is actually an invented group that Plaintiffs use precisely to avoid the requirement to plead specific allegations against individual defendants,” Vitol said.

According to the fuel supplier, the plaintiffs allege that Prepa approved a bid for Vitol to deliver an emergency supply of fuel to Prepa in 2008 but they do not allege that Vitol delivered non-compliant or much less committed any RICO predicate in connection with any transaction that year.  

The company says that while plaintiffs continue to claim that Vitol delivered fuel to Prepa in 2012 that did not comply with contractual quality specifications, the allegation is baseless because Vitol ceased delivering fuel to PREPA in 2009, years before plaintiffs’ complaint alleges the events took place.

“Conspicuously, plaintiffs have never disputed that Vitol ceased delivering fuel to Prepa in 2009. But Plaintiffs want to yoke Vitol into this sprawling lawsuit,” Vitol said.


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