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| R. Hewitt Pate | Randy Mastro |
Chevron's management team, led by new CEO Michael Wirth and longtime General Counsel R. Hewitt Pate, faces deepening problems in Canada as Ecuadorian indigenous peoples and farmer communities continue what is fast becoming a very realistic campaign to seize company assets to collect on their historic $12b pollution judgment.
Clear indications of Chevron's deteriorating litigation position: many Chevron shareholders are expressing deep anxiety about the company's scorched-earth approach when dealing with indigenous peoples. In the meantime, Canadian courts continue to rule in favor of the villagers and against Chevron on several critical issues.
This press release from the Front for the Defense of the Amazon ("FDA") -- the community-based group in Ecuador's rainforest that brought the claims against Chevron in 1993 and has led the campaign to hold the company accountable -- captures some of the recent developments. But there is much more to suggest Chevron's management team is under bone-crushing pressure on Ecuador and that it might get even worse.
That management team -- including Pate, the architect of the company's scorched-earth litigation policy since 2009 -- have spent (or squandered) huge sums of shareholder funds to hire 60 law firms and 2,000 lawyers to try to beat back the indigenous groups and farmer communities. The Chevron effort has been led by the Gibson Dunn law firm. Gibson Dunn has used hundreds of lawyers to bill Chevron an estimated $1 billion over the last five years.
These Chevron expenditures, as large as they are, now appear to be largely for naught. The company surely thought they would be enough to kill off the claims. But what is arguably the world's most important corporate accountability campaign and indigenous rights litigation continues to pick up steam.
Consider:
**Chevron's RICO Judgment Is Backfiring: The Ecuadorians won their historic judgment against Chevron in 2011 after Chevron insisted the trial be held in Ecuador and accepted jurisdiction there. But Chevron's high-water mark in the case took place in 2014 when controversial U.S. judge Lewis A. Kaplan presided over a farcical non-jury civil "racketeering" (known as "RICO") trial financed by Chevron and designed -- in clear violation of international law -- to attack the Ecuador judgment from the company's hometown court. Chevron's case was led by Randy Mastro, a notoriously nasty lawyer from Gibson Dunn who once fanned the flames of racial discord in the early 1990s for right-wing New York City Mayor Rudy Giuliani.
It is now undeniable that Kaplan's ruling for Chevron was the product of the company's fabricated evidence and paid-for witness testimony, a fact which earned Chevron and Mastro a criminal referral letter to the U.S. Department of Justice -- something the company has yet to disclose to shareholders. A RICO judgment that the company once thought was its best defense has now arguably become one of its worst liabilities. And Pate, who is up to his neck in financing this Gibson Dunn-led corruption, is shockingly still using the ethically-challenged Mastro as the company's lead lawyer on the case.
How effective has the Pate/Mastro alliance been? At least 21 appellate judges in Ecuador and Canada have rejected or ignored the Kaplan RICO ruling, including the entire Supreme Courts of both countries which issued separate unanimous decisions in favor of the villagers affirming all or parts of the underlying judgment. These decisions have rendered Kaplan's judgment a nullity for purposes of blocking enforcement. Let's not forget that Pate's entire objective in bringing the RICO case was to block enforcement of the Ecuador judgment. (For a full explanation of Chevron's corruption of the RICO case, see this report.)
**Canadian Courts Have Little Love For Chevron: Chevron's litigation position in Canada is faltering despite having hired four of the country's best law firms on top of the 60 law firms Chevron hired in the U.S. The Canada Supreme Court in 2015 unanimously rejected Chevron's attempt to block the villagers from collecting company assets on jurisdictional grounds. The Ontario Court of Appeal also ruled against Chevron twice, including on a preposterous attempt by Pate to impose a $1 million costs order on the impoverished villagers. Chevron also faces a possible major tax fraud issue in Canada involving the transfer of billions of dollars from its subsidiary to the governments of Nigeria and Indonesia, which will do little to endear it to authorities or the public.
Chevron is now hurtling toward an enforcement trial in Toronto where its "RICO" evidence risks a humiliating collapse in front of shareholders and the public. Canadian judges are attuned to indigenous rights and human rights issues in ways that U.S. judges are not, creating a hostile litigation environment for a company responsible for toxic dumping on the ancestral lands of First Nation's groups.
Making matters worse for Chevron, the FDA has attracted extremely competent support, including well-known commercial litigator Alan Lenczner, renowned aboriginal rights lawyer Peter Grant, former National Chief Phil Fontaine (of Canada's Assembly of First Nations), Grand Chief Ed John, and Greenpeace co-founder Rex Weyler. (See here for comments by Fontaine and John and here for Weyler accusing Chevron of committing "ecological crimes" in Ecuador.)
**Chevron's Defense In Canada Rests On A Thin Reed: Chevron's defense in Canada is now down to a very thin reed. The company will claim in a hearing before the Ontario Court of Appeal scheduled for April 17 that its wholly-owned Canadian subsidiary, Chevron Canada, should be immunized from asset collection. The goal is impunity for corporate human rights abuses.
