Chevron Should Be Booted From Transparency Initiative Over Corruption Concerns, Say Civil Society Groups

Several civil society groups, including London-based Global Witness and Oxfam America, are seeking to boot Chevron from the board of a major international transparency initiative designed to combat oil industry corruption. This seems like a long overdue step for what has to be one of the most morally bankrupt oil companies on earth. Readers of the Pit might remember that in 2015 in Davos, Chevron won the Public Eye Award for being the world's worst corporation over its Ecuador environmental disaster.

Chevron is now well into its seventh year of trying to stiff Ecuadorian indigenous peoples and farmer communities out of their $12 billion environmental judgment, won in 2011 after an 8-year trial delayed repeatedly by the company's strategy of subterfuge. Three layers of courts in Ecuador, where Chevron had insisted the trial be held, found the company deliberately dumped billions of gallons of toxic oil waste onto rainforest ancestral lands and abandoned roughly 1,000 open-air toxic waste pits prior to fleeing the country in 1992. (See here for the overwhelming evidence of what is now considered the world's worst oil-related environmental disaster.) 

The very idea that Chevron -- which later fabricated evidence and bribed a witness with $2 million to try to evade its liability to the people of Ecuador -- could be leading any type of anti-corruption initiative is laughable.

Chevron faces this backlash in part because of its refusal to disclose tax payments in compliance with the standards of the Extractive Industries Transparency Initiative (EITI), which was founded in 2003 with the backing of the British government to root out corruption in the oil industry. The EITI has created model anti-corruption laws now adopted by 51 countries (including Canada) that require oil, gas, and mining companies to disclose any payments to foreign governments. 

The U.S. Congress passed the EITI standards into law in 2010 as part of Dodd-Frank, but Chevron for years has worked with industry lobbyists to block the rules required for implementation. Now that the Trump Administration is doing the oil industry's bidding, the EITI rules opposed by Chevron and the American Petroleum Institute are all but dead in the United States. Several American oil companies still comply voluntarily with the rules, but not Chevron or Exxon.

Chevron and Exxon sought to weaken the transparency rules while serving on the Board of the EITI and professing to support them. They then cynically blamed the absence of a rule in the U.S. whose implementation they blocked for their own failure to comply with the EITI standards. 

Here's what 12 civil society leaders from around the world wrote in seeking to boot Chevron (and Exxon) from the EITI Board:

"We urge that the ... EITI Board meeting include a discussion about the refusal of ExxonMobil and Chevron to disclose their tax payments through the terms of implementation of the EITI Standard in the United States. We believe strongly that the refusal to engage in the most basic aspect of compliance constitutes a repeated and willful violation of the EITI Code of Conduct ... and an act of bad faith that is counter to the spirit of the EITI movement itself. These actions not only contributed to the demise of the U.S. EITI process, but damaged the credibility of the EITI both in practice and in the eyes of the global community.

Here is the full letter.

Our advice to the EITI: given Chevron's horrendous record of toxic dumping in Ecuador and its burgeoning tax problems in Australia, the company never should have been part of the EITI leadership to begin with. That's like putting the arsonist in charge of the firehouse.

We at the Chevron Pit know that abusive and hypocritical behavior is deeply rooted in Chevron's management culture. Company officials like General Counsel R. Hewitt Pate actually receive large bonuses for committing corrupt acts against the Ecuadorians and then losing legal cases against them based on the evidence. CEO John Watson had five shareholders who criticized his Ecuador policy arrested at the 2010 annual meeting. Pate in 2013 also served subpoenas on more than 100 civil society advocates, journalists, and activists who were trying to help the Ecuadorian communities.

Last year, Chevron was slammed with a $1 billion fine in Australia for ripping off the company's tax authorities. Chevron had set up a tax-avoidance scheme whereby a Chevron subsidiary in Delaware loaned money at exorbitant interest to a Chevron subsidiary in Australia. Payments on the loans from the Australian subsidiary to the Delaware subsidiary then "disappeared" the company's sizable Australian profits. This enabled Chevron to avoid taxes in Australia entirely even though it made billions of dollars annually from its operations in the country.

In the Ecuador pollution case, Chevron desperately wanted the litigation over its toxic dumping in the Amazon heard in Ecuador even though the villagers originally sought relief in U.S. courts. That was, until it started to lose the case and began attacking Ecuador's courts while selling off all of its assets in the country to evade any eventual liability. A Chevron official recently threatened the Ecuadorian indigenous peoples with a "lifetime of litigation" if they continued to pursue their claims. That forced the villagers into Canadian courts where they are trying to seize some of the company's estimated $15 billion worth of assets in the country to force compliance with their judgment.

