A federal judge on Thursday denied efforts to unseat him and the court-appointed special master overseeing the sale of Citgo's parent company to satisfy billions of dollars in Venezuelan debt, ruling that the motions are both procedurally defective and unmeritorious.

Ruling in a 54-page opinion, U.S. Circuit Judge Leonard P. Stark concluded that the motions were untimely and based on waived arguments. Moreover, his impartiality in the case, as well as that of special master Robert Pincus and his advisers at Weil Gotshal & Manges LLP and Evercore Inc., could not be reasonably questioned, according to the opinion.

In a long-running dispute, creditors against Venezuela are seeking in Delaware federal court to attach shares in the parent of the energy company Citgo, which is indirectly owned by Venezuela's state-owned oil company. (Photo by Jakub Porzycki/NurPhoto via AP) Judge Stark, formerly a district court judge for the District of Delaware, was elevated to the Federal Circuit in 2022, but he continues to oversee a variety of cases brought by creditors against Venezuela in Delaware federal court.

The parties that filed the motions are Gold Reserve Ltd.; Venezuela; state-owned oil company Petróleos de Venezuela SA, or PDVSA; and Citgo, whose parent company, Citgo Holding Inc., is indirectly owned by PDVSA through subsidiary PDV Holding Inc. Shares in PDV Holding are being auctioned off in the proceeding.

They argued that Pincus and his advisers were conflicted due to their role advising hedge fund Elliott Investment Management, the company whose bid to purchase shares in PDV Holding won a nod from Pincus in his updated final recommendation for a bidder. The moving parties also pointed to tens of millions of dollars in fees paid to Weil Gotshal for its representation of bondholders owed nearly $3 billion by Venezuela, referred to as to 2020 bondholders for the year their bonds matured. The 2020 bondholders have a 50.1% interest in Citgo Holding.

But Judge Stark was unconvinced, saying the public nature of the sales process had reduced "opportunities for mischief" and that the moving parties' attempts to portray favoritism toward Elliott were "selective and unconvincing."

Gold Reserve had additionally challenged Pincus and Judge Stark on the basis of actual bias, but this, too, was rejected by the judge.

In his conclusion, the judge noted that it was necessary in the long-running case to appoint a special master to accomplish the "daunting task" of attaching shares in PDV Holding and auctioning them off to satisfy more than $22 billion in Venezuelan debt. That special master would need qualified legal and financial advisers, and eliminating from the bidding any interested entity that had been represented by these advisers "would undermine, if not entirely defeat, the court's goal, and legal obligation, to conduct the sale in [a] manner maximizing value," he wrote.

Judge Stark noted that these advisers would "inevitably have precisely the types of entanglements" with potential bidders that the moving parties argued should be disqualifying.

"The court recognizes that failure is precisely what the Venezuela parties have always desired, as they candidly admit," he wrote. "Failure is also the result Gold Reserve currently prefers, as it plainly fears that if it cannot prevent the court from reaching the merits then the court is going to approve the bid the special master recommended instead of its own."

"While, as noted earlier, the court is not making any finding as to the motivations of the movants, neither is it blind to the facts it has noted," according to the opinion.

The Delaware court is conducting the long-awaited sale seven years after defunct Canadian mining company Crystallex International Corp. won an attachment order over the PDV Holding shares to satisfy a $1.2 billion arbitral award it won after being ousted from a lucrative Venezuelan gold mining project.

In the years since then, the process has attracted other creditors of Venezuela owed billions of dollars more, since Citgo is Venezuela's most significant seizable asset. Those creditors include Gold Reserve, which won its $713 million arbitral award in September 2014 after Venezuela yanked its permit for a gold mining project.

Gold Reserve initially won the nod from Pincus as his chosen bidder in a final recommendation earlier this year, with a $7.382 billion bid. But the special master later changed his mind, issuing an updated final recommendation that the court approve a $5.892 billion bid from Elliott. The latter bid included additional cash consideration to discharge $500 million of attached judgments as well as an agreement with a majority of the 2020 bondholders.

Gold Reserve is represented by Kevin J. Mangan, Matthew P. Ward and Stephanie S. Riley of Womble Bond Dickinson (US) LLP, Matthew H. Kirtland, Katherine G. Connolly and Taylor J. LeMay of Norton Rose Fulbright US LLP, and by Michael J. Bowe, Lauren Tabaksblat, Andrew T. Sutton and Kate E. Fisch of Brithem LLP.

Pincus is represented by Myron T. Steele, Matthew F. Davis, Bindu A. Palapura and Malisa C. Dang of Potter Anderson & Corroon LLP, and by Matthew S. Barr, David J. Lender, Jared R. Friedmann and Chase A. Bentley of Weil Gotshal & Manges LLP.

Venezuela and PDVSA are represented by Samuel Taylor Hirzel II and Brendan Patrick McDonnell of Heyman Enerio Gattuso & Hirzel LLP, Donald B. Verrilli Jr., Elaine J. Goldenberg, Ginger D. Anders, George M. Garvey and Adeel Mohammadi of Munger Tolles & Olson LLP, and Joseph D. Pizzurro, Kevin A. Meehan and Juan O. Perla of Curtis Mallet-Prevost Colt & Mosle LLP.

PDV Holding and Citgo are represented by Susan W. Waesco, Alexandra M. Cumings and Phillip Reytan of Morris Nichols Arsht & Tunnell LLP and by Nathan P. Eimer, Lisa S. Meyer, Daniel D. Birk, Gregory M. Schweizer and Hannah Bucher and Alec Solotorovsky of Eimer Stahl LLP.

Crystallex is represented by Raymond J. DiCamillo, Jeffrey L. Moyer and Travis S. Hunter of Richards Layton & Finger PA, and by Robert L. Weigel, Jason W. Myatt, Rahim Moloo, Miguel A. Estrada, Lucas C. Townsend, Zachary Kady and Adam M. Smith of Gibson Dunn & Crutcher LLP.

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, case number 1:17-mc-00151, in the U.S. District Court for the District of Delaware.