Foley Hoag Obtains Victory for Venezuela in Federal Case Involving Fake Promissory Notes Allegedly Worth $100 Million

U.S. District Court Judge Dismisses Lawsuit That Spanned More than a Decade

July 25, 2016

After more than a decade of litigation that culminated in a five-week bench trial, a U.S. District Court judge in Ohio on Friday dismissed a suit by Skye Ventures against the Bolivarian Republic of Venezuela to collect on two purported promissory notes with a face value of $100 million that were allegedly issued in 1981 by Bandagro, a defunct Venezuelan bank.

The case had attracted international attention because Skye Ventures, an Ohio company, had obtained the purported notes in 2004 from a Panamanian company run by an Italian national who had previously been convicted twice—in England and Italy—for trafficking in purported notes similar to those at issue in this litigation.

Foley Hoag LLP partners Andrew Z. Schwartz and Matthew C. Baltay of Boston led Venezuela’s legal defense team.

“This is a significant victory for Venezuela and its citizens,” said Schwartz.  “Venezuela has long maintained that the notes are fraudulent, and the Court’s decision fully vindicates Venezuela’s position.”

Skye Ventures brought suit in August 2004 in the U.S. District Court for the Southern District of Ohio claiming that Venezuela had defaulted on the two purported notes, which Skye Ventures claimed were valid debt obligations based on a legal opinion by the Venezuelan Attorney General in October 2003 finding in favor of paying out monetary claims on the purported notes.  Skye Ventures maintained that the Attorney General’s October 2003 opinion was final and binding.

Chief Judge Edmund A. Sargus, Jr. rejected Skye Ventures’ claim by first finding that the purported notes were fraudulent: Bandagro neither issued the debt nor received consideration for it. Judge Sargus then found that the October 2003 opinion did not cure the fraud because, even if it were binding, the Attorney General reevaluated and disavowed it two months later. Judge Sargus also found that Venezuela did not ratify the debt, Skye Ventures did not reasonably rely on the Attorney General’s October 2003 opinion such that Venezuela would be obligated to pay, and Skye Ventures was not a holder of the purported notes in due course.

Venezuela’s successful defense against Skye Venture’s claims was led by Reinaldo Muñoz, the Venezuelan Attorney General. In addition, Venezuela was represented by Foley Hoag lawyers Thomas Ayres, Richard Baldwin, Tracy RooseveltMadeleine Rodriguez, Peter Shults, Christopher Hart, Kevin J. Conroy, Benjamin Guthrie and Julia Amrhein, and by Albert J. Lucas, a partner in the Columbus, Ohio office of Calfee Halter & Griswold LLP.

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