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Home » Venezuelan Parties Demand Rejection of “Grossly Inadequate” CITGO Auction Recommendation Amid Serious Allegations of Process Flaws and Bias

Venezuelan Parties Demand Rejection of “Grossly Inadequate” CITGO Auction Recommendation Amid Serious Allegations of Process Flaws and Bias

In the CITGO auction process, the Venezuelan Parties, namely PDVH, CITGO, PDVSA, and the Bolivarian Republic of Venezuela, objected to the final recommendation made by judicial expert Robert Pincus on July 2, 2025, which they deemed “grossly inadequate.”

In this context, they request that the court reject Dalinar’s bid recommendation and suspend the sale process until a decision is rendered on the motions related to the 2020 bond litigation, as well as the adoption of an “appropriate sales process.” They reserve the right to present further objections and respond to any objections that may be raised by Red Tree or other parties.

Pincus endorsed the offer from Dalinar Energy Corporation, which proposed to buy the Venezuelan refinery in U.S. territory for USD 7.382 billion. The sale of Venezuela’s most valuable asset, represented in shares of PDV Holding Inc., is considered inadequate by PDVH, CITGO, PDVSA, and the Republic due to the price offered.

They also allege defects in the CITGO auction process led by the judicial expert, the invalidity of the attachment orders against the Republic, claims of PDVSA’s sovereign immunity, perceived bias from the judicial expert, inconsistencies in the judgment amounts related to Gold Reserve, and objections to the terms of Dalinar’s SPA.

They insist that the process has harmed their rights and led to a significant undervaluation of PDVH’s assets, which they view as the “crown jewel” of the state-owned oil company.

CITGO and PDV Holding Challenge Judicial Expert’s Recommendation

On July 8, 2025, the Venezuelan parties, including the Bolivarian Republic of Venezuela, PDV Holding (PDVH), CITGO Petroleum Corporation, and PDVSA, filed their objections before the U.S. District Court for the District of Delaware regarding the judicial expert’s final recommendation in the CITGO auction.

As is known, Robert B. Pincus recommended approving the sale of PDV Holding Inc. shares to Dalinar Energy Corporation for USD 7.382 billion, an offer the Venezuelan parties label as “grossly inadequate,” arguing that the sale process had defects that prevented maximizing value while asserting that the creditors’ attachments are invalid under Delaware law.

They argue that PDVSA is immune from liability for the Republic’s debts, citing potential conflicts of interest or bias on the part of the judicial expert and their advisors, pointing out inconsistencies in the judgment amounts of one of the bidding consortium members, Gold Reserve, along with their relationships with the Maduro regime. Finally, they object to a clause in the sales agreement proposed by Dalinar.

Extreme Undervaluation of CITGO Petroleum Corporation

Venezuelan parties claim multiple flaws and “strategic errors” from the judicial expert

The Venezuelan parties argue that Dalinar’s offer of USD 7.382 billion is “grossly inadequate” and “unaware,” according to Delaware law, as it represents “less than 50% of the fair market value of PDVH Shares.”

They cite case law to support that even if it exceeded 50%, selling such a significant asset for billions less than its fair market value would still be “unfair and unprecedented.”

They emphasize that the sale involves control of the “crown jewel” of a foreign state-owned oil company, underscoring the critical importance of the sale price.

Defects in the CITGO Auction Process

PDVH, CITGO, PDVSA, and the Bolivarian Republic of Venezuela outline to the Delaware Court what they consider multiple flaws and “strategic errors” made by the judicial expert, Robert Pincus, which they claim prevented maximizing value and led to a bid far below fair market value.

They refer to the selection of the Initial Bidder, which resulted in Red Tree, offering “less than half of the highest bid submitted during that process,” and having set a “too low floor during the capped period,” which they argue “distorted the bidding.”

The Venezuelan parties state that prioritizing the resolution with the holders of PDVSA 2020 Bonds over the purchase price “signaled to bidders that they did not need to compete on price.”

They highlighted the refusal to “share information with bidders about proposals from others,” which prevented a competitive bidding environment, failing to create “competitive tension” and maximize value. A lack of “regulatory guidance on potential antitrust concerns” also hampered the participation of strategic bidders.

They accuse the judicial expert of making “repeated public indications” that the resolution of the 2020 bond litigation was a “gateway issue for a successful bid,” which “inflated the perceived importance and risk” of this litigation, thereby “chilling bidder participation” and diverting value from the price.

