Wednesday, December 19, 2012

Star Witness Backfires Against Chevron

Chevron’s new “witness” in the Ecuador case, Fernando Reyes, is the latest in a long line of company operatives whose comments have backfired against the oil giant in the long-running environmental litigation in Ecuador.

The growing list of discredited Chevron witnesses features a convicted felon who secretly videotaped a judge, an environmental expert who designed a soil sampling plan to make sure Chevron did not find contamination, a Chevron employee who ran a supposedly “independent” lab controlled by the oil company, an independent academic who turned out to be affiliated with a think tank that denies global warming, and a “technical expert” who turned out to be a former top lobbyist for the chemical industry.

The Reyes story is turning out to be more of the same.

Yesterday, Chevron released a press bulletin about a declaration by Reyes that is replete with lies and spin.

Reyes is an oil industry technician in Ecuador who worked briefly for the rainforest communities several years ago as part of their effort to monitor Chevron’s attempts to sabotage the trial.  In his declaration – parts of which appear to be written by Chevron lawyers -- Reyes claims the plaintiffs did not believe in their own evidence, which is simply untrue as these summaries demonstrate. See herehere, here, and here. 

In fact, Reyes could not point to one piece of evidence to contradict the overwhelming scientific data (including more than 80,000 chemical sampling results) that formed the basis for the $19 billion judgment against the company. See here. Even Chevron’s own lawyer, Rodrigo Perez Pallares, admitted in an advertisement the company deliberately dumped 16 billion gallons of toxic waste into Amazon waterways. See here and here. That’s about 85 times more oil waste than BP spilled in the Gulf of Mexico in 2010.

It turns our that Reyes worked for Fugro McClelland, a geotechnical consulting company paid by Chevron to audit its operations in Ecuador in the early 1990s.  He currently works for Ivanhoe Energy, an oil industry stalwart with operations in China, Mongolia, and Ecuador.

The Fugro audit, released during the trial of Chevron in Ecuador, contradicts the contention by Reyes that the contamination was not as severe as the lawyers claimed. That report said: “All produced water from the production facilities eventually discharged to creeks and streams” except for one of the 376 well sites and separation stations operated by the company. See here and here for more details.

Reyes later worked for Fugro as part of Chevron’s remediation in the mid-1990s, which is widely condemned as a sham.  That is to say, Reyes, by his own admission, took part in one of the largest environmental frauds in history – one that Chevron lawyers tried to use as a defense in their failed strategy during the Ecuador trial. 

Reyes claims he was not paid for his affidavit.  We’re not so sure.  It was signed in Colombia, so at a minimum he received an all-expenses paid trip to that country – similar to the one Chevron offered Mary Cudahee, an American journalist Chevron tried to recruit to spy on the plaintiffs.  Reyes was also trying to insinuate himself into the Ecuador case to make as much as possible,  according to Pablo Fajardo, the lead lawyer for the rainforest communities.

We clearly remember Chevron’s claim that Diego Borja, the Chevron contractor who orchestrated a failed video entrapment scheme against a sitting judge in Ecuador, was motivated by “civic duty”.  Chevron’s scheme completely backfired.  Later, Borja admitted that the company paid him at least $2.2 million for his efforts while describing him as a “Good Samaritan”. See here.

Reyes is yet another Chevron “witness” peddling junk science and fake facts.  We hope he shows up in court to face cross-examination so the truth can be fully disclosed, unfiltered by Chevron’s legal team and the fake narrative being peddled by the company’s six public relations agencies. Other witnesses presented by Chevron in the Ecuador matter whose credibility was quickly blown up include:

Witnesses like these must give Chevron shareholders great comfort in CEO John Watson’s handling of the litigation. Really, it’s all under control.
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Thursday, December 13, 2012

Chevron’s Self-Deluded CEO John Watson

Shareholders can now reasonably question whether Chevron CEO John Watson is fit to lead America’s second-largest energy company.  Increasingly, Watson is acting like a palace dictator surrounded by yes men who only deliver good news as the streets rage in protest.

It is well-documented that Chevron’s share price recently has taken a hit due to the $19 billion Ecuador liability and other litigation problems around the world, including a potential $22 billion liability in Brazil.  Wall Street has begun to take notice, with the company’s share price down 10% since October. 

Recently, Watson ventured out of corporate headquarters and entered what he thought would be a friendly setting at the prestigious Council On Foreign Relations in New York City.

