$19B Ecuador Liability Puts Chevron CEO Watson On Hot Seat Before Annual Meeting

Amazon Watch has issued this press release (see below) about Chevron's upcoming shareholder's meeting and the heat CEO and Chairman of the Board John Watson will take from activist shareholders about the Ecuador liability.

OAKLAND, Calif., May 14 /CSRwire/ - Facing growing shareholder unrest over asset seizure actions and forced to testify about his alleged misconduct in the $19 billon Ecuador case, Chevron CEO John Watson again will be on the hot seat at the company’s annual meeting in late May where rainforest indigenous villagers and investors plan to confront him over his company’s toxic dumping in the Amazon.

In a stunning rebuke to Watson, U.S. Magistrate Judge James C. Francis last week ordered that he and another top Chevron legal official sit for depositions to be taken by lawyers for the villagers and one of their representatives, New York-based attorney Steven Donziger. (See the judicial order hereand a Reuters article here.) Watson likely will have to answer questions about his own role in the case, including payments from Chevron officials for witness testimony, among other hot-button topics that the villagers say prove Chevron committed crimes in Ecuador.

The depositions had been furiously opposed by Chevron’s lawyers at Gibson Dunn & Crutcher, who are facing their own ethical challenges in defending the oil giant’s toxic dumping in Ecuador. (See this court ruling and this blog.)

At the Chevron annual meeting, scheduled for May 29 at company headquarters near San Francisco, Watson also will try to beat back two shareholder resolutions that directly challenge his mishandling of the Ecuador liability. Currently, Chevron faces enforcement actions targeting billions of company assets in Argentina, Canada and Brazil (see here for Canada, here for Brazil, and here for Argentina) and has suffered a series of devastating courtroom setbacks, including one in the U.S. Supreme Court, which prevented the oil giant from using U.S. courts to block international enforcement efforts.

The Financial Times reported just this week that Chevron was forced to “rethink” a planned $1.5 billion investment in a huge gas field in Argentina because of the enforcement action stemming from the Ecuador judgment. Earlier, a Chevron official has testified that the enforcement actions could cause “irreparable harm” to the company’s global operations.

The enforcement actions stem from an Ecuador court finding that Chevron dumped billions of gallons of toxic waste into the Amazon rainforest, decimating indigenous groups and causing an outbreak of cancer and other oil-related diseases. A summary of the judgment, based on a 220,000 page trial record and more than 64,000 chemical sampling results, can be found here.

A video about Chevron’s human rights abuses in Ecuador can be viewed here while a 60 Minutes report on the legal battle – which documents how Chevron installed pipes to deliberately run oil sludge into streams – can be viewed here.

Watson also is under fire for subpoenaing the files of several shareholder critics and alleging they are in a “conspiracy” with the Ecuadorian villagers who won the judgment against the company.New York Times columnist Gretchen Morgenson called the Chevron counterattack against its own investors “remarkable” in the annals of shareholder activism. (See Morgenson's article here.)

Last year, a resolution critical of Chevron management for the Ecuador liability received a whopping 38% of the vote from shareholders representing a combined $73 billion worth of Chevron stock. In addition, 40 institutional investors representing $580 billion in assets sent Watson a letter asking him to settle the case.

This year, the two shareholder resolutions that cite the Ecuador liability as a driving factor call for Chevron to appoint a director with environmental expertise and to lower the threshold needed to hold a special meeting.

Watson also faces these additional problems related to the Ecuador liability:

**Conflict of interest. Shareholders and activists say Watson should step down as Chevron CEO because of his failure to properly vet the Ecuador liability when the company purchased Texaco for $31 billion in 2001. Watson was a key driver behind the controversial transaction even though Amazon Watch specifically warned the company about the size of the liability.

**Deceit of shareholders. Watson also has been accused of lying to shareholders and the markets about key facts in the case, according to a recent report prepared by a Canadian securities lawyer. Several shareholders and a U.S. Congresswoman have asked the SEC to investigate Chevron for violating its disclosure obligations under U.S. law.

**Use of Kroll to spy on Chevron adversaries. The order from Judge Francis also requires that an official from the U.S. investigative services company Kroll, which essentially functions as a private surveillance agency for Chevron on the Ecuador case, sit for a deposition. Kroll operative San Anson was caught trying to bribe journalists to spy on the plaintiffs, while evidence surfaced the company has been involved in payments to judges in Ecuador and espionage against Donziger and his family, who live in Manhattan.

**Cash for witness testimony. Under Watson’s leadership, Chevron used Miami lawyer Andres Rivero to offer a suitcase full of cash to a former Ecuador judge in exchange for favorable testimony. Chevron later admitted it paid the judge more than ten times his annual salary and moved him to the U.S., where it is helping him obtain political asylum even though he is an admitted criminal.

