Ecuador Government Urges U.S. Judge to Release Documents That Expose Chevron Corruption

A U.S. federal magistrate judge in San Francisco is inexplicably sitting on documents that tie Chevron to attempts to corrupt the Ecuadorian judiciary to evade payment of a $19 billion liability related to the world's worst oil-related ecological disaster.  The magistrate judge, Nathanael Cousins, has provided no good reason why he has waited more than one year to make a decision about whether to release hundreds of explosive documents from Chevron and the Mason Investigative Group.  See the press release below.

U.S. Judge Sits On Documents That Tie Chevron to Corruption In Ecuador

Amazon Defense Coalition, 25 September 2012, Contact: Karen Hinton, 703-798-3109.  Karen@hintoncommunications.com

 San Francisco – A U.S. federal judge in San Francisco is inexplicably delaying the release of documents that would shed light on Chevron’s extensive misconduct in judicial proceedings in Ecuador where it recently was hit with a $19 billion judgment for dumping toxic waste into the Amazon rainforest. 

More than a year has passed since Federal Magistrate Judge Nathanael Cousins was asked by rainforest villagers in Ecuador’s rainforest to force Chevron and the Mason Investigative Group to release hundreds of pages of material related to a scheme to bribe an Ecuadorian judge and undermine the court process there, said Karen Hinton, the U.S. spokesperson for the Ecuadorians.

More recently, the Republic of Ecuador – represented by the U.S. law firm Winston & Strawn – urged Cousins to release the documents, all to no avail.  Cousins heard extensive argument on the issue more than a year ago and the documents have been on his desk for months pending decision. 

“We believe Judge Cousins is sitting on a treasure trove of documents that will shed light on Chevron’s corrupt activities in Ecuador and are highly relevant to ongoing litigation,” said Hinton.  “He should act immediately on these long-overdue requests.”

The government of Ecuador first asked for the documents in March 2011.  That August, Northern California District Judge Charles Breyer ordered Chevron and the Mason Group to produce the documents.

When Chevron and the Mason Group claimed most of the documents were privileged, Judge Cousins was ordered to review them; his ruling has been pending ever since.

   

Documents that the plaintiffs are urging Cousins to release include: 

**The contents of an IPhone from Chevron operative Diego Borja, believed to be held by Robert Mittelstaedt, a lawyer from Chevron law firm Jones Day in San Francisco.   Borja has said the information on the phone proves that Chevron “cooked evidence” during the trial and if released would allow the villagers to win the case “just like that”. See  here. 

**Emails and other materials that prove Borja was paid more than $2 million in hush money from Chevron to maintain his loyalty.   

**Materials related to Wayne Hansen, a convicted felon used by Chevron to help Borja try to bribe a judge in Ecuador.  With the help of the Mason Group, Hansen was moved from California to Peru, apparently to avoid being served with a subpoena.  See this Courthouse News article.

 **Early drafts of an “affidavit” prepared by Borja that will prove that his later affidavit submitted to the court contains false information. 

**Materials and correspondence that shows that Mittelstaedt and his partners managed the intimate details of Borja’s life after he mysteriously moved from Ecuador to the U.S., at Chevron’s expense, to evade an official investigation in his home country. Mittelstaedt, for example, took care of payments for Borja’s cell phone, plane tickets, rent, and furniture. 

Chevron hired several powerhouse law firms to try to persuade Cousins to block release of the documents.    Those firms include Arguedes, Cassman & Headley, Jones Day, and Boies Schiller. 

“Clearly Chevron is willing to spend any amount necessary to prevent or to delay the release of these documents,” said Hinton.  

The Republic of Ecuador, in a letter to Cousins sent in August, said it “is not only being denied the right to review the documents it has been seeking for over a year, but is unable to pursue necessary related discovery” for its arbitration case against Chevron.

Cousins was appointed to the federal judiciary in 2011.  Before joining the Court, he was a federal prosecutor in the antitrust division of the Department of Justice – ironically, the same division that was formerly headed by Chevron’s current General Counsel, R. Hewitt Pate. 

After an eight-year trial, Chevron in 2011 was found liable for deliberately dumping billions of gallons of toxic waste into Amazon waterways and forests to save on production costs.  Evidence before the court showed the contamination caused an outbreak of cancer and decimated indigenous groups.

Having won their judgment, the Ecuadorians have filed asset seizure actions against Chevron in Canada and Brazil to force the company to abide by the Ecuador court ruling.  The trial was held in Ecuador at Chevron’s request after originally being filed in U.S. court.

A video about Chevron’s human rights violations and fraudulent cover-up in the Ecuador can be seen here.  A written summary of the evidence used to find Chevron liable can be seen here.

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Chevron Fights Like Mad to Block Release of Documents

Court Begins to Question Oil Giant's Double Standard When It Comes to Disclosure of Case Files

If you want an example of how a large oil company can mock court orders and get away with it, look no further than Chevron's behavior in the Ecuador environmental case where the company faces an $18 billion liability and allegations that it engaged in criminal misconduct to undermine a trial.See here and here.

The bottom line: due to a series of discovery decisions by a U.S. federal judge, who is clearly biased against the Ecuadorians, Chevron has almost the entire case file of the Ecuadorian's legal team while the Ecuadorians and their lawyers have almost none of Chevron's documents. There is simply no level playing field in the case.

Reporters covering the matter have completely missed the story of Chevron's gamesmanship before U.S. Judges. This gamesmanship makes it clear that Chevron will do anything to evade what is the largest court judgment in history for environmental damage. (See here)

One example vividly illustrates Chevron's maneuvering. For more than a year, the Ecuadorians have been fighting to obtain thousands of documents related to Diego Borja, the Chevron operative who secretly videotaped himself and his colleague Wayne Hansen offering a bribe to be given to the presiding judge in Ecuador as a way to sabotage the proceedings. Borja's own lawyer has admitted publicly that his client faces criminal liability in the U.S. and Ecuador for his actions. Borja has admitted Chevron has paid him vast sums of money -- including covering his U.S. income taxes -- for not working while living in the U.S. out of reach of journalists and investigative authorities.

When it comes to seeking Chevron's documents, the Ecuadorians have been met with nothing but obstructionism from Chevron's army of lawyers at Gibson Dunn & Crutcher, King & Spalding, Jones Day, Boies Schiller & Flexner, and Arguedes Cassman & Headley. (Yes, you read that correctly -- Chevron has hired five of the most powerful corporate and criminal defense firms in America to defend its environmental dumping in Ecuador. The Gibson Dunn firm recently disclosed it has at least 75 lawyers working on the case, meaning it is probably is billing the oil giant well over $100 million annually to get it off the hook for human rights violations in Ecuador.)

Consider the radically different ways U.S. courts have treated Chevron's requests for discovery, as compared to those made by the Ecuadorians.

In federal court in New York, the battle was fast and furious for release of privileged documents belonging to the Ecuadorians when Chevron wanted them. Thanks to a "technicality" ginned up by federal judge Lewis A. Kaplan, who insulted the Ecuadorians from the bench by claiming their lawsuit was imaginary, Chevron collected practically every document and email written about the 18-year-old case from their longtime lawyer Steven Donziger.

Kaplan prevented Donziger from arguing why particular documents were protected by privilege. Instead, he ordered Donziger to truck over his entire stash of tens of thousands of emails and internal memos to Chevron's law offices on the grounds his privilege log was turned in “late”. In fact, his log was prepared by numerous lawyers working furiously for weeks to list each of his thousands of documents, and it was clearly prepared in a reasonable amount of time (about four weeks after Kaplan denied Donziger's motion to quash the subpoena).

