Citigroup blocked PDVSA attempt to pay Siemens

The dispute stems from a January 2017 promissory note that cash-strapped PDVSA issued to oilfield equipment provider Dresser-Rand for $120 million, plus interest

Citigroup Inc blocked an attempt by Venezuelan state oil company PDVSA to make debt payments to a Siemens unit, a Citi executive testified on Wednesday in a U.S. trial over whether PDVSA is liable for the payments.

In a bench trial that began on Tuesday in Manhattan federal court, PDVSA is contending that U.S. sanctions implemented in August 2017 rendered payment impossible.

The dispute stems from a January 2017 promissory note that cash-strapped PDVSA issued to oilfield equipment provider Dresser-Rand for $120 million, plus interest. PDVSA made the first two interest payments for about $4 million, but defaulted on a $1.9 million payment due in October 2017.

In May 2020, U.S. District Judge Louis Stanton of the U.S. District Court for the Southern District of New York entered a $149.5 million judgment in Dresser-Rand's favour.

On Tuesday, Raymond Romano, Citi's chief administration officer for Latin America, testified that Citi blocked PDVSA's wire attempt because "it did not meet our requirements for processing."

In a Sept. 25, 2017 email submitted as evidence, a Citi employee told Dresser-Rand that the bank restricted Venezuela and PDVSA activities because of the sanctions, but that it would consider processing pre-approved transactions.

Romano said Dresser-Rand did not seek pre-approval.

In testimony that could bolster Dresser-Rand's argument that PDVSA had other ways to make the payment, he said that Citi implemented the PDVSA-related restrictions before the August 2017 sanctions based on its own internal risk policies.

Stephanie Rice, a former sanctions compliance officer at various banks who was called by Dresser-Rand as an expert witness, said the payment was not in violation of sanctions and other banks may have processed it.