**The Diego Borja bribery scandal. Under Watson’s tenure, Chevron admitted that it paid former employee Diego Borja more than $2 million to try to sabotage the Ecuador trial by entrapping a sitting judge in a fake bribery scandal. The move backfired, but the company still moved Borja to the U.S., where it pays him a substantial salary – the plaintiffs call it “hush money” – with no indication he is working.

As for enforcement actions, Watson faces a series of growing headaches.

In early November, a court in Argentina ordered that the company's assets be frozen while independent analysts are beginning to take notice that Chevron faces significant litigation problems around the world related to the Ecuador judgment. Chevron has $2 billion worth of assets in Argentina, and approximately $80 million of in cash is already in a court escrow account pending resolution of the enforcement action.

While Chevron recently won a temporary stay of the enforcement action in Canada on narrow technical grounds, the court found that the Ecuadorians established jurisdiction over Chevron subsidiaries that control roughly $15 billion worth of assets. The stay is now on appeal, with a decision expected in a few months.

In Brazil, where Chevron has an estimated $4 billion in assets, the Ecuador enforcement action is going through a streamlined process in the country’s highest court, with a ruling expected sometime in 2014. Chevron also faces a lawsuit from Brazilian authorities over its spill off the coast of Rio de Janeiro in 2011.

On a more personal level, the indigenous communities in Ecuador plan to confront Watson directly at the annual meeting. In past years, Watson has turned off the microphones of the Ecuadorians to silence them.

“Chevron needs to put its pants on, start acting like a grown up and accept responsibility for its mess in Ecuador,” Watson was told last year by Luz Trinidad Andrea Cusangua, an Ecuadorian who traveled from the rainforest to speak at the 2012 annual meeting.

Two years ago, Chevron’s annual meeting in Houston erupted in chaos when five shareholder critics were arrested as they confronted the company about its human rights abuses in Ecuador. At the time, Watson was accused of "losing his head" over the Ecuador case by Rainforest Action Network’s, Maria Ramos. Last year, he prevented two villagers from showing a video of the company’s damage to their ancestral lands. Chevron security officials also blocked them from passing out copies of the video to shareholders.

“Since becoming CEO Watson has led Chevron further down a dismal path – one where its international reputation is that of a corporate criminal on the run from justice,” said Paul Paz y Miño, a director at Amazon Watch, which has been monitoring the Ecuador liability for a decade.

“At any other company with an independent Board of Directors that adhered to proper ethical standards, Watson probably would have been fired by now,” added Paz y Miño.

For more background on the case, see this update prepared by Fenton Communications.

For more information, please contact:

Matt Krack

Twitter: @ChevronPit

Become a follower of  The Chevron Pit.

Follow us on Twitter at @ChevronPit and like us on Facebook.

Visit and watch a video on ChevronToxico.com to find out more.
Support Amazon Watch and Rainforest Action Network.

---

Read More

A Race For Time? Chevron Desperate to Extort Its Way Out of Paying $19 Billion Ecuador Judgment

An Argentine newspaper La Nacion reported that Chevron is in a "race for time" to convince a court in Argentina to lift a freeze of its assets as payment of the $19 billion judgment for oil contamination in the Ecuador rainforest. Chevron is trying to scare Argentina government officials by saying its subsidiaries there will go bankrupt and, as a result, have to close down its operations unless, of course, the government pressures the courts to unfreeze their assets. Or, in other words, extortion: If you don't tell your courts how to rule, we'll shut down our investments.

Meanwhile, back in the United States, Chevron has filed an ethics complaint against New York State Comptroller Tom DiNapoli, who has had the courage to stand up to Chevron and question its misconduct in Ecuador and its use of shareholder funds in regard to the historic, long-running lawsuit. 

Interestingly, Chevron is filing the complaint more than two years after obtaining emails that the oil giant falsely bases its complaint on. Why did Chevron wait so long? If it's so concerned about ethics, why not two years ago? Or one year ago? Do you think it might have anything to do with Argentina, Brazil and Canada, where lawsuits have recently been filed to seize company assets as payment for the judgment?

They have tried and failed to get U.S. courts to stop enforcement of the judgment.

They have tired and failed to get negative press coverage in these three countries to pressure their governments and courts to stop enforcement.

Maybe the Albany, NY press corps will come to Chevron's defense.

But, wait, this article basically says the complaint against DiNapoli is a lot of nothing.

