Diaz Reus & Targ LLP scored a stunning victory in the U.S. District Court for the Southern District of New York last week on behalf of the government of Venezuela, obtaining complete and final dismissal with prejudice of a suit brought by Smith Rocke Ltd., a purported creditor in the Lehman Bros. bankruptcy.
The case is Smith Rocke, Ltd. v. Republica Vliviariana De Venezuela, No. 12 Cv. 7316 (LGS)., 2014 BL 20749 (S.D.N.Y. Jan. 27, 2014).
Smith Rocke’s Allegation
The suit was predicated on Smith Rocke’s allegation that Venezuelan government agencies had expropriated the company’s entitlement to payments from the Lehman Bros. bankruptcy estate worth more than $400 million. In a comprehensive opinion handed down by U.S. District Court Judge Lorna Schofield, the Court soundly rejected all of the Plaintiff’s expropriation and conversion claims, and dismissed the suit with prejudice.
Smith Rocke, a BVI company, is controlled by its Venezuelan shareholders who were previously associated with a Venezuelan bank, Banco Canarias, and another affiliated Venezuelan entity, Credican. Both Banco Canarias and Credican were placed into receivership several years ago by Venezuelan banking regulators. Shortly thereafter, Smith Rocke facilitated an unauthorized “assignment” of the right to receive payments from the defunct entities to Smith Rocke, in an effort to gain control of assets valued in the hundreds of millions of dollars. Regulators are seeking to recover these assets in order to satisfy depositors and creditors of the failed financial institution.
Outcome of This Case
Once the Venezuelan government learned of the diversion of assets by the Smith Rocke shareholders, they notified the Lehman bankruptcy trustee so that no payments from the Lehman estate would be made to them. That action resulted in the filing of this suit by Smith Rocke against our client. The problem for Smith Rocke, of course, is that these shareholders never had a legitimate legal claim to these assets, and now the court has told them so.