Even there, he was confronted by the Ecuador reality.

After his remarks, the first question that hit Watson was from a Wall Street Journal editor who asked about the Ecuador liability that he said was “dogging” the company.  Watson had this to say in response:

"We are largely winning in the court of public opinion. You see much less written because anyone who has done their homework knows it’s a fraud and so we’re winning in the court of the public opinion, we’re making great progress in the courts but yes we do have to fight and we’ll fight it till we win."

This is a man not in touch with reality.

If Watson thinks the case is a fraud, how does he explain how Chevron’s fraud allegations have been examined and rejected by two courts in Ecuador, the U.S. Supreme Court, multiple U.S. appellate courts, and did not bother an enforcement court in Argentina that recently froze $2 billion of Chevron assets in that country?

Chevron now faces asset seizure actions targeting $15 billon in company assets around the world, including massive oil fields in Brazil and Canada critical to the company’s long-term strategic growth.   In the meantime, Watson’s lead U.S. law firm fighting the litigation – Gibson Dunn & Crutcher -- has been slammed for committing ethical violations on behalf of Chevron. 

The Ecuador case is not only costing Chevron massive sums in legal fees, but is putting Chevron at a competitive disadvantage worldwide. The company already is being forced to suspend planned investments in places where it faces asset seizure actions.

Watson believes much less is being written about the case?  Click on the links below and see just how out of touch Watson has become.

Small Sampling of Recent News Coverage of Ecuador Case









San Francisco Chronicle: Ecuadorans Take Right Against Chevron To Canada

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Monday, December 10, 2012

New York Times: Chevron Management Attacks Its Own Shareholders

Embattled by a $19 billion judgment in Ecuador, Chevron’s management team -- headed by CEO John Watson and General Counsel R. Hewitt Pate -- seems to be forgetting that shareholders actually own the company where they work. In their increasing arrogance, these fine men seem to ignore this basic truism of the corporate form.
This disturbing phenomenon at Chevron has become even more evident in an article published Sunday by one of the top business writers for The New York Times, Gretchen Morgenson. Morgenson weighed in on Chevron's attempt to intimidate and harass an institutional shareholder for urging the company to take responsibility for one of the world's largest environmental disasters in Ecuador. Chevron has undertaken an aggressive legal strategy against the Ecuadorians who filed the lawsuit and any shareholder who has raised questions over management’s mishandling of the litigation.
Morgenson reports that Trillium Asset Management, which oversees $1 billion in sustainable investments and is a Chevron shareholder, has been subpoenaed by the company in its so-called "extortion" case against the Ecuadorians and their lawyers and consultants. Trillium, as Morgenson points out, has asked the Securities and Exchange Commission to determine if Chevron has "adequately explained" its litigation risk. It also sponsored a shareholder resolution last year requiring Chevron’s Board of Directors to hire an independent expert to analyze its environmental practices. 
Essentially, Morgenson suggested that Watson and his team have an obligation to shareholders to answer their questions and grant them their right to criticize the company without trying to intimidate them into silence.
 She writes, "Trillium's activities do not seem outlandish. Hiring an independent environmental expert to sit on a board is a common shareholder request these days and asking the S.E.C. to review a company’s disclosures is fair game for shareholders. And yet, the receipt of the subpoena seems to indicate that Trillium’s work has drawn the company’s wrath. It is not alone."
Morgenson explains that Chevron also has attacked another large shareholder, the pension fund of New York that owns approximately $800 million of Chevron stock. Chevron has asked for an investigation into State Comptroller Thomas DiNapoli for calling on Chevron to settle the case as a way to mitigate its risk. See here.
Although Morgenson did not touch on it, Watson seems to have created a delusional psychological shell for company management.  When it comes to the Ecuador risk, he continues to mislead shareholders as demonstrated by this chilling report by securities lawyer Graham Erion. His recent comments to the Council on Foreign Relations – where he inserted himself personally into the litigation -- have to be disconcerting to any shareholder.  
In short, given his utter failure to confront the Ecuador reality honestly, shareholders can now reasonably question whether Watson is even fit to lead the company. It is already publicly documented that he suffers from a conflict of interest on the matter, having been a lead Chevron official who never adequately vetted Texaco for the Ecuador liability when Chevron bought the company in 2001.  We note that last year Watson suffered a series of stunning rebukes from shareholders at the company’s annual meeting related to the Ecuador matter. 
Read the entire article in The New York Times here.

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