Gold Reserve is seeking the disqualification of Judge Leonard Stark, court officer Robert Pincus, and two advisory firms from the auction of Citgo Petroleum’s parent company – with Elliott Investment Management affiliate Amber Energy currently the front runner, according to a report by Reuters.
The Toronto-listed miner, one of 15 creditors vying for proceeds from the sale of PDV Holding (Citgo’s Delaware-based parent), claims the auction process has been compromised by conflicts of interest benefiting Amber Energy, which was recommended as the winning bidder despite Gold Reserve’s higher $7.9bn offer.
Gold Reserve alleges that the switch in recommendation to Elliott’s Amber — whose $5.9bn bid was endorsed in August — stemmed from undisclosed ties between the court’s advisers and Elliott. The company is seeking a temporary stay on all sale decisions until its disqualification motions are resolved.
At the heart of the dispute are Weil, Gotshal & Manges and Evercore, both advising the court on the sale. Gold Reserve contends that Weil has simultaneously represented Elliott in unrelated matters, while both Weil and Evercore maintain relationships with bondholders who stand to gain from Elliott’s proposed structure.
The move intensifies scrutiny over a process already watched closely by distressed-debt investors. Citgo’s parent auction is considered one of the largest enforcement actions ever tied to Venezuela’s defaulted obligations, drawing bids and litigation from funds and creditors pursuing expropriation awards and unpaid bonds.
A hearing on the motions is scheduled for 21 October, after which Judge Stark is expected to rule on the conflict allegations and determine the final winner of the Citgo auction.