Using Judge Kaplan as its ally, Chevron also obtained documents from case interns, other lawyers for the Ecuadorians, consultants, financial advisors, and financial supporters -- over 1 million documents in all, according to legal briefs.

Chevron's discovery orgy was abruptly shut down in September by the federal appeals court in New York, which stayed the underlying legal proceeding before Kaplan where Chevron was seeking an unprecedented (and probably illegal) worldwide injunction barring enforcement of the Ecuadorian judgment. Without that case, Chevron lost the legal mechanism it was using to continue its U.S. discovery odyssey. Without the injunction, Chevron also now finds itself in a bigger jam now than when Kaplan was allowed to run wild on its behalf.

Interestingly, a few days before that appellate ruling staying Kaplan's proceeding, Chevron's double standard was revealed in a little-noticed decision by New York Magistrate Judge James Francis IV. Francis had this to say about Chevron's privilege logs (which lists Chevron's documents related to the litigation that the company is trying to prevent from being turned over to the Ecuadorians):

“(The review) reveals the categorization process engaged in by Chevron obscures rather than illuminates (emphasis added) the nature of the materials withheld….”

“Distressingly, Chevron has taken a view of its own discovery responsibilities sharply different from the obligations it seeks to impose on the (Ecuadorians) …. Chevron was highly critical of (the Ecuadorians’) privilege log descriptions that turn out to have been far more detailed (emphasis added) than Chevron's own.”

In the meantime, the wheels of justice have turned much more slowly in legal proceedings initiated by the Ecuadorians in California seeking Chevron's documents related to the Borja corruption scandal. See here.

Despite more than a year’s worth of motions filed by the Ecuadorians and granted by the court to compel Chevron and Borja to hand over documents, only a handful of largely irrelevant documents have actually been produced. With the legal action in New York dormant, Chevron is fighting even harder in California to stop anyone from discovering the depths to which the company sank with Borja in Ecuador. If Borja has potential criminal liability for trying to sabotage the proceedings in Ecuador, what does that say about Chevron's liability given that Borja was working for Chevron at the time and is now a “kept man” by the oil company in the U.S.? That's the question Chevron does not want answered.

Chevron has been trying ever since to cover up its involvement, even lying to the public about key facts in a press release -- such as characterizing Borja as a "Good Samaritan", failing to disclose that his sidekick Wayne Hansen (who helped him shoot the videos) was a convicted drug felon, or hiding the fact the pair met with Chevron lawyers as the scheme was unfolding.

Arguing for a balanced playing field for the Ecuadorians, attorney Jim Tyrrell of Patton Boggs recently asked a California magistrate judge to force Chevron, Borja and a private investigative firm paid by Chevron to stop hiding behind their privilege logs.

“… Respectfully, what we get back from Chevron and their allies is garbage. We can't tell what those privilege logs mean,” argued Tyrrell before Magistrate Judge Nathanial Cousins, who is expected to rule soon.

“Chevron has every one of my lead lawyers' documents for 18 years," Tyrell said. "We're quibbling over one here or there. That's not a level playing field, and that's not what justice is about.

“If anybody deserves a press account as to their conduct with respect to fraud, it isn't my side. It's the folks, respectfully, at Chevron.”

We are waiting to see if Magistrate Judge Cousins stands up to Chevron and its army of lawyers. He should allow a full airing of the facts related to this scandal.

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Wikileaks Cable Reveals Chevron Tried To Buy Ecuadorian Government Support To Kill Contamination Lawsuit With A Few "Social Projects" In Amazon

Courthouse News in an article about the Wikileaks cables from the U.S. Embassy in Ecuador revealed Chevron's hypocrisy in accusing the Ecuadorians of "conspiring" with Ecuadorian government officials in the long-running legal battle in the Amazon rainforest. Seems Chevron was "conspiring" with the U.S. Embassy. In his closing, legal reporter Adam Klasfeld reminds readers that even the highly-prejudiced Federal Judge Lewis Kaplan recognized that Chevron does not have "clean" hands. The surfacing of the Wikileaks' cables comes on the heels of a 2nd Circuit Court of Appeals decision that rebuked Kaplan in his effort to block the Ecuadorians from enforcing their $18 billion judgment in Ecuador.

Here's the story, and below are a few excerpts:

Reporter Adam Klasfeld wrote:

"Chevron tried to shake off multibillion environmental claims in Ecuador by lobbying government officials, even as it blasted opponents for allegedly playing to the courts' corrupt and political side, according to diplomatic cables released by Wikileaks…."

".... in a cable to the U.S. secretary of state, former U.S. Ambassador Linda Jewell wrote that Chevron had begun to "quietly explore" a deal with the government of Ecuador (GOE) to make the case disappear. (The cable read:) 'Chevron had begun to quietly explore with senior GOE officials whether it could implement a series of social projects in the concession area in exchange for GOE support for ending the case, but now that the expert has released a huge estimate for alleged damage, it might be hard for the GOE to go that route, even if it has the ability to bring the case to a close,' Jewell wrote on April 7, 2008…."

"....The Wikileaks cables also show that Chevron did not always have misgivings about the Ecuadorean courts. One rallying cry Chevron has used to undermine the Lago Agrio trial is a video that allegedly implicates the presiding judge, Juan Nuñez, in $3 million bribery scheme. Chevron has claimed it received videos unsolicited and published them over the Internet on Aug. 31, 2008….

"Two days after Chevron published the Nuñez footage, then-U.S. Ambassador Heather Hodges sent a cable to the secretary reporting that Chevron lawyers phoned the Embassy to give diplomats a 'heads up' about the disclosure. Ecuador ultimately expelled Hodges this past April for disclosures she made in unrelated cables obtained by Wikileaks. While denying wrongdoing, Nuñez stepped down from the case to avoid the appearance of impropriety. But cracks quickly surfaced in Chevron's allegations. Summarizing hours of footage, The New York Times later reported, 'No bribes were shown on the tapes.'"

"Hodges explained in the cable that the 'tapes were recorded clandestinely by Diego Borja, an Ecuadorian who had performed work for Chevron as a logistics contractor, and Wayne Hansen, a U.S. citizen with no ties to Chevron.' Although Chevron has distanced itself from the cameramen, Courthouse News discovered emails currently under a court seal that show Hansen contacted the company's investigator months before the release of the videos. Hansen claimed in the email that Chevron duped him, and he threatened to ask Judge Nuñez for forgiveness if the company did not contact him."

"More than a year later, he sent another email to Borja's investigative firm. Hansen claimed that he was in Peru, to which he had apparently fled in defiance of a subpoena that would compel an explanation of the videos. Hodges, the ambassador, told Washington that Ecuadorean government officials were immediately skeptical and indignant about the recordings….."

".... In a follow-up cable sent about a week later, Hodges said that Ecuador's prosecutor general called on the (U.S.) attorney general to 'initiate proceedings against Chevron in the United States, presumably for violations under the Foreign Corrupt Practices Act.' The Ecuadorean government has not backed off from allegations that Chevron orchestrated a 'judicial entrapment' scheme, and it continues to ask a U.S. federal judge to unseal the Borja and Hansen communications."

"In one of the first discovery proceedings Chevron initiated last year in New York, U.S. District Judge Lewis Kaplan interrupted counsel for the Ecuadoreans as the lawyer assailed Chevron's litigation strategy.

'I am not naive,' Kaplan said. 'I don't assume that anyone's hands in this are clean.'"

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Ecuadorians Beat Back Chevron's Effort To Evade Justice In Massive Contamination Lawsuit

Earlier this week, the Second Circuit Court of Appeals affirmed what the Ecuadorians have said all along: Chevron has abused not only the laws in Ecuador but in its own country, and Federal Judge Lewis Kaplan jumped the gun in issuing a preliminary injunction against enforcement of the $18 billion judgment the Ecuadorians sought and won.

