Hew Pate, Chevron's $7.8 Million Lawyer, “Celebrates" Another Legal Defeat At the Hands of Ecuador's Rainforest Communities
These losses include a unanimous reversal in January by a U.S. federal appeals court of an injunction purportedly barring enforcement of the Ecuador judgment and an affirmance earlier this year by the Ecuador appellate court of the overwhelming evidence that the company committed crimes and fraud in Ecuador. See here and here.
Chevron's contamination in Ecuador also has been confirmed by numerous independent journalists and is simply indisputable -- see this 60 Minutes segment and this video prepared by the plaintiffs. In addition, Chevron's lead outside law firm in the case -- Gibson Dunn & Crutcher -- has been sanctioned repeatedly for committing ethical violations even as it bills the company hundreds of millions of dollars as part of a "rescue operation". See here.
One would never know from Pate that the legal prospects of Chevron are dimming or that the company is being taken for a ride by Gibson Dunn. In a press release that can only be described as the ultimate in chutzpah, Pate celebrated Chevron's latest legal defeat yesterday by claiming "victory" because the judge tossed out only a few of the fraud claims the company filed against lawyers for the plaintiffs as opposed to all of the claims. In keeping with his spin, Pate failed to mention in his press release that Kaplan expressly found that Chevron is unlikely to prevail on the remaining fraud claims.
We have said it before: Pate and the higher-ups in Chevron management are leading Chevron and its shareholders down a dangerous path over the Ecuador liability, and possibly over a cliff. The spin is getting increasingly desperate as the walls begin to close in on the company's plan to evade paying the judgment.
Whether spinning bad news into fake news is a deliberate strategy or a function of internal self-delusion can be sorted out by others -- including SEC regulators who have been called on to determine whether the company is producing materially false and misleading information about the Ecuador liability. See here.
These are our takeaways on the Kaplan decisions this week:
1) Pate's latest press release shows the company continues to mislead shareholders over the Ecuador liability, as documented in stunning detail by Canadian securities lawyer Graham Erion in this report released in April. Pate's press release was designed to sugarcoat an adverse legal decision, exactly the kind of gamesmanship that regulators frown upon. Expect a new report soon from the plaintiffs on how Pate's press releases on the Ecuador case are designed to hide risks from shareholders and the markets.
2) Judge Kaplan, who used to consistently favor Chevron in his decisions, has started to lose his appetite for the case after getting sternly rebuked in January by the U.S. court of appeals in New York. Not only did Kaplan deny a Chevron motion to attach the assets of the Ecuadorians for the second time, he also dismissed two fraud claims and cast serious doubt on Chevron's remaining RICO claims against American lawyer Steven Donziger. (The Ecuadorians maintains that Chevron's claims are baseless and are a ruse to distract attention from its own criminal misconduct in Ecuador.)
3) It is increasingly clear that Chevron's RICO case is a dog reluctant to hunt. Worse for Chevron, if the case hunts -- as in, actually survives various motions to dismiss and gets to a jury -- it can bite Chevron far more harshly than it can bite Donziger or his Ecuadorian clients. Chevron will be on the defensive because of counterclaims about its attempts to corrupt the Ecuadorian judicial system. A jury will be able to hear evidence about Chevron's sham remediation, its efforts to bribe Ecuador's government, its attempts to doctor evidence through its "dirty tricks" operative Diego Borja, and its threats to judges. All of this has been detailed in a sworn affidavit from Juan Pablo Saenz, an Ecuadorian lawyer.
4) Pate is going to have a whale of a time explaining the Ecuador problem at the company's upcoming annual meeting on May 30. How he explains why several prominent law firms around the world have rallied to the cause of the Ecuadorians when the case is supposedly an "extortionate scheme" will be interesting to watch. Further, a large group of Chevron shareholders is pressuring the SEC to investigate Chevron based on the Erion report, which exposes out of control risk-taking and an apparent cover-up. Expect several pension funds to speak out with a more forceful voice.
Multiple lawsuits against Chevron assets in various jurisdictions are now looming over the company. Once these actions are filed and start progressing through the courts, Chevron will have a hard time entering into partnerships or making further investments in countries that could be strategically important to the company's growth.
In the meantime, Chevron's feckless Board of Directors awarded Pate a 75% pay increase (to $7.8 million) for losing the Ecuador case. See here. Because of Pate's bungling of the Ecuador matter, billions of dollars of Chevron assets are now at risk of being attached, seized, and auctioned off at fire sale prices because the company refuses to comply with its legal obligations. In the double-dealing inside world of Chevron-land, this merits an extraordinary pay raise.
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