Read the press release below for more details about Argentina:

Chevron Threatens to Shut Down Argentina Operations Over Ecuador Lawsuit

Buenos Aires, Argentina – In a clear effort to apply political pressure to judges, Chevron is threatening to bankrupt the company’s subsidiaries in Argentina unless an asset freeze order issued against $2 billion of the oil giant’s assets is lifted, according to news reports. 

The order was imposed last week because Chevron refuses to pay a $19 billion judgment in Ecuador for systematically dumping toxic waste into the streams and rivers of the rainforest, decimating indigenous groups and causing an outbreak of cancer. 

For background on the overwhelming evidence against Chevron in Ecuador, see HERE; a video on the case can be seen HERE.

La Nacion, a leading newspaper in Argentina, is reporting  that desperate Chevron executives are giving Argentina’s national government until December to force a court to reverse the freeze order before facing “operational problems” that could shut down two subsidiaries that produce an estimated $600 million in revenue annually for the parent company.

The newspaper reported that “a host of Chevron lawyers and executives in Miami were analyzing alternatives in a race against time” given that they expect funds to run out in several weeks – a prospect that the plaintiffs in the case call a “manufactured scare tactic” designed to apply pressure to Argentina’s courts.

Representatives of indigenous rainforest villagers in Ecuador had little sympathy for the company, calling Chevron’s threats another example of “improper political pressure” used to avoid being held accountable under the law.

“Chevron has been running from the law for years in Ecuador, where out of pure greed it deliberately created what is probably the world’s worst oil contamination,” said Graham Erion, a Canadian lawyer advising the rainforest communities.  “It is not surprising that the company’s illegal behavior is finally catching up to it.

“The pollution Chevron intentionally caused in Ecuador is an assault on all of Latin America,” he added. “Chevron would never commit such atrocities in its own country.”

The Argentina embargo prohibits Chevron from disposing of any interests in concessions, pipelines, or other projects without the court’s consent and diverts 40 per cent of the company’s annual revenue to an escrow account controlled by the court.  The court chose to garnish less than half of the revenue to allow Chevron’s subsidiaries to operate with flexibility, said Erion.

Chevron also was planning to invest $1.8 billion over the next three years in Argentina to build 120 new oil wells, and was exploring an investment in a huge oil shale project called Vaca Muerta.

“The threat by Chevron CEO John Watson to pull out of Argentina endangers the company’s interests in a country that should be a key driver of future growth in the region,” said Karen Hinton, U.S. spokesperson for the rainforest communities in Ecuador. “This is not in the interests of Chevron shareholders.”

Chevron’s woes in Argentina were compounded this week when Spain’s Repsol oil company sued the oil giant in Spain on the grounds that  it was trying to profit from operations that had been expropriated by Argentina’s government.

Reports out of Argentina were quick to show that Chevron has already begun to lobby furiously for an extra-judicial solution. 

La Nacion reported that the governor of the oil rich province of Neuquén publicly stated that he hopes Chevron succeeds in fighting the embargo, which was imposed pursuant to an international treaty in Latin America that allows for the reciprocal recognition of foreign judgments. 

Chevron’s attempts to enlist political allies in Argentina are directly out of the oil giant’s playbook, with documented  attempts to bribe Ecuadorian government officials, use the U.S. embassy in Quito to undermine the case, and lobby the U.S. government to cut Ecuador’s trade preferences for refusing to intervene in the case.  

Pablo Fajardo, the lead Ecuadorian lawyer for the affected communities, told La Nacion that Chevron is trying to “extort” Argentina.

“Chevron has options,” he said. “You can pay the judgment or offer bail in Argentina bail to replace the embargo. It seems that Chevron intends to act outside the law and is choosing to attempt to extort Argentina. If the company suspended its operation, it is demonstrating that it is only interested in working when it has impunity."

One of the consequences of the freeze order is that any future investments Chevron makes in Argentina will also be subject to seizure, up to the full amount of the $19 billion Ecuador judgment.

Chevron also faces asset seizure actions over the Ecuador judgment in Brazil , Canada, and Ecuador. 

Become a follower of The Chevron Pit.
Also follow us on Twitter at @ChevronPit and like us on Facebook.

Visit and watch a video on ChevronToxico.com to find out more.

Support Amazon Watch and Rainforest Action Network.

Read More

Chevron Lawyer Hew Pate Earned $7.8 Million for Losing $18 Billion Ecuador Case

Chevron's Board of Directors recently awarded its General Counsel R. Hewitt Pate a 75% raise -- bringing his 2011 salary to a whopping $7.8 million -- for losing the landmark $18 billion environmental lawsuit in Ecuador, according to a recent public filing of the company.