Han Shan of Amazon Watch captured the emotions of the day best in his blog here:

Huge Victory for Ecuadorians Fighting for Justice from Chevron as Oil Giant's Legal Strategy Derails,

Yesterday, a 3-judge panel from the 2nd Circuit Court of Appeals dealt a stunning blow to Chevron's abusive and deceitful efforts to evade accountability for its oil disaster in Ecuador.

The appeals court threw out U.S. District Court Judge Lewis Kaplan's injunction that purported to prohibit the Ecuadorian plaintiffs from enforcing the $18 billion judgment against Chevron delivered by an Ecuadorian court in February. It also indefinitely stayed a trial that Judge Kaplan had scheduled for November over a preposterous countersuit filed in his court against the Ecuadorians and their attorneys, at which Chevron hoped to have the Ecuadorian verdict against the company declared unenforceable. The preliminary order from the 2nd Circuit came just one business day after a hearing before the panel on Friday, Sept. 16th, and said that a full ruling looking at the various issues will come "in due course."

Amazon Watch founder and Executive Director Atossa Soltani appears on Democracy Now! with Amy Goodman to discuss the implications of the Ecuadorian plaintiffs' victory in the appeals court.

As legal reporter Alison Frankel writes in her On the Case column:

Monday's stunning two-page order from the panel gave the Ecuadorean plaintiffs their first victory in two years of battling in New York's federal courts. But it was a huge win.

The appeals court order constitutes a harsh rebuke to Judge Kaplan's over-reach in the case, making him Chevron's most valuable legal asset in the company's dirty fight to avoid responsibility for its pollution in Ecuador. The appeals panel didn't remove Judge Kaplan, as requested by the Ecuadorian plaintiffs, but as Marco Simons, legal director for EarthRights International writes on his blog:

"... the appeals court declined to remove Judge Kaplan, who the Ecuadorians believe is biased against them, from the case. But it's possible that, after the court issues its opinion, there won't be any case left for Kaplan to preside over."

The ruling also dealt a humiliating rebuke to the strategy driven by outside law firm Gibson Dunn, and Crutcher law firm and lead counsel Randy Mastro, who was literally laughed out of court at the hearing which led to the order.

After attending hearing after hearing at which Mastro made sweeping fraud and conspiracy allegations against the Ecuadorians and their lawyers supported by the flimsiest of fantasy, theory, and conjecture, it was truly a breath of fresh air for this author to watch the Gibson Dunn lawyer wither at questions from the appellate panel based in logic, common sense, and the rule of law.

Pablo Fajardo, lead lawyer for the plaintiffs, told the Associated Press:

"We can now at least dream there will be justice and compensation for the damage, the environmental crime, committed by Chevron in Ecuador."

More than anything, the order from the appeals court represents the most stinging rebuke to the arrogant and deceitful strategy employed by the cabal of lawyers, spinmasters, and seriously-conflicted executives running a mini Orwellian empire within the company devoted to characterizing the Ecuadorian plaintiffs as criminals, and painting the company that poisoned them as victims. They thought overwhelming evidence of the company's crimes in Ecuador could be beaten back with shameless cynicism and an astonishing outlay of cash.

Even 2nd Circuit appeals court Judge Richard Wesley wondered aloud how much money had been spent by Chevron to pursue its legal strategy, and at what cost to shareholders.

Regulators, politicians, institutional investors, and shareholders who have heard Chevron management deny that the company faces any significant liability in Ecuador are going to be asking the most difficult questions that Chevron's lawyers and leadership (if one can call it that) have yet heard, now that the 2nd Circuit has affirmed the rule of law over Chevron's deceptive sensationalism.

Will Chevron management "face reality" as New York State Comptroller Thomas DiNapoli—trustee of the New York State's Pension Fund with $780 million in Chevron stock—demanded during this past May's Chevron shareholder meeting? Or will CEO John Watson, architect of Chevron's takeover of Texaco and the company's toxic legacy in Ecuador, and other senior management allow the entire company to be driven off a cliff by outside lawyers who have no interest in ending a legal saga that continues to line their pockets?

Secoya indigenous leader Humberto Piaguaje (L) and campesino communtiy leader Servio Curipoma (R)—who have both worked tirelessly to demand justice from Chevron—outside of a courthouse in New York on Sept. 16.

Either way, this decision brings the people of the Ecuadorian Amazon one step closer to justice, and we call on Chevron's management to do the right thing by meeting the company's moral, legal and fiduciary obligations to clean up its contamination in Ecuador. Of course, justice delayed is justice denied, and the men, women, and children of the Ecuadorian Amazon have suffered for far too long already.

More coverage:

BBC: 'US court rules against Chevron in Ecuador oil case'

Global Post: 'Chevron must pay for Amazon damage: court'

The Guardian (UK): 'Chevron loses latest stage of Amazon pollution battle'

The San Francisco Chronicle: 'U.S. court rules against Chevron in Ecuador case'
– Han

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Reuters’ Column Reveals Judge Kaplan’s Bias Against Ecuadorians In His Upcoming “Show Trial” On $18 Billion Judgment Against Chevron

A recent Reuters’ column by journalist Alison Frankel reveals the stark bias of U.S. Federal Judge Lewis Kaplan against the Ecuadorians who recently won an $18 billion judgment against the oil giant for oil contamination in the Amazon rainforest.

Frankel’s column makes clear that even though Chevron’s charges against the Ecuadorians focus largely on one of their lawyers, Steven Donziger, Judge Kaplan has refused to allow Donziger and his attorneys to participate in an upcoming trial on the enforceability of the Ecuadorian judgment.

It’s also clear from the mountain of trial discovery that Chevron is demanding from Donziger, the other attorneys in the case (even interns!) and the Ecuadorians that the oil giant fully intends to drag Donziger center stage into the trial.

Frankel quotes from the legal brief, asking Judge Kaplan for fairness:

“If what actually happened in Ecuador matters at all to the court's decision, the court should let Donziger intervene, grant the Lago Agrio plaintiffs' motion (for more time) and let the parties conduct a real, not show, trial," states the brief, written by Donziger’s law firm, Keker & Van Nest.

Frankel includes this statement from the brief:

"The exclusion of Donziger from full intervention in this 'do-over' trial has reached the point of absurdity. The trial will be about him, and he won't be there to defend himself against Chevron calumny."

Frankel reported that Judge Kaplan even went so far as to deny Donziger attorney John Keker the right to speak on a telephone conference call with the judge and Chevron’s lawyers.

She wrote from the transcript of an August 2nd phone conference. “At the end of the conference, John Keker said, ‘Your honor, can I say something?’ Kaplan replied: ‘No, Mr. Keker. You're not in the case for this purpose. You're being given the courtesy of being conferenced in but the scope of your intervention has been fixed.’"

Meanwhile the Ecuadorians, represented by Smyser, Kaplan & Veselka, see Judge Kaplan’s actions as proof of his bias.

"Judge Kaplan encouraged Chevron to file the lawsuit against Steven Donziger and when Donziger demanded an immediate jury trial Judge Kaplan all but directed Chevron to drop him as a defendant," said the Ecuadorians’ spokeswoman Karen Hinton. "Now he won't let Donziger anywhere near his courtroom. This is turning into a home-cooked judicial bailout for Chevron."

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American Judge Heaps Insults On Ecuadorian Indigenous Plaintiffs

U.S. Judge Lewis A. Kaplan’s distaste for the Ecuadorians suing Chevron was on clear display recently in his order denying their motion to recuse him for his apparent bias against their lawsuit in Ecuador.