They further denounce the exaggeration of the risk of “Alter Ego” lawsuits, capitulation to bidders’ demands, failure to consider alternative sale processes, incorrect incentives from the advisor, and the public stance on fair market value.

Invalidity of Attachment Orders under Delaware Law

The Venezuelan parties argue that the attachments from Crystallex and other creditors against the Republic are invalid under Delaware law, as the statute states that a creditor can only attach and execute shares of a corporation owned by an alleged “alter ego” of a debtor if “fraud or similar injustice in the use of corporate form” is demonstrated.

They assert that “No creditor of the Republic has demonstrated sufficient fraud or similar injustice to lift the veil between the Republic and PDVSA,” and the court already determined this concerning Crystallex.

Moreover, they warn that if the creditors’ lawsuits against the Republic were eliminated, the remaining “attached trials” from PDVSA’s creditors would total only USD 1.9 million, an amount that “could have been satisfied without selling 100%, or any, of PDVH’s shares. This contravenes the guideline of Section 324 to sell “only [such] shares” as necessary.

They argue that Gold Reserve, Koch, and Rusoro, members of the Dalinar consortium, “are not entitled to a credit offer” because their attachments originate from a lawsuit against the Republic and are invalid for the reasons outlined.

Sovereign Immunity of PDVSA under the FSIA

The Venezuelan parties maintain that PDVSA is immune from the court’s jurisdiction to be held liable or for its property to be executed to satisfy the Republic’s debts on an “alter ego” basis under the FSIA.

They object that the judicial expert and his advisors were “biased against the Venezuelan Parties and in favor of recommending a quick sale at any cost.” They believe that Robert Pincus “sometimes acted as an attorney on behalf of Crystallex, ConocoPhillips, and other creditors,” and even for his conduct before the OFAC, “he should have been disqualified.”

They accuse “apparent inconsistencies” in the amount of the attached judgment from Gold Reserve, as Venezuela paid them USD 254 million under the 2016 Settlement Agreement and yet claimed in court to have received “only USD 13,811,558.” This discrepancy of approximately USD 240 million “distorted the bidding process and produced a flawed outcome.”

Notification from CITGO and PDVH Regarding Expert Witnesses

On July 7, 2025, CITGO and PDV Holding Inc. (PDVH) submitted to the U.S. District Court for the District of Delaware the opinions of their expert witnesses in the case of Crystallex International Corp. against the Bolivarian Republic of Venezuela.

The document supports objections to the judicial expert’s final recommendation of the CITGO auction through experts José Alberro, who will testify on the valuation of PDVH shares, and Randall J. Weisenburger, who will address the defects in the sales process. Furthermore, lawyers from Eimer Stahl LLP and Morris, Nichols, Arsht & Tunnell LLP represent PDVH and Citgo Petroleum Corporation in this litigation.

This document serves as “notice of the expert testimony presented in support of their upcoming objections and notes that José Alberro’s testimony will focus on the “Valuation of PDVH Shares,” which is considered crucial, as the valuation of PDV Holding’s assets — including CITGO as a subsidiary — is likely a central point in the dispute, possibly related to attachments or execution of judgments.

Meanwhile, it indicates that Randall J. Weisenburger will address the “Defects in the Sales Process,” constituting significant objections to how the CITGO auction has been carried out or is proposed to be conducted. This challenges the fairness, legality, or procedures involved in that sale.

Explanation of Sealed Objection Notice Submission

On July 7, 2025, attorney Alexandra M. Cumings from the firm Morris, Nichols, Arsht & Tunnell LLP communicated with Judge Leonard P. Stark to explain the sealed submission of an Objection Notice by PDV Holding Inc. (PDVH) and CITGO Petroleum Corporation (CITGO) in the case Crystallex International Corp. v. Bolivarian Republic of Venezuela.

She states that the primary reason for sealing is that the Notice contains confidential information about the offers and the CITGO auction process, obtained from the judicial expert, who instructed the parties not to disclose it publicly.

They mention that PDVH and CITGO do not have a stance on whether the information should remain sealed but will follow the guidelines of judicial expert Robert Pincus. The letter also notes that a redacted version of the Objection Notice will be submitted in the near future, after Pincus indicates the necessary redactions.