In reaching the $18 billion judgment -- the largest ever in an environmental case (see here and here)  -- the Ecuador trial court used Chevron's own admission that it deliberately dumped billions of gallons of toxic oil waste into Amazon waterways from 1964 to 1992, when the company operated in Ecuador under the Texaco brand.  The dumping decimated indigenous groups and caused an outbreak of cancer and numerous deaths, according to several peer-reviewed studies.

“Only in America could a major oil company give a 75% raise to a lawyer who lost an $18 billion case to a legal team with a fraction of the resources,” said Karen Hinton, the U.S. spokesperson for the dozens of rainforest communities who sued the oil giant.

Chevron’s 2012 proxy statement reported that Pate’s salary jumped “in part because of his 'outstanding management of Ecuador (lawsuit).'" See pages 28 and 43.

Pate's 75% salary increase also is out of line with the 16.6% increase in Chevron's 2011 year-end stock valuation - a key metric for investors in deciding to support annual 'say-on-pay' votes. Chevron CEO John Watson received an even more ludicrous 65% raise to $24.7 million in 2011 compensation.

"Chevron's enormous executive pay raises are way out of step with shareholder returns and the company's dismal handling of its liability in Ecuador," said Graham Erion, a securities lawyer advising the rainforest communities.

In the latest of a series of legal setbacks on the Ecuador matter, a panel of appellate judges in affirmed the $18 billion judgment in January.  The same month, a U.S. federal appeals court sharply rebuked Chevron for trying to use an illegal injunction to block the Ecuadorians from enforcing their judgment.

A new report published last week also found that under Pate's leadership Chevron has continually misled its own shareholders about the Ecuador liability.  Some shareholders have criticized company management for mishandling the Ecuador litigation while others have asked for an investigation by the Securities and Exchange Commission.

Pate recently reported that Chevron has used 483 lawyers and legal assistants on the Ecuador case from at least 39 different law firms.  The rainforest communities are led by Pablo Fajardo, a 40-year-old Ecuadorian man who grew up in poverty and recently was award a CNN "Hero" prize. See this CNN piece and Vanity Fair article.

A former Bush Administration antitrust lawyer with little experience in the oil industry, Pate took over Chevron's legal department in 2009.  Since that time, the oil giant has suffered multiple legal setbacks in Ecuador and elsewhere: 

• Part of the $18 billion judgment in Ecuador is to compensate the rainforest communities for harm caused by Pate’s hyper-aggressive and unethical litigation tactics, including the repeated filing of frivolous motions and the threatening of the presiding judge with jail time if he didn't rule in favor of the company.

• Last September, jurists from across the world blasted Pate's strategy for trying to illegally use a U.S. trial court to block the international enforcement of the Ecuador judgment.  Chevron's lead attorney on that case, Randy Mastro of Gibson Dunn & Crutcher, was harshly criticized by the appellate panel. See page 19 of this transcript.

• Chevron in 2009 orchestrated a video entrapment scheme against a sitting judge in Ecuador which backfired against the company and prompted an investigation of the company's attempts to corrupt the country's justice system. The incident has created potential exposure for Chevron under the Foreign Corrupt Practices Act.

• U.S. courts have repeatedly sanctioned Pate's lawyers for engaging in unethical behavior. Recently a U.S. federal judge fined Chevron after finding that Gibson Dunn lawyer Kristin Hendricks (an associate working under Mastro) abused the discovery process to harass a respected environmental organization. A Colorado judge in 2010 rebuked Gibson Dunn lawyer Andrea Neumann for trying to intimidate a witness.

• Under Pate’s leadership, reports recently surfaced that Chevron floated a $1 billion bribe offer to Ecuador's government to kill the legal case, made via an official in charge of an environmental project; that Chevron lied to its own expert witnesses so they would defend the use of deceptive sampling practices during the trial; and that the company used a secret lab to hide evidence of contamination from the court.

During Pate's tenure, Chevron faces a $22 billion lawsuit in Brazil after it appeared to mislead investigators about the impacts of an offshore spill; paid a $600,000 penalty for environmental violations at approximately 100 storage tanks in Puerto Rico; paid $24.5 million to California for violations of laws governing the disposal of hazardous materials; and suffered a horrific pipeline spill in Utah which resulted in a $4.5 million fine and ongoing lawsuits. The company, as part of an oil consortium, also faces a $64 million fine in Kazakhstan for releasing airborne toxins.


Become a follower of The Chevron Pit.

Follow us on Twitter at @ChevronPit and like us on Facebook
Visit and watch a video on ChevronToxico.com to find out more.
Support Amazon Watch and Rainforest Action Network.

Read More