Kaplan repeatedly has sided with Chevron's increasingly desperate efforts to escape the $18 billion Ecuador judgment against the company. An Ecuador judge in February found that Chevron dumped billions of gallons of toxic waste into streams and rivers, decimating indigenous groups in the Amazon and creating an outbreak of cancer and other oil-related diseases.

In the meantime, Kaplan has heaped insult after insult on the Ecuadorians who against all odds brought the lawsuit almost two decades ago against one of the world's largest and most powerful corporations. Kaplan is overseeing one of Chevron's many attacks against the Ecuador judgment in the U.S.

Among the many complaints in the motion to recuse Kaplan and a Writ of Mandamus submitted to the Second Circuit of Appeals in New York, lawyers for the Ecuadorians cited Kaplan’s repeated description of their clients as the “so-called Lago Agrio plaintiffs” as evidence that he is questioning their very existence.

In denying the motion to recuse, Kaplan begins his order with: The "so-called Lago Agrio plaintiffs" (emphasis added) recently obtained a multibillion dollar judgment against Chevron Corporation from a provincial court in Ecuador for alleged environmental pollution by Texaco, Inc. Find it here.

In the Writ, Patton Boggs lawyer James Tyrrell, who represents the Ecuadorians, wrote:

"…in an act of apparent spite wholly inconsistent with any notion of detached impartiality, the first six words of Judge Kaplan's Recusal Memorandum Opinion are 'the so-called Lago Agrio plaintiffs.'"

Tyrrell continued:

"From the beginning, Judge Kaplan has been careful to qualify his reference to the Ecuadorian Plaintiffs with the derisive modifier 'so-called' lest he advertently confer any semblance of legitimacy on these people,"

Tyrrell also noted that Kaplan once described the Ecuadorian plaintiffs as "a number of indigenous peoples said to reside in the Amazon rainforest."

An Amazon Defense Coalition press release provides more details.

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Chevron Groupie Posing As Journalist Removes His Blog From Web

Looks like Chevron groupie Alex Thorne has ended his short-lived career as a “journalist.” After the Amazon Defense Coalition issued a press release exposing Thorne masquerading as a journalist in an effort to undermine funding for an environmental advocacy group, Thorne deleted his blog and appears to be taking a hiatus from posting articles.

Karen Hinton, who represents the Ecuadorians suing Chevron for oil contamination, suggests that Thorne focus on his children, a worthy profession. Thorne admitted to Hinton last week that he was a “bored stay-at-home Dad,” not a journalist.

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New Shareholder Report Warns Chevron Investors of Risks Surrounding $18 Billion Ecuador Environmental Liability

Financial Analyst Raises Questions Over Chevron Management of Litigation & Misleading Disclosures to Shareholders

Raising the eyebrows of Chevron shareholders is a new report on the financial and operational risks to the company over its $18b legal liability for illegal dumping of toxic waste in the Ecuadorian Amazon rainforest. It warns investors about “misleading” disclosures made by Chevron’s management about the “significant risk” the liability poses to the company’s business and value.

Noted shareholder risk analyst Simon Billenness and shareholder-rights attorney Sanford Lewis authored the independent report, entitled “An Analysis of the Financial and Operational Risks to Chevron Corporation from Aguinda v. ChevronTexaco.” It was released as Chevron prepares for a May 25th annual meeting where shareholders are expected to voice their concern about Chevron’s handling of the lawsuit.

Billenness and Lewis write:

“While Chevron has admitted in sworn legal statements that the company is at risk of ‘irreparable injury to [its] business reputation and business relationships’ from potential enforcement of the Ecuadorian court’s judgment, the company has failed to characterize these risks to the company in its public filings and statements to shareholders.”

For example, the report describes Chevron’s assertion in its 10-K SEC filings that Ecuador’s courts “lack jurisdiction over Chevron” as “misleading” based on the company’s failure to disclose that the U.S. Second Circuit Court of Appeals has ruled that Chevron “assured the district court that it would recognize the binding nature of any judgment issued in Ecuador…As a result, that promise, along with Texaco’s more general promises to submit to Ecuadorian jurisdiction, is enforceable against Chevron in this action and any future proceedings between the parties.”

Nell Minow, a leading expert on corporate governance and investing, reviewed the report and found it “hard to dispute … that the company’s admissions about its liability risks in court documents are inconsistent with its financial reports and that its legal and public relations strategy poses an unacceptably high risk.” See her article here.

Meanwhile, Robert Kropp, a financial writer for Socialfunds.com, reported that “Trillium and its co-filers are preparing an Investor Statement, in which the company's failure to negotiate a settlement in the lawsuit raises questions about its ability to manage risks associated with environmental and human rights issues. Echoing the findings of Billenness and Lewis, it calls on the company to provide full disclosure of the risks associated with enforcement of the judgment in Ecuador.” Read his article here

Billenness and Lewis also criticize the Chevron board of directors for their failure to fulfill their duties to oversee management and respond to shareholder concerns regarding the Ecuador liability. According to the report, the board has been “unresponsive” to approaches by shareholders to discuss concerns regarding managements and quantification of the Ecuador litigation’s risk and liabilities.

“These choices may lead some investors to question the adequacy of the company’s public statements and disclosures and whether the board and management are fulfilling their fiduciary duties to properly manage this significant risk to the company’s business and value,” the report concludes.

See these stories for more information here and here.

The 2011 report is simply the latest in a long series of concerns expressed by shareholders over the company’s management of its environmental liabilities in Ecuador. As early as 2003, shareholders filed the first in a series of shareholder resolutions on the issue, culminating in a 2010 shareholder resolution asking Chevron to nominate an independent board member with a “high level of environmental experience” to oversee the company’s environmental actions, including the Ecuador liability.

Despite efforts by Chevron’s management to defeat the 2010 resolution and to downplay the environmental liability in Ecuador, the resolution garnered the support of more than 25% of the outstanding Chevron shares, equal to approximately $38 billion in shareholder value. Typically, any shareholder resolution opposed by management that gains more than 10% of shareholder support is considered a success.

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Potential Witnesses Into Chevron Misconduct Possibly Being Paid Hundreds of Thousands of Dollars By The Oil Giant

One Living “Like A King” In Peru

A Chevron dirty trickster is apparently enjoying the good life on the beaches of Peru after unsuccessfully trying to derail the historic Ecuadorian lawsuit against the oil giant for oil contamination. His partner, another Chevron operative, has been on the Chevron payroll since June 2009, receiving $10,000 to $15,000 a month but doing no legitimate work for the company.

Sounds like a great deal for the two of them, who are both potential witnesses into Chevron’s misconduct in an Ecuadorian court, which recently awarded a group of Ecuadorians an $18 billion judgment against the company for massive oil contamination.

Providing anything of value or benefit to potential witnesses is certainly unethical and could be illegal, if found to influence testimony. But, that hasn’t stopped Chevron.

Chevron operative and drug felon Wayne Hansen, who along with Chevron contractor Diego Borja tried to bribe an Ecuadorian judge in 2009, recently wrote he is living “like a king” on $1,200 a month in a beach town in northern Peru, according to a subscribers-only Reuters story that highlighted an email from Hansen to a private investigative firm hired by the oil giant.

Reuters obtained the email from discovery documents now under seal in the Northern District Court of San Francisco.

The Ecuadorians have been trying to locate Hansen to subpoena him about the bribery scheme. Hansen had been living in Bakersfield, California, while working in concert with the Chevron contractor and self-proclaimed “dirty tricks” operative Diego Borja to bribe a judge hearing the Ecuadorians’ oil contamination lawsuit.