Even with these intimidation tactics, it is becoming apparent that Chevron is losing the enforcement action in Canada despite deceitfully trying to downplay the risk in its public filings. Journalists in the industry are recognizing Chevron is in serious trouble. (See here.) Appellate courts in Canada have delivered three straight unanimous decisions in favor of the villagers. Now, the Canadian public is beginning to see how Chevron can be a very ungrateful guest when it comes to respecting tax laws.

This is highly relevant after Chevron recently disclosed that its wholly-owned 7th-tier subsidiary in Canada (Chevron Canada) was funneling billions of dollars annually to the governments of Nigeria and Indonesia. Not only are these payments from a low-level foreign subsidiary to foreign governments highly suspicious from a corruption standpoint, they undercut Chevron's legal argument in the enforcement case that the assets of its Canadian subsidiary should be off-limits to the villagers given that it is only a Canadian company. A critical legal argument on that issue is scheduled for April 17-18 in Toronto.

Chevron's disingenuous claim that its shareholders should be allowed to reap huge profits from Chevron Canada while its assets should be immunized from any liabilities has never held much water legally. But we can thank EITI for requiring the rather stunning Chevron disclosure that Chevron Canada is not what the company had claimed, but is in fact at the epicenter of a global profit-making machine that spreads into Asia and Africa.

Canadian tax authorities and the U.S. Department of Justice -- which already has a criminal referral letter about Chevron over the Ecuador pollution case -- might want to find out just why Chevron is sending huge payments via a 7th-tier subsidiary in Canada to foreign governments that are themselves known for tolerating and even encouraging corruption.

These are not the only problems faced by Chevron over the Ecuador pollution matter.

Chevron's main defense to enforcement in Canada is a retaliatory U.S.-based "racketeering" case attacking the villagers that supposedly found "fraud" in Ecuador's courts. But that case -- handled by a woefully biased U.S. judge who refused to seat a jury -- has collapsed after it turned out company lawyers at the Gibson Dunn law firm paid a Chevron witness to lie on the stand, among other problems. No fewer than 21 appellate judges in Ecuador and Canada, including the Supreme Courts of both countries, have either rejected or ignored those findings. (For more detail about Chevron's corrupt and even criminal acts in that U.S. case, see this excellent analysis by human rights lawyer Aaron Page and this analysis by Marissa Vahlsing of Earth Rights International.)

Chevron scientists recently were caught on video trying to defraud the Ecuador court by trying to hide evidence of the company's pollution. Chevron also cheated during the Ecuador trial by using a wholly inappropriate laboratory test (called TCLP) designed to "miss" any trace of toxins in its soil samples that were submitted to the court. (See here for more of Chevron's junk science.) Company lawyers threatened Ecuadorian judges with jail time and once filed 39 motions in 50 minutes to paralyze the proceeding, which took eight long years while untold numbers of people died of oil-related diseases. (See this story on the cancer death of legendary nurse Rosa Moreno). 

Aside from its EITI problems, Chevron is also under real heat from its own shareholders.  Several have criticized management's "material mishandling" of the Ecuador litigation. Chevron is also under fire for its toxic dumping in Ecuador from the leadership of the Assembly of First Nations, the national indigenous federation in Canada which represents 634 nationalities in the country. Greenpeace co-founder Rex Weyler accused Chevron of committing "ecological crimes" in Ecuador after touring the impacted area last year.

It is clear is that Chevron does not deserve to be on the Board of the EITI or any anti-corruption initiative given its pattern of truly savage behavior toward the people of Ecuador and the shroud of secrecy it maintains over its operations. Interestingly, just days ago the Canadian Broadcasting Company and activist groups (including Friends of the Earth and Amazon Watch) filed motions in Canada to lift Chevron's completely over-broad confidentiality in the enforcement case brought by the Ecuadorians. Chevron imposed that order to hide huge chunks of what must be a very embarrassing court record.

That court record apparently includes details from a recent deposition of a Chevron Canada official by a lawyer for the Ecuadorians. The official likely was asked why a 7th-tier wholly-owned subsidiary that Chevron claims should not be responsible for paying court-ordered compensation to the people of Ecuador is instead paying billions of dollars to foreign governments on the other side of the world. 

Chevron should be booted from the EITI Board and Canadian courts should lift the secrecy order post haste from this important public interest litigation. Courts need to shine a bright light on a company that appears to be in a class by itself when it comes to disrespecting indigenous groups and using corrupt tactics to evade its legal obligations. More public scrutiny -- both in and out of court -- is absolutely critical to ensure real accountability for Chevron in the Ecuador litigation.