Friday, September 28, 2012

How Chevron Squanders Big Bucks on Ecuador Case

Want a good example of how the lawyers at Gibson Dunn & Crutcher rip off their wealthy client Chevron?

It is becoming increasingly obvious that Chevron CEO John Watson and General Counsel R. Hewitt Pate are unable to stop the Gibson Dunn "rescue team" from squandering shareholder money to flout the company’s $19 billion environmental liability in Ecuador.

In a sickening example of overkill that might explain why people hate the legal profession, Chevron recently reported that it has employed 41 different law firms and almost 500 lawyers and legal assistants to fight the indigenous groups in Ecuador. These groups -- including the Cofan, Secoya, and Siona -- have been victimized by Chevron's deliberate dumping of billions of gallons of toxic waste into the precious Amazon ecoysystem that the tribes depend on for their survival.

See this video for background on the case and this summary of the evidence against the oil giant.

In New York federal court this week, Gibson Dunn sent 11 lawyers to a relatively inconsequential hearing on a subpoena given to a non-party in its far-fetched “RICO” conspiracy case against the indigenous groups and their lawyers who are fighting to hold Chevron accountable. 

The firm dispatched five high-billing partners from various offices around the country – Randy Mastro (New York), Lauren Elliott (New York), Peter Selig (Washington, D.C.), William Thomson (Los Angeles), and Richard Mark (New York) – along with six other associates.

It was only Mastro, however, who stood up and argued to Judge Lewis A. Kaplan while the others seemed to sit around churning their billable hours while occasionally giving Mastro a cite to the record, a task any secretary could do.

Gibson Dunn obviously has some underutilized senior partners trying to jack up their billable hours at the expense of Chevron shareholders.

Let’s run the numbers.

Five partners, billing an average rate of $800 per hour, amounts to $4000 per hour. The hearing took several hours over two days, not to mention significant preparation time, travel time, and the writing of the subpoena itself. The six associates probably billed an average of $400 an hour to sit in the gallery and essentially do little but fetch coffee while watching the proceedings.

That’s roughly $6,400 per hour billed to Chevron shareholders for doing a whole lot of nothing. The entire proceeding easily could have been handled by Mastro and one associate. This reminds us of how 10-20 Chevron lawyers and technical staff would show up to watch American lawyer Steven Donziger be deposed for 15 days in 2010 and 2011. One person would ask questions, while the rest would watch. Various other Chevron lawyers around the country would bill for watching a live internet stream of Donziger’s testimony. 

The total bill for that exercise in overkill was at least $100,000 per day.

Chevron admitted it polluted Ecuador, but it claims it spent $40 million on a “remediation” that was nothing more than a fraudulent cover-up of its toxic waste pits. In the meantime, Chevron has spent an estimated $1 billion on its defense in the case, with Gibson Dunn’s per-partner profits in 2010 jumping 20% during a sharp downturn in the legal profession -- largely because of the wasteful billing practices that we saw this week in New York.

Chevron shareholders should not expect CEO Watson and top lawyer Pate to do much about safeguarding the company's assets when it comes to the Ecuador gamble. They double down on the company's increasingly futile defense almost weekly, so it means little to squander another $100,000 of shareholder money on a day in court so Mastro can renovate his house in the Hamptons over the winter.

Watson almost lost part of his job over his mishandling of the Ecuador litigation at the company's last annual meeting.

With waste like this and the increasing risk that billions of dollars worth of Chevron assets around the world will be seized, expect an even more forceful push by shareholders against Watson next year.

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 to find out more.