It’s now known that Chevron has paid Borja around $340,000 (if not more), according to the San Francisco Daily Journal, which recently reported that Borja has been receiving payments since June 2009.

Borja and Hansen secretly videotaped the judge after meeting with Chevron’s lawyers in San Ramon, the company’s corporate headquarters. The judge never discusses a bribe and, in fact, leaves the meeting when Hansen mentions it.

A private investigation conducted by the Ecuadorians found that both Borja and Hansen have complained about Chevron not paying them adequately for their bribery sting operation. Borja threatened to reveal evidence it had about Chevron’s misconduct in the Ecuadorian trial if the company did not compensate him appropriately.

Earlier this year the Ecuadorians successfully subpoenaed and deposed Borja but the U.S. federal judge hearing their discovery motion sealed the court documents. Some reporters, though, obtained some of the documents and emails when they were filed in a related case in the Southern District Court of New York.

Information obtained from discovery and three days of depositions by Borja will be used by the Ecuadorians in their and Chevron’s appeal of the $18 billion judgment in Ecuador. It also will be used to defend the Ecuadorians in Chevron’s so-called “extortion” lawsuit in New York federal court.

It is not clear if the San Francisco judge will unseal the documents before the Ecuadorian and U.S. courts hear arguments expected late this year, but it will be interesting when he does.  Stay tuned.

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Chevron fights justice in Ecuador on two fronts, but needs to win everywhere

"I'm not aware of any case where a court has ever even tried to restrain foreign plaintiffs from enforcing a foreign judgment in foreign jurisdictions."

"...even if Chevron wins the enforcement battle in the US, that doesn't end the matter, because the plaintiffs will go to other countries to enforce the judgment. The plaintiffs only need to win once or a few times, while Chevron needs to win everywhere."

Interesting observations from Marco Simon, Legal Director of Earth Rights International, about Chevron's effort to escape the $18 billion Ecuadorian judgment in U.S. federal court.

As Simon points out, Chevron wants an American judge to rule that the Ecuadorian judgment is unenforceable so the oil giant has a legal tool to use in foreign courts to prevent the Ecuadorians from obtaining the award by seizing Chevron's assets in foreign countries. (Chevron has no assets in Ecuador.) To get that ruling, Chevron has to jump a few legal hurdles, like -- Can an American judge tell Ecuadorians what to do, and can the American judge tell other countries' court systems what they can and can't do? Only time will tell, but Simon is exactly right when he says Chevron will have to convince dozens of countries (where Chevron has assets) that an American judge can tell their judges want to do.

Simon wrote:

"The Ecuadorians can go after Chevron in the US, but they can also try to enforce the judgment in Argentina, Brazil, Venezuela, and dozens of other countries where Chevron operates or has assets. Not surprisingly, Chevron is working hard to prevent that….

"...Chevron's entire case is premised on the notion that Judge (Lewis) Kaplan (the American judge) has jurisdiction over the Ecuadorian plaintiffs and other members of the plaintiffs' class action. That is a highly questionable position, and one that will receive considerable scrutiny from the Second Circuit. Even if Judge Kaplan can prevent the American lawyers from proceeding to enforce the judgment, if he doesn't have jurisdiction over the Ecuadorians, he cannot prevent them from going to other countries to seek enforcement."

And, then there is the nagging issue of Chevron's asking Judge Kaplan to act as the world's judiciary police chief.

"The Second Circuit may also be concerned with the propriety of interfering with foreign countries' judicial processes. I'm not aware of any case where a court has ever even tried to restrain foreign plaintiffs from enforcing a foreign judgment in foreign jurisdictions."

Simon also reminds us that Chevron is getting what it asked for:

"Chevron has every opportunity to challenge the judgment in the Ecuadorian courts; Chevron chose to litigate in Ecuador over the plaintiffs' objection, and the Second Circuit may well hold them to that choice. In fact, in a recent decision in a related case, the Second Circuit said that Chevron was bound by its original promise to satisfy any judgments in Plaintiffs' favor, reserving its right to contest their validity only in the limited circumstances permitted by New York's Recognition of Foreign Country Money Judgments Act."

Given Judge Kaplan's comments about Ecuador, its court system and the Ecuadorians themselves, no one thinks he won't rule for Chevron. His bias is obvious. Other judges in other countries may not share his sentiments, however.

"Ultimately, even if Chevron wins the enforcement battle in the US, that doesn't end the matter, because the plaintiffs will go to other countries to enforce the judgment. The plaintiffs only need to win once or a few times, while Chevron needs to win everywhere. Even Chevron wins twenty cases, just one loss could cost the company hundreds of millions or billions of dollars," wrote Simon.

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Miami Herald Journalist Proves Chevron Lied About The Remediation

"(Chevron) always show(s) you the shirt the coat and the tie. They never show you the tumor underneath the shirt."

Miami Herald reporter Jim Wyss has caught Chevron in yet another lie about its so-called “remediation” agreement. Wyss toured one of the oil well sites, Sascha 53, that Chevron told both U.S. and Ecuadorian courts had been cleaned.

He described what he saw after a man with him dug just a few inches below the ground in today’s Miami Herald article:

“Within a few inches the dirt gives off the pungent odor of petroleum. Within a few feet the dirt glistens with oil residue. When a few handfuls of the soil are dropped into a bucket of water, a thick oil-slick coats the surface.”

Chevron claims it is not guilty of the contamination in Ecuador because the remediation agreement between Chevron and the Ecuadorian government releases it from any responsibility. However, scientific tests have proven that Chevron has never cleaned up the oil sites mentioned in the agreement.

Today the Amazon Defense Coalition released this press release that argues the reporter’s eye-witness account of the contamination is further evidence that Chevron has lied to U.S. Judge Lewis Kaplan who has, by and large, accepted Chevron’s statement that it remediated a small percentage of the oil sites.

The only response Chevron’s spokesperson could come up with was accusing Ecuadorians of “spiking” the ground with oil themselves.

Wyss quoted Donald Moncayo, a representative of the Ecuadorians, saying:

"They (Chevron) always show you the shirt the coat and the tie," he said of the area, called Sacha 53, which is now pastureland and spindly trees. "They never show you the tumor underneath the shirt."

"This is their remediation effort," Moncayo says. "They're no better than animals."

Exactly.

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Chevron Exposed For 18 Years of Unethical Conduct In Ecuador

Big news came out of New York this week. Plaintiffs from Ecuador – backed by hundreds of pages of exhibits – submitted a new 42-page sworn affidavit, which outlined in stunning detail Chevron’s 18-year effort to undermine justice.

Ecuadorian attorney Juan Pablo Saenz in his declaration to U.S. Judge Lewis Kaplan of the Southern District Court of New York (SDNY) wrote:

“After decades of exploiting the country and wielding its influence like a club as it extracted riches from the Napo Concession, Chevron believed it could use that same power to buy or bully its way to a swift dismissal of this case, or, at the very least, to delay the day of reckoning indefinitely.”

You can view the affidavit by going here.

The declaration was filed in opposition to extortion charges filed by Chevron in New York against the Ecuadorian citizens bringing the lawsuit, and their lawyers and advisors. The charges are part of a flurry of legal activity (which some have derided as "corporate bullying") launched by the oil giant to try to block enforcement of a judgment based on the overwhelming scientific evidence of contamination caused by the company’s actions, according to legal papers filed by the plaintiffs.


Chevron’s allegations are particularly ironic given that the company is seeking relief from the same U.S. court that it asked to send the case to Ecuador in 2002, claiming at the time the South American nation was a more appropriate venue for the trial.

