State-owned Mexican oil company Pemex PEMX.UL sued Siemens AG (SIEGn.DE) and a South Korean company for $1.5 billion on Thursday over a bribery scheme that has dogged the German conglomerate for years.
Pemex's lawsuit marks a rare instance of a company owned by a foreign government seeking restitution through the U.S. courts for alleged bribery.
In a lawsuit filed in U.S. District Court in New York, Pemex accused Siemens and SK Engineering & Construction Co Ltd SKEC.UL, a subsidiary of SK Holdings Co Ltd (003600.KS), of securing contracts to participate in an oil refinery modernization project in Mexico through bribes to Pemex officials.
Pemex said it began looking into whether its dealings with Siemens were "tainted by bribery" after the company paid a record $1.6 billion to U.S. and European authorities in 2008 to resolve allegations of paying bribes around the world, from Iraq to Argentina.
A parallel action brought by the U.S. Securities and Exchange Commission as part of that case alleged that Siemens in late 2004 made around $2.6 million in payments to a politically connected consultant to help settle cost overrun claims with refinery modernization projects in Mexico.
Siemens neither admitted nor denied the allegations in settling with the SEC.
Pemex's lawsuit accused Siemens and SK Engineering of racketeering violations. Another defendant is Conproca, S.A. De C.V. CONPR.UL, a Mexican joint-venture between Siemens and SK that was created to bid for the state oil company's refinery contract. Conproca is 85 percent owned by SK, according to the complaint.
The lawsuit seeks at least $500 million in damages, which could be tripled under the Racketeer Influenced and Corrupt Organizations Act.
Guenter Gaugler, a spokesman for Siemens, and officials with Mexico City-based Pemex declined comment. An SK representative could not be reached. A lawyer for Conproca did not respond to requests for comment.
RESTITUTION LAWSUITS RARE
While the United States has stepped up its enforcement of its anti-bribery law, the Foreign Corrupt Practices Act, the countries in which bribery occurred have rarely appeared in U.S. courts to seek their own restitution.
Last year, an electric utility in Costa Rica objected to a bribery settlement French telecoms company Alcatel Lucent SA (ALUA.PA) entered into with U.S. authorities, and demanded restitution.
The Justice Department had accused an Alcatel subsidiary of paying bribes to Costa Rican government officials, including five employees of the electric utility. The utility, the Instituto Costarricense de Electricidad, lost in the lower courts and asked the U.S. Supreme Court to look at the case, but was denied earlier this week.
Alcoa Inc (AA.N) agreed to pay $85 million in October to resolve a bribery-related case brought in the United States by Aluminium Bahrain ALBH.BH, a settlement that may have inspired the Pemex lawsuit. Alcoa has not yet resolved any related action from the U.S. Justice Department or the Securities and Exchange Commission.
A settlement under the Foreign Corrupt Practices Act usually signified the end of a matter for a company, but the recent cases suggest companies could face new types of post-settlement action, according to Michael Koehler, a law professor at Southern Illinois University and expert on the foreign bribery law.
"An FCPA enforcement action in many cases now is not the end of the day but in many respects, the opening of a whole new day in terms of potential civil causes of action," he said.
In its lawsuit, Pemex said its investigation showed that the Conproca joint venture partners bribed Pemex officials in connection with its refinery modernization project in the Cadereyta region of Mexico, which it sought bids for in 1996.
Pemex contends that bribes caused cost overruns that were a "significant component" of an arbitration with Conproca, according to the court papers.
Conproca, which has been seeking to recover $530 million in the arbitration with Pemex, filed a lawsuit, also in New York federal court, in December 2011 seeking to confirm an award on liability.
In the arbitration, Conproca asserted claims for payment for work done beyond the scope of the contract and for costs arising out of delays and disruptions caused by Pemex. The lawsuit remains pending.
Pemex said in its lawsuit that a criminal investigation in Mexico "has been substantiated, and is moving forward to uncover the full extent of the corruption."
The case is Petroleos Mexicanos v. Conproca, S.A. De C.V., U.S. District Court, Southern District of New York, 12-9070.