Thursday, January 9, 2014

Desperation: Chevron CEO Asked Venezuela President for Help On Ecuador

In 2014, Watson Faces Host of  Challenges As Company Tries to Evade Accountability for Toxic Dumping

With shareholder discontent over its Ecuador liability on the rise yet again, Chevron CEO John Watson is facing a new series of challenges in 2014 as the company continues its two-decade campaign to evade accountability for the toxic contamination it left in the Amazon rainforest.   One example of the company's desperation: news reports from Latin America recently disclosed that Watson pleaded in person with Venezuela’s new President, Nicolas Maduro, for help in blocking enforcement of the Ecuador judgment.

This is what the oil giant does.  It uses its political muscle to interfere in court systems around the world.  As a Chevron lobbyist told Newsweek, "We can't let little countries like Ecuador screw around with large companies."  Ecuador's Supreme Court has affirmed the judgment against Chevron.  But Watson simply ignores court decisions from Ecuador that he doesn't like while his lawyers continue their  scorched-earth campaign to avoid paying what the company owes.  For background, see this 60 Minutes segment and this video from Steven Donziger, one of the lawyers who has fought for years to hold the oil company accountable.

These are some of the colossal challenges Watson faces in 2014 because of the company's failure to pay the Ecuador judgement:

**Legal actions to enforce the Ecuador judgment against Chevron are proceeding in Canada, Argentina, Brazil, and Ecuador.  These actions can no longer can be pushed under the rug by the company. Just last month, a Canadian appellate court green-lighted an enforcement proceeding that puts an estimated $15 in Chevron assets in play; Chevron’s defense brief is due later this month.  The Canadian court also openly derided Chevron’s two-decade effort to challenge jurisdiction in three different countries. 

** Canada is now considered one of the most strategically important oil producers in the world, with the third largest proven reserves.  If the Ecuadorian villagers prevail in what is widely seen as one of the world’s most reputable judicial systems – one that, unlike the U.S., is not the product of constant political warring -- they can collect the entirety of their $9.5 billion judgment and begin a long-awaited clean-up.

**On the shareholder front, Watson is likely to face a firestorm over Chevron's Ecuador quagmire.  Displeasure over his $32 million compensation package is at an all-time high.   Prominent shareholders – including the New York state comptroller – are backing resolutions related to the Ecuador case that directly challenge Watson’s stewardship.  One calls for the separation of the CEO and Chairman positions; another calls for the appointment of a Board member with environmental expertise.  In 2011, these resolutions garnered a whopping 38% of shareholder support.

Copies of the three resolutions related to Chevron that will be voted on at the 2014 annual meeting in May are
 here, here and here.   Background on Chevron’s shareholder dissent can be read here

**Watson has become so nervous about the fallout from the Ecuador judgment in Latin American that he personally asked Venezuela President Maduro for help during a recent visit to that country, according to media reports.   Watson must shudder at the thought of an enforcement action against Chevron in the oil-rich country, which has the largest proven reserves in the world.  Any action against Chevron by Venezuela’s courts could have a massive impact on the company’s prospects.  It also could lead to huge problems for Watson and R. Hewitt Pate, Chevron's General Counsel and the mastermind behind the company's exorbitantly expensive ($400 million per year) legal strategy.

**Another way to understand why Watson visited Venezuela is that Ecuador President Rafael Correa is waging diplomatic war against Chevron in Latin America.  Chevron's lobbying effort in Washington to cut off U.S. trade preferences to Ecuador could cost the small country 300,000 jobs.  Correa has called Chevron’s campaign against Ecuador “criminal” and has vowed to defend his country's sovereignty.  Chevron's bullying tactics hardly endear itself to the people of the region.  Correa, who polls show is South America’s most admired leader, has launched the anti-Chevron offensive through ALBA, a regional body that includes Venezuela, Brazil, Bolivia and Argentina.   

**Citizen committees in solidarity with the Ecuadorian villagers have sprouted up in several countries (like Venezuela and France) in response to Chevron’s abominable behavior.   A recent report by famed Argentina journalist Jorge Lanata has spread firsthand proof through Latin America of Chevron’s environmental crimes in Ecuador.   A huge new Chevron investment in Argentina’s gas fields is being hampered by grass roots support for efforts to enforce the Ecuador liability in that country, according to local news reports and 

 The New York Times.  

