Shaky Evidence and Appellate Court Scrutiny Starting to Disrupt
Company’s Master Plan
Chevron’s vaunted
114-lawyer “rescue team” at Gibson Dunn seems to be getting the jitters over
its upcoming RICO trial in federal court in New York.
In an otherwise routine
scheduling conference recently before Judge Lewis A. Kaplan, Gibson Dunn lawyer
Randy Mastro suggested the oil giant was prepared to drop all damages claims
against the Ecuadorians and their counsel, Steven Donziger, just to avoid a
jury trial. The company’s “Plan B” appears to be to seek a fraud
finding from Judge Kaplan alone -- something the judge does not seem inclined
to do, and something that would have little chance of working even if he did.
The fact Chevron is even
thinking of this possibility is a huge retreat. It’s also a strong
indication that Chevron believes its billion-dollar investment in the RICO case
has suddenly become a high-stakes gamble with far greater risk than CEO John
Watson is letting on to shareholders and the financial markets. A loss in the case via a jury verdict would
be disastrous for the company both in the U.S. and in defending enforcement
actions targeting its assets in countries around the world.
If it were to drop the
damages claims, Chevron might avoid a civil jury trial which in most cases is
only guaranteed to a defendant when money is at stake. But if Chevron
chooses to go down this path, it will be left with virtually nothing to
litigate. It might get a “finding” from the discredited Judge Kaplan, but
that will be of little or no use in foreign courts who already see the judge as
a vassal of U.S. judicial arrogance.
To be clear: Chevron never
thought the RICO case would get this far. Juries are inherently unpredictable. For a large corporation like Chevron with a
$19 billion liability and the reputations of its senior management team at
stake, that’s also terrifying. Chevron
simply cannot afford to lose this case.
Chevron assumed that the
small legal team for the Ecuadorians would be ground to a pulp by now. Or
that Judge Kaplan would have found a way to rule in Chevron’s favor on
pre-trial motions. Both strategies have failed.
After being unanimously
reversed in 2012 when he tried to block the Ecuador judgment from being
enforced anywhere in the world, Judge Kaplan appears anxious to push Chevron’s
allegations into the hands of a jury. (That will come after the judge
continues to make evidentiary decisions to rig the trial in Chevron’s
favor. See here and here
for a taste of Kaplan’s bias.) In the end of the day, Judge Kaplan knows
any finding he makes alone has little chance of surviving appeal and his own
instincts at this point are to protect himself, even if it means Chevron cannot
get everything it wants.
Chevron also knows juries
tend to follow their gut. That does not bode well for Chevron’s absurd
notion that it is the victim of a global
“racketeering scheme” foisted on it by the very indigenous groups who
have had their ancestral lands poisoned by the company’s toxic dumping. This
“blame the victim” approach is classic historical revisionism practiced the
world over by oppressors and Chevron is no different.
(For an understanding of
the overwhelming evidence against Chevron in Ecuador, see this video,
this 60 Minutes segment,
and this summary of the evidence
relied on by the Ecuador court to find the company liable for both polluting
the delicate rainforest ecosystem and for trying to corrupt the trial that held
it accountable.)
In 2011, the Second Circuit
Court of Appeals reversed Judge Kaplan’s illegal injunction purporting to block
worldwide enforcement of the Ecuador judgment. Judge Kaplan’s ham-fisted
attempt to rescue Chevron from its misdeeds in Ecuador remains a sad example of
ugly Americanism at its worst. See here,
and here
to get a feel for the international scorn provoked by this short-lived attempt by
a U.S. trial judge to control the Ecuador judgment on a global basis.
Despite this personal
setback – no Judge likes to get reversed -- Kaplan does not appear to be the
least bit chastened from the experience. And that’s bad for Chevron
because Judge Kaplan’s hubris has put him in serious trouble yet again.
Just last week, the
appellate court set oral argument in late September to determine whether Judge
Kaplan should be removed from the RICO case altogether given his continued
defiance of the Second Circuit’s order that he not opine on the validity of the
Ecuador judgment. See here
for the latest facts underlying the petition for his removal. Let’s just
say it is serious business whenever a trial court thumbs its nose at an
appellate court. To do it on multiple occasions and blatantly is even
more perilous.
Judge Kaplan encouraged
Chevron to bring the RICO action in the first place. Without his efforts,
it likely never would have gotten past first base. The judge has
jerry-rigged the evidence by repeatedly violating the due process rights of the
Ecuadorians and Donziger. He even has ruled they will not be allowed to
present testimony about Chevron’s massive pollution in Ecuador, thus making it
virtually impossible to mount a meaningful defense. Should the case be
reassigned to a fair judge, look for Chevron’s claims to lose all traction.
As for the lawyers, Mr.
Donziger and others are still confident. It was Donziger who recently
forced Chevron CEO Watson to testify about Ecuador during a deposition – a shocking
risk given that he now could be charged with perjury if it is found that he
lied under oath. This industry royal was forced to endure the humiliation of
answering live questions posed by a solo practitioner (Donziger) he previously
called a “criminal” on earnings calls with investors. (Chevron has gone
to great lengths to keep Watson’s testimony confidential. When the lies
and memory lapses get exposed, Watson will be further embarrassed and the
global shareholder campaign against him will pick up even more
steam.)
Given
these problems, it is understandable why Mastro is nervous about a jury trial.
But there are other reasons.
First, Mastro is known far
more as a political fixer than a trial lawyer. He will fight like a pit
bull to avoid ceding the high-profile trial stage to the many more talented
lawyers at Gibson Dunn, including his colleagues Theodore Boutrous and former
star federal prosecutor Reed Brodsky. Any defendant would want Mastro to lead
the Chevron show before a jury. Let’s hope he hangs in there.