• In his declaration, Saenz summarized some of Chevron’s gamesmanship and misconduct over a span of almost 18 years since the filing of the action in 1993 -- including attempts to delay and derail the case, tamper with evidence and inappropriately influence Ecuador's government and the United States government to intervene on its side. For example:


• An internal company fax indicated Chevron officials in the 1990s ghostwrote a letter from the Ecuadorian ambassador to the U.S. Department of State, prevailing upon the agency to intervene and try to have the case dismissed when it was pending in federal court in New York City.


• Chevron lawyer Ricardo Reis Veiga, one of two Chevron officials criminally indicted in Ecuador for falsifying the results of a purported remediation, admitted in a 2006 deposition that he had met with Ecuador’s attorney general in 2003 in an extrajudicial effort to have the executive branch of the Ecuadorian government order the lawsuit dismissed.


• A 1972 Chevron memo revealed that a company executive ordered the destruction of all documents relating to oil spills and demanded that company employees no longer keep records of such spills.


• Between 2003 and 2010, Chevron delayed the trial via subterfuge -- including canceling a critical site inspection by fabricating a security threat, inundating the court with frivolous motions, refusing to pay court experts, and blocking the gathering of scientific evidence.


• In 2009, Chevron used an Ecuadorian employee and a convicted American drug trafficker to mount an unlawful sting operation against the presiding judge as part of a scheme to entrap him in a bribery scandal. Although the scheme was quickly discredited, the scandal delayed the trial by two years and served as a tool for Chevron to try to intimidate the court.


• Diego Borja, a member of Chevron's trial team in Ecuador, has been quoted saying he “cooked” evidence for Chevron and that he replaced contaminated samples with clean ones before submitting them to laboratories for testing. Borja also said "crime pays" and that he had evidence that showed Chevron’s guilt that he would disclose unless the company compensated him.


• In February 2010, Chevron offered $20,000 to a U.S. journalist to spy on the plaintiffs under the false pretenses that she was writing a story.


• Throughout the trial Chevron has taken out paid advertisements in Ecuadorian media and in various online media outlets accusing judges and court-appointed experts of bias in an effort to intimidate the court.

The affidavit was submitted by the plaintiffs because under U.S. law a party with "unclean hands" does not have the right to seek the type of injunctive relief requested by Chevron to prevent enforcement of the Ecuador judgment. Chevron has removed all assets from Ecuador and has claimed it will not pay the judgment, even though years ago it had promised U.S. courts it would be abide by the Ecuador court's decision as a condition of the case being transferred to Ecuador.


In any event, the Ecuadorian plaintiffs have said the U.S. court has no jurisdiction over them and that after appeals they will retain the option of enforcing the judgment in any of dozens of countries around the world where Chevron has assets.


For more on this read the press release from Amazon Defense Coalition by going here.

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Scapegoating Petroecuador – A Key Chevron Strategy to Evade Justice for Its Ecuadorian Mess

One of Chevron’s key legal strategies to evade justice in Ecuador has been to scapegoat Petroecuador - the state owned oil company. This argument is nothing more than an attempt to sidestep responsibility and whitewash history. Let’s explain this a bit more.

So, Chevron has argued to both U.S. and Ecuadorian courts that Petroecuador is the only party responsible for the devastating environmental damage to rainforest. As plaintiffs submitted in their final argument to the Ecuadorian court, there is no support in law or fact for this.

Petroecuador took over Chevron’s predecessor Texaco’s operations in 1990. The facts are clear that it was Chevron’s predecessor – Texaco – that dumped 16 to 18 billions of gallons of contaminated and highly toxic chemicals directly into the soil, groundwater and surface water in Ecuador and caused an environmental disaster that continues to plague the region.

It is also crucial to note that this case was originally filed in the United States in 1993, shortly after Petroecuador had taken over the Chevron sites for more on the historic trial. At that time, there was no possible way Chevron could have argued that anyone but Chevron was responsible for the environmental catastrophe in Ecuador. However, Chevron succeeded in challenging the jurisdiction of the U.S. courts, a process that took almost an entire decade until the case was re-filed in Ecuador. Chevron has used this slow march to justice as an excuse to scapegoat Petroecuador.

The facts do not support Chevron’s argument that Petroecuador is solely to blame for several reasons:

• Sites operated by Chevron only and closed before Petroecuador became operator contain illegal levels of toxic materials, in violation of Ecuadorian laws.


• The vast majority of contamination at well sites occurs during the drilling and development (not once production starts), and the Ecuadorians’ lawsuit incorporates only well sites and stations built and operated by Chevron.


• Petroecuador inherited Chevron’s sub-standard and faulty infrastructure designed with the intention of releasing toxins into the environment. Chevron’s subsequent abandonment of its facilities does not absolve it of liability.


• Petroecuador made dramatic improvements in Chevron’s prior environmental practices in virtually every respect, including building re-injection wells to pump the wastewater back into the ground, instead of dumping it directly in the rainforest as Texaco did. Petroecuador also stopped using unlined pits for permanent storage of the toxic sludge and developed an oil spill reporting and management system, something Chevron never did.

For more on the plaintiff’s final argument presenting overwhelming scientific evidence of Chevron’s mess in Ecuador go here.

It is baseless and cynical for Chevron to claim that it bears no responsibility for one of the largest environmental disasters in history. Its attempts to evade justice by scapegoating Petroecuador is nothing more than part of a craven attempt to sidestep responsibility and whitewash history.

No one else is to blame for Chevron’s environmental transgressions.

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Chevron’s Ads “Add Up To One Big Lie”

Advertising Age’s Jonathan Salem Baskin got it right in his latest piece about Chevron’s lies in its new “We Agree” ad campaign: “Is Your Advertising Telling a Lie?”

Baskin wrote:

“The story in London's Independent newspaper last week was unequivocal: Chevron has been fined more than $8 billion for causing an environmental disaster called by some "the Amazon's Chernobyl"....This is the same Chevron that is running a glossy "We Agree" branding campaign that claims it's in a conversation with people about saving the planet and, oddly enough, supporting communities.”

“You just can't take Chevron's branding seriously if you know what it's doing in Ecuador.”

“Every CMO should take note of this dichotomy: Both stories are true when presented separately. It's only when you put them together -- which is exactly what I think consumers are going to begin to do more of -- that they add up to one big lie.”

As Baskin notes, it’s clear Chevron’s expansive ad and public relations department isn’t coordinating with Chevron’s expensive legal team, Gibson Dunn, the law firm that promises to change the law if the law gets in the way of their clients’ goals.

Baskin wrote:

“...(Chevron’s) legal team has been fighting a lawsuit triggered by an operational division, using various delaying tactics reminiscent of the way tobacco companies used to keep terminally ill plaintiffs out of court. Chevron's lawyers have probably received bonuses for their accomplishments .... I find it gallingly stupid that the company ha dedicated significant money and staff resources for almost two decades to fight communities, and yet it recently decided to claim it cares about them, too.”

Baskin states bluntly that consumers can’t take Chevron seriously once they learn about the company’s behavior in Ecuador:

“Chevron's leadership must be daft if it thinks its gas-station consumers don't occasionally troll the internet for something more than a pickup poker game. Ditto for any state or federal regulator they're trying to impress. We learn things about brands far beyond the information marketers want us to know, and actions -- real-world activities, not clicks or qualitative surveys -- speak louder than words. You just can't take Chevron's branding seriously if you know what it's doing in Ecuador. The campaign all but dares people to check up on them.”

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Chevron's Operative Borja Must Testify

A San Francisco judge ruled that Diego Borja, Chevron’s "dirty tricks" agent who is responsible for recording misleading tapes of Ecuadorean Judge Juan Nunez, has to turn over hundreds of documents and testify about his role in falsifying evidence related to the pollution lawsuit by March 21. This will give plaintiffs a chance to question the man who has played a big role in Chevron’s attempts to undermine the multi-billion dollar environmental trial.