**In Ecuador, the country’s Supreme Court in November issued a 222-page decision that unanimously affirmed an intermediate appellate court decision in favor of the villagers.  The judgment is now final and ironclad, which opens up the possibility of enforcement actions being filed in yet more jurisdictions.  The court rejected each element of Chevron’s fake narrative that it was the victim of an “extortion” plot by the villagers, who suffer from high cancer rates and other diseases due to Chevron’s sub-standard operational practices.    See these photos on the Huffington Post to get a sense of the human impact on the people Chevron claims are trying to extort money from the company.

**Chevron is now openly conceding in legal papers that it faces enormous risk to its operations from the Ecuador case.   In a recent filing in New York, Chevron admitted that the seizure of the company’s trademarks in Ecuador is “causing millions of dollars of harm to Chevron” and that the Ecuadorian villagers have “injured Chevron is both calculable and incalculable ways” by winning their case. Yet the company has continually failed to disclose these monumental risks to shareholders in its public filings, prompting calls by a group of shareholders and a U.S. Congresswoman for an SEC investigation of the company.

**Aside from Venezuela, another game changer for Chevron is that an Ecuador court recently froze $96 million in cash owed the company from Ecuador’s government from an international arbitration decision.  If these funds are recovered by the villagers, one of Chevron’s main tactical advantages – superior resources – will be significantly mitigated. The villagers will then be able to expand and redouble their legal efforts to force Chevron to clean up its toxic waste.

**The backlash against Chevron for its fugitive-like behavior and aggressive counterattack strategy has begun to take shape.  Just last week numerous environmental and human rights organizations, including Amazon Watch and the Sierra Club, slammed the company in an open letter for using the legal system to try to intimidate and silence its critics.  An announcement that several more prominent civil society organizations have signed is expected soon.

**Chevron’s retaliatory RICO case in New York remains a trial to nowhere, while outraging civil society organizations and public interest groups.  (For a great summary of the trial, see this recent blog  from the Huffington Post.)  After being helped along by an activist judge who seems to despise the concept of tribal leaders suing an American company in their own courts, Chevron lost credibility when it suddenly dropped all damages claims on the eve of trial to avoid a jury.  On the legal front, Chevron's case faces enormous obstacles and is highly unlikely to survive appeal.  The remedy sought by Chevron – an injunction from a U.S. court preventing enforcement of a foreign court judgment – already has been declared illegal by a federal appeals court and produced scorn from legal scholars worldwide.

Chevron has a track record of bribing witnesses for favorable testimony , trying to pay off Ecuadorian government officials to quash the case, trying to entrap a judge in a video scandal, spiriting its own employees out of Ecuador to avoid criminal prosecution, trying to threaten Ecuadorian judges with jail time if they did not rule in the company’s favor , trying to pay journalists to spy on the villagers, using 180 agents from Kroll to spy on adversary counsel, breaking promises to U.S. courts that it would pay the Ecuador judgment, and having top officials like Sylvia Garrigo claim on camera that the company does not believe it should be in court at all over the Ecuador contamination.

The Ecuador-related problems faced by Watson are largely of his own making.  The company has invested an estimated $2 billion to beat back the Ecuador judgment.  It has used 60 law firms, 12 investigative firms, and dozens of lobbyists and public relations firms to try to intimidate its critics.  And it has done so for years and years.

Only two weeks into 2014, Chevron’s grand strategy to avoid paying for a cleanup of its contamination in Ecuador is fraying at the edges.  Its “lifetime of litigation” strategy is sputtering.  Days after the closing arguments in the RICO trial— with no remedy even if the company wins — a court in Ontario gave the Ecuadorians an early Christmas present.

Ontario Court of Appeal Justice James C. MacPherson wrote:

Even before the Ecuadorian judgment was released, Chevron, speaking through a spokesman, stated that Chevron intended to contest the judgment if Chevron lost.  He said: ‘We’re going to fight this until hell freezes over.  And then we’ll fight it out on the ice.’

Chevron’s wish is granted.  After all these years, the Ecuadorian plaintiffs deserve to have the recognition and enforcement of the Ecuadorian judgment heard on the merits in an appropriate jurisdiction.  At this juncture, Ontario is that jurisdiction.
This is shaping up to be a perilous year indeed for Watson and his management team.   The deep freeze and long winter north of the border does not bode well for Chevron's fight on the ice to block enforcement.  The odds favor the villagers.

For background on Chevron’s contamination, see this video, this summary of the evidence against the company, and this video from Steven Donziger, a longtime lawyer for the Ecuadorians and the principal target of Chevron’s retaliation campaign.