We have seen from previous hearings before Judge Kaplan how Mastro and his sidekick, Andrea Neumann, lack
basic courtroom agility and have an off-putting personal style.
Mastro already lost three key appellate arguments in the case and literally was
laughed out of court in 2011
when he couldn’t answer the most basic questions when trying to defend Judge
Kaplan’s illegal injunction before a three-judge appellate panel.
Second, Chevron’s witness
list reads like a Who’s Who of small-time thugs, criminals, and cartoon
characters. Almost all have agreed to testify because of some combination
of bribes or intimidation coming from Chevron headquarters. While the oil
goliath has packaged this testimony for maximum effect in affidavits clearly
ghostwritten by its own lawyers (leading to a lot of slanted reporting in its
favor), under the klieg lights of trial it is doubtful that any of these people
will retain even the slightest veneer of credibility.
Exhibit A is former Ecuador
Judge Alberto Guerra Bastides, an admitted con artist who received a suitcase
full of cash from Chevron lawyer Andres Rivero in Quito in exchange for
favorable testimony.
In a deal negotiated directly by Mastro, Chevron has committed to paying
Guerra at least $326,000 or roughly ten times his annual salary. These
payments are a clear violation of the ethical rules. Given his many
credibility problems, it is unclear if Guerra will even take the stand.
If he does, he will help the Ecuadorians more than Chevron.
Exhibit B is Christopher
Bogart, the disgraced CEO of the litigation hedge fund Burford Capital.
Bogart helped to fund the legal battle of the Ecuadorian communities until Chevron
threatened to add Burford as a RICO defendant. In a panicked response,
Bogart betrayed his clients and engaged in some cowardly double-dealing with
Chevron – privately negotiating an exit from the case with Chevron’s lawyers
while supporting the Ecuadorian communities publicly. Bogart even
emailed Mastro after the Chevron RICO filing and just weeks after he funded the
Ecuadorians: “Randy – congratulations on a superbly executed
campaign!”
Bogart eventually signed an
affidavit to help Chevron where he clearly lied to the court about being
“misled” by the Patton Boggs law firm and Donziger (Bogart’s own emails, which
are nauseating to read, showed he actually believed the opposite). See
this devastating take-down
of Bogart in a court brief filed by Patton Boggs as it seeks to strike his
affidavit and impose sanctions against Chevron. It is unclear to us after
reading this brief how Bogart will ever again work in the funding business.
(If any investor out there
is thinking about Burford as an opportunity, they should read about the lack of
ethics displayed by Bogart and another Burford director, Ernest J. Getto.
Since Bogart cannot be trusted to disclose this document – it is nowhere to be
found on Burford’s website -- we have decided to post it here.)
Chevron’s other main
witnesses have been similarly discredited. It is now clear that Chevron
threatened Douglas Beltman and Ann Maest – former scientific consultants to the
Ecuadorians -- with personal bankruptcy and career destruction before they
signed affidavits that contradicted prior sworn statements under oath attesting
to the company’s responsibility for massive pollution in Ecuador. [http://thechevronpit.
Chevron’s internal
documents suggest the company is hanging itself by its own petard. When
faced with overwhelming scientific evidence of its guilt in Ecuador, Chevron
decided to launch a strategy to “demonize” Donziger to distract attention from
its own environmental crimes and fraudulent remediation. This included
using six Kroll operatives to spy on Donziger and his family in
Manhattan.
How will a jury view a big oil company that tries to cover up its atrocities by
demonizing a human rights lawyer who helped hold it accountable?
Chevron also launched a
campaign to attack the government of Ecuador and to declare war on its courts
even though Chevron fought for years to venue the case there. A memo by
Chevron consultant Sam Singer suggests the company adopt “message themes” that
would portray Ecuador as “the next major threat to America” and “as the next
Cuban missile crisis in the making.” This type of overreach
actually reflects Chevron’s level of desperation. The company’s incessant
attacks against Ecuador’s popular President, Rafael Correa, have started to
alienate almost every oil-producing nation in South America and put the
company’s business operations at further risk.
The Singer memo will not
sit well with a New York jury either. Nor will other internal documents
that show Chevron tried to bribe judges,
pay off Ecuador’s government to illegally quash the case,
or ask its employees to engage in obstruction of justice by destroying damning documents about its many oil spills in the Amazon.
Chevron’s entire strategy
with the RICO case has been to obtain a huge judgment that it can then use to
offset the enforcement actions (currently pending in Canada, Brazil, and
Argentina) where the rainforest communities are targeting company assets.
Chevron has sued Donziger and his clients for upwards of $60 billion, thought
to be the largest potential personal liability in U.S. history. Giving up
on that cannot be an easy decision.
Chevron is now caught in a
maze of its own creation. Here is Chevron’s dilemma. If it
takes the case to trial before a jury, the entire house of cards is at risk of
falling down. If it drops the damages claims to avoid a jury, any
decision by Judge Kaplan will have little or no impact. And the court of appeals is watching so
closely that Chevron simply cannot expect Kaplan to run roughshod over the
Ecuadorians and Donziger as before, even if he is allowed to stay on.
After billing Chevron
outrageous sums and making grandiose promises to the world, the pressure is now
all on Gibson Dunn. The firm’s lawyers know a jury is risky business for
a major client like Chevron with a proven record of human rights abuses and
other corrupt activities in Ecuador. See this gripping photo essay from
journalist Lou Dematteis
for a sense of the profound human devastation Chevron has caused and that
Gibson Dunn with Judge Kaplan’s help is trying to bury.
It would be a personal and
professional disaster for Mastro and Chevron General Counsel R. Hewitt Pate to
fail to deliver a verdict in the company’s favor. Watch for more furious
maneuvering by Chevron as the October trial date nears.
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