Since Chevron Canada purports to control all of Chevron's assets in the country, if the Canadian court agrees with Chevron then indigenous groups in Ecuador likely will not collect a single dollar on their judgment. Given the extent to which indigenous groups and vulnerable peoples across the planet will suffer from corporate harms if Chevron's extreme argument becomes law, it is highly unlikely Canadian judges will agree. Chevron's position is just legally and practically untenable in the modern world of globalized commerce.
**Shareholders Angry With Chevron Management: Key Chevron shareholders are again taking note of the increasing risk in Canada. The U.S. firms Zevin Asset Management and Newground Investment have led the fight to hold company management accountable for its "material mishandling" of the case. Last year, two resolutions related to the Ecuador liability received substantial support despite being opposed by management.
Even more shareholders -- including the pension fund from Vermont -- are backing the resolutions this year, where they are likely to garner even more support while indigenous leaders from the rainforest plan to confront CEO Wirth face to face. Shareholders with an estimated $500 billion of assets have urged company management to look for a settlement.
**Chevron's Attacks On Human Rights Defenders Suggest Desperation: When Chevron begins to lose ground in court, it often tries to distract attention by attacking the lawyers for the Ecuadorians. Those attacks are a good barometer of how desperate company management feels at any given time. In recent weeks, as the company's litigation prospects dim, Chevron has renewed its attacks on U.S. human rights defender Steven R. Donziger, the only lawyer still working on the case who helped to launch the original litigation in 1993. Chevron earlier conceded in an internal email that its long-term strategy was to "demonize" Donziger.
In yet another sign of anxiety, Pate recently ordered Mastro to go back to Judge Kaplan (four years after the end of the RICO case) to try to block Donziger's ongoing efforts to help his clients finance the enforcement litigations. Chevron is trying to claim Donziger should be held in "contempt" for doing his job as a lawyer, which includes ensuring his clients have sufficient resources to pursue their human rights claims in the face of Chevron's attack campaign. Pate's latest move is nothing more than a ruse to try to intimidate supporters of the communities. Chevron once sued more than 100 bloggers, journalists, and activists who have in some way helped the affected communities.
Chevron also has mounted some bizarre attacks on Alan Lenczner and Peter Grant, the two prominent Canadian lawyers representing the Ecuadorians. Chevron is trying to block Grant from arguing the case within the framework of indigenous rights. The company also baselessly accused Lenczner of violating a ridiculously over-broad confidentiality order it imposed on the litigation to try to hide its own bad news from the media and the public.
**Chevron's Lack of Public Disclosure of Its Ecuador Risk: Chevron is also lying again to shareholders. Although we will explain this in more detail in a future blog, the company's response to the Ecuador lawsuit in its public disclosures to the Securities and Exchange Commission -- which regulates public markets in the U.S. -- is, to put it mildly, extremely misleading.
Chevron in its disclosures does not explain how its RICO judgment has collapsed or is the product of its own fraud, as orchestrated by the Gibson Dunn firm; that certain company officials and outside lawyers are the subject of a criminal referral letter for fabricating evidence; that the company faces a humiliating trial in Canada; that appellate courts in Ecuador and Canada have consistently ruled against Chevron; or that company officials appear to be selling off their Canadian assets, possibly to evade the ongoing liability to the people of Ecuador. U.S. and Canadian authorities have every obligation to investigate these evasive actions.
There is little doubt that new Chevron CEO Wirth inherited a litigation disaster when he assumed leadership of the company in February. The question is whether Wirth has the good sense to try to clean it up. To do so, the obvious first move is to muzzle Mastro and find a more reasonable General Counsel to take over from Pate. Wirth also needs to explore an exit strategy before the company's business problems in Canada grow even worse and more indigenous peoples die from cancer in Ecuador in the area where Chevron abandoned and refused to properly remediate 1,000 unlined toxic waste pits.
When it comes to the Ecuador matter, Chevron's litigation department is like a crack addict on a trip gone seriously awry. Each short-term high only leads to a greater desire for another which leads to an unpleasant downward cycle of massive spending producing ever-diminishing returns. This irritates shareholders, harms indigenous peoples, discourages governments from doing business with Chevron, and creates enormous reputational risks. Throw in Chevron's lack of responsiveness to global warming and one sees a business model that is simply not sustainable over the long haul.
In the meantime, Mastro and other lawyers at Gibson Dunn buy new vacation homes and live high off the company's hog of litigation stupidity. Pate receives $8 million in annual bonuses for architecting a failed strategy. Chevron's CEO gets yelled at by indigenous peoples at the annual meeting.
It is clear that the Pate/Mastro gig is almost up. The question is whether Wirth recognizes it.
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| Oil waste pit left by Chevron in Ecuador |