Sting "ringleader" re-enters Chevron-Ecuador case

By Braden Reddall and Dan Levine

SAN FRANCISCO (Reuters) - Plaintiffs in the Ecuador pollution case against Chevron Corp will get to question the man they call the "ringleader" of a sting operation that is key to Chevron's efforts to avoid paying a massive judgment.

The deposition of Diego Borja will be the first chance for the plaintiffs to use the same kind of U.S. legal device extensively used by the oil company in building its extortion case against them.

The Borja ruling comes just days after an Ecuadorean court awarded plaintiffs $8.6 billion in damages -- which is set for appeal -- and offers the Republic of Ecuador a chance to gather evidence for a case before an international tribunal that was brought by Chevron under a U.S.-Ecuador treaty.

A U.S. magistrate judge in San Francisco ruled late on Wednesday that Borja, one of two men who secretly taped Ecuadorean Judge Juan Nunez discussing the pollution case, must surrender hundreds of documents this week and travel from Texas to submit to three days of questioning at some point before March 21.

The decision means the Republic of Ecuador, the plaintiffs and Chevron can question Borja under a procedure known as a 1782 action, which was used by Chevron to force plaintiffs' lawyer Steven Donziger to turn over a trove of evidence.

Ecuador originally filed the action alone, but the potential for appeals in the Ecuadorean case brought in the plaintiffs, who are indigenous people backed by U.S. lawyers.

Plaintiffs' lawyer James Tyrrell, from Washington D.C. law firm Patton Boggs, flew in to appear before Judge Edward Chen in the federal court for the Northern District of California.

"We think we have the ringleader of the dirty tricks," said Tyrrell, whose firm took a lead role in the plaintiffs' case after Donziger came under fire.

Borja, along with American Wayne Hansen, secretly taped videos of Nunez in 2009 before turning them over to Chevron. The company then released them online in August 2009, and moved Borja and his wife to a home near its headquarters in San Ramon, California, 30 miles east of San Francisco.

Three weeks later, Chevron claimed Ecuador had violated a bilateral U.S.-Ecuador investment treaty because its judicial system was not independent. Nunez recused himself, and his successor was replaced late last year by Nicolas Zambrano, who delivered the damages ruling on Monday.

The plaintiffs managed to locate a Borja acquaintance who had records of conversations in which Borja said he had incriminating evidence against Chevron that he could use as leverage if the company "betrayed" him.

Plaintiffs also say Borja and his wife were representatives of a firm involved in independent tests of soil samples related to the pollution case -- originally brought against Texaco in 1993 and inherited by Chevron when it bought Texaco in 2001.

Responding to Chen's decision, Chevron said in an emailed statement: "The government of Ecuador has done nothing to address the misconduct of one of its judges and it seems the government remains more interested in persecuting Mr. Borja than addressing corruption in its courts."

Earlier on Thursday, Chevron lawyers in Ecuador requested clarification of the $8.6 billion ruling, which found it liable for contaminating the jungle and damaging local people's health in the two decades before Texaco left in 1992.

The cases in the U.S. District Court for the Northern District of California are In re: application of the Republic of Ecuador, case no. 10-mc-80225, and In re: application of Daniel Carlos Lusitand
Yaiguaje, et al., case no. 10-mc-80324.

(Editing by Gerald E. McCormick and Steve Orlofsky)

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After 18 Years Of Waiting, Justice Is Served!

After 18 years of litigation in both the U.S. and in Ecuador, a court of law has found Chevron accountable for the massive contamination of the Ecuadorian rainforest. Below is a statement from the Ecuadorians who have lived with Chevron’s pollution for five decades. Also below is the front page article that appeared today in the Wall Street Journal.

Amazon Defense Coalition
14 February, 2011 – FOR IMMEDIATE RELEASE
Contact: Karen Hinton at 703-798-3109 or Karen@hintoncommunications.com

Pablo Fajardo, the lead Ecuadorian attorneys representing the indigenous tribes suing Chevron for oil contamination, released this statement today about the judgment against Chevron, issued by the Provincial Court of Justice of Sucumbíos in Lago Agrio, Ecuador:

“We believe today’s judgment affirms what the plaintiffs have contended for the past 18 years about Chevron’s intentional and unlawful contamination of Ecuador’s rainforest. Until we have had a chance to review the lengthy decision, we will not be able to comment in detail.

“As a general matter, the plaintiffs provided the court with a great quantum of scientific and documentary evidence that Chevron deliberately and in violation of all industry norms discharged billions of gallons of toxic waste into the rainforest and into the water supply relied on by thousands of Ecuadorian citizens.

“Rather than accept that responsibility, Chevron has launched a campaign of warfare against the Ecuadorian courts and the impoverished victims of its unfortunate practices. We call on the company to end its polemical attacks and search jointly with the plaintiffs for common solutions. We believe the evidence before the court deserves international respect and the plaintiffs will take whatever actions are appropriate consistent with the law to press the claims to a final conclusion.”

Chevron Hit With Record Judgment
By BEN CASSELMAN, ISABEL ORDONEZ and ANGEL GONZALEZ

An Ecuadorian judge on Monday ordered Chevron Corp. to pay $8.6 billion to clean up oil pollution in the country's rain forest in what is believed to be the largest-ever judgment in an environmental case.

And if the U.S. oil giant doesn't publicly apologize in the next 15 days, the judge ordered the company to pay twice that amount.

The ruling brings to an end one chapter of a legal drama that has played out in courtrooms in Ecuador and the U.S. for nearly two decades.

The case has been bitterly fought by both sides, with each accusing the other of improprieties. In recent months, Chevron uncovered a secret memo revealing the plaintiffs' strategy for enforcing any favorable Ecuadorian ruling around the world. That means that Chevron could be forced to defend itself in any of the dozens of countries where it does business.

The oil company, which denies responsibility for the pollution, has no assets in Ecuador and has vowed to fight any efforts to seize its property overseas. Other multinational corporations are closely watching the case.

The plaintiffs, residents of Ecuador's oil-rich Amazon rain forest, are seeking to hold Chevron accountable for environmental damage they say was caused by Texaco Inc., which operated in the country from 1965 to 1992. Chevron inherited the case when it acquired Texaco in 2001.

Chevron has said for more than a year that it expected to lose the case in Ecuador, where it says collusion between the government and the plaintiffs have made a fair ruling impossible. On Monday, the company vowed to appeal and said it won't pay the fine or apologize as the judge demanded.

"We believe it to be illegitimate and unenforceable," Chevron spokesman Kent Robertson said. "It's the product of fraud, and it's contrary to the legitimate scientific evidence."

The plaintiffs deny Chevron's fraud allegations and say scientific evidence backs up their claims of environmental damage.

The ruling was a rare piece of good news for the plaintiffs after months of setbacks in U.S. courts that left their team divided and scrambling for cash.

But the victory could be short-lived. Last week a panel of international arbitrators in The Hague granted Chevron a preliminary injunction that could block the plaintiffs' efforts to enforce the judgment.

Steven Donziger, a New York lawyer who led the case for years until Chevron's continued attacks caused him to step down as lead plaintiffs' attorney, declined to comment. Instead, the plaintiffs released a statement from their Ecuador-based attorney Pablo Fajardo.

"We believe today's judgment affirms what the plaintiffs have contended for the past 18 years about Chevron's intentional and unlawful contamination of Ecuador's rain forest," he said.

Under Ecuadorian law, Chevron doesn't have to pay any judgment until after an initial appeal, which could take months.

Meanwhile, Chevron is using the U.S. courts, in hopes of never paying anything at all. The company sued the plaintiffs and their lawyers in the U.S., where a federal judge recently issued a temporary stay blocking the plaintiffs' American lawyers from seeking to enforce any judgment.

Chevron has also sued the country of Ecuador under the terms of a trade agreement between it and the U.S. Last week, a panel of arbitrators in The Hague ordered Ecuador to take "all measures at its disposal" to block enforcement of any ruling, both in Ecuador and overseas, until the panel rules on the case. That could make it much more difficult for the plaintiffs to convince a foreign court to seize Chevron's assets.

Ecuador has asked a U.S. court to block Chevron's trade suit and has challenged the panel's jurisdiction.

Even if Chevron never has to pay, the ruling could worsen what has already been a public relations nightmare for the oil giant when all oil companies are under added scrutiny in the wake of last year's oil spill in the Gulf of Mexico.

Investors, however, shrugged off the ruling Monday. Chevron's shares rose 1.3% to $96.95 in 4 p.m. composite trading on the New York Stock Exchange.

The judge ruled Chevron must pay $5.4 billion to restore polluted soil and $1.4 billion to create a health system for the community, among other penalties. The court also ruled that Chevron should pay the Amazon Defense Front, a coalition formed by the plaintiffs, an additional 10% in damages, or about $860 million. That could bring the total judgment to $9.5 billion.

In the ruling, Judge Nicolas Zambrano said that Texaco had the knowledge and technical ability to avoid damages; the damages "were not only foreseeable, but also preventable."

Few legal experts expected the case to get this far. The plaintiffs first sued Texaco in New York in 1993. Texaco, and later Chevron, successfully argued that the case should instead be heard in Ecuador, which was then run by a government seen as friendly to American business interests.

In 2007, however, Ecuador elected as president Rafael Correa, who has publicly supported the plaintiffs' cause. Chevron accuses the left-leaning government of interfering in the case, a charge the government denies.

Many of Chevron's fraud allegations involve a report from a court-appointed expert, Richard Cabrera, who in 2008 estimated Chevron's liability at more than $27 billion. Chevron said the report was actually written by experts hired by the plaintiffs, who then sought to cover up their involvement. In his ruling, however, the judge said he didn't base his opinion on the evidence presented by Mr. Cabrera, because of the fraud allegations.

The plaintiffs have taken steps that may leave them better prepared for the next phase of the case. They have secured millions of dollars in new financing, some of it from a London-based hedge fund that specializes in backing class-action suits. And they have hired new lawyers, led by Washington law firm Patton Boggs.

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Chevron Trying To Intimidate Ecuadorian Judge

Chevron CEO John Watson

Chevron has gone even further with its bullying practices in the environmental lawsuit over the contamination in Ecuador. Chevron lawyers threatened Nicolas Zambrano, the trail judge overseeing the case, with criminal sanctions and prison, if Chevron’s motion to nullify the trail is denied.Pablo Fajardo, the Ecuadorian lawyer representing the plaintiffs said:

"Chevron's threat to the judge is another example of its abuse of the rule of law and its desperation to avoid a judgment,"

"Threatening judges with criminal sanctions is typical of the Chevron way when it comes to litigating in Ecuador,"

Below is the press release by Amazon Defense Coalition with more details about Chevron’s threats toward the judge.

Chevron Threatened Ecuador Judge With Prison Time If He Failed to Grant Motions, Court Papers Say

On Eve of Judgment, Chevron Resorting to Intimidation Tactics

Amazon Defense Coalition
3 February 2011 – FOR IMMEDIATE RELEASE
Contact: Karen Hinton at 703-798-3109 or Karen@hintoncommunications.com

Lago Agrio, Ecuador (February 3, 2011) -- Chevron's lawyers in Ecuador have threatened the trial judge overseeing the historic environmental trial where the company faces a potential judgment in the billions of dollars, according to court papers made available by the plaintiffs.

In a series of recent legal papers, Chevron lawyers Enrique Carbajal and Alberto Racines threatened trial Judge Nicolas Zambrano with criminal sanctions and prison if he failed to grant their motions asking for a dismissal of the case, which has been on trial since 2003 in the Amazon town of Lago Agrio. The threats were clearly outlined in motions signed by the two lawyers and submitted to the court, said Pablo Fajardo, the Ecuadorian lawyer for the plaintiffs.

"Chevron's threat to the judge is another example of its abuse of the rule of law and its desperation to avoid a judgment," said Fajardo, who represents an estimated 30,000 Ecuadorians who brought the lawsuit.

Judge Zambrano recently sanctioned and fined Racines approximately $1,600 for repeatedly filing the same motions in an effort to delay the Ecuador trial. A third Chevron lawyer in Ecuador – Patricio Campuzano – was sanctioned for the same reason 2009. Also that year Racines exploded in anger at a trial testing site when oil was found at one of Chevron’s so-called “remediated” sites.

The first motion, filed by Carbajal on Chevron’s behalf, falsely claimed that the signatures of twenty of the 48 signatories to the lawsuit -- almost all indigenous persons and impoverished farmers -- were forged by attorneys for the plaintiffs. The plaintiffs rejected the claim and most of the 20 farmers appeared at a recent public event to verify that they actually signed the original lawsuit.

In the motion seeking the annulment of the trial based on the supposedly "forged" signatures, Carbajal wrote to the judge: "If you deny this motion, your conduct will fall within Article 292" of the criminal code of Ecuador, which requires a criminal sentence of up to six months for any public official who does not report a crime.

One day later, Racines filed a motion asking Judge Zambrano to nullify an expert report submitted by the plaintiffs by Dr. Lawrence Barnthouse, a renewed American natural resources ecologist. Racines, also citing Provision 292 of Ecuador's criminal code, said to the judge that "if you don't do it, you will have committed a criminal infraction punished by prison."

"Threatening judges with criminal sanctions is typical of the Chevron way when it comes to litigating in Ecuador," said Fajardo. "They would never attempt such intimidation tactics in U.S. courts."

In addition to the threats, Chevron has repeatedly been charged with trying to use intimidation tactics to dissuade law firms and financial partners from working with the plaintiffs, who live in dire conditions in approximately 80 different indigenous and farmer communities spread throughout the rainforest.

In recent days, Chevron has sued each of the 47 named plaintiffs in New York federal court; sought an unprecedented injunction from a U.S. federal judge to bar any American lawyer working on the case from enforcing a judgment from Ecuador's court anywhere in the world; and has actively tried to depose several of the plaintiff's lawyers. All told, the company has tried to depose 33 people in the U.S. who have worked with the plaintiffs.

Chevron also filed a civil RICO suit in New York, claiming the indigenous groups were trying to extort money from Chevron via the lawsuit.

"Chevron is acting out of pure desperation because we are nearing judgment," said Karen Hinton, the spokeswoman for the plaintiffs. "The company's new legal actions are designed to intimidate lawyers and funders and to provide a fake cover story for shareholders when the company is hit with an adverse judgment."

The environmental lawsuit charges Chevron with deliberately discharging more than 16 billion gallons of chemical-laced "formation water" into the streams and rivers of the Amazon over a 26-year period when it operated a large oil concession, decimating indigenous groups and poisoning an area the size of Rhode Island. The case was moved from U.S. federal court at Chevron's request after Chevron filed 14 sworn affidavits praising Ecuador's court system.

The top end of the damages claim recently submitted by the plaintiffs in their final argument is $113 billion. The plaintiffs have submitted tens of thousands of chemical sampling results that prove extensive soil contamination at 100% of Chevron's 378 former well and production sites in the Amazon.

"In the end, the voluminous scientific evidence will triumph over Chevron's intimidation tactics," said Fajardo.

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