Friday, September 5, 2014

Rolling Stone Nails Chevron for Corrupt Acts In Ecuador Litigation

None other than Rolling Stone (with its 4 million Twitter followers) has now weighed in on Chevron's environmental catastrophe and cover-up in Ecuador. The picture is not pretty for company management and shareholders.

The detailed story by Alexander Zaitchik that appeared last week on the magazine's website nails Chevron for trying to sabotage and corrupt the eight-year trial that ended in 2011 with a devastating $9.5 billion judgment against the company. The judgment was later affirmed unanimously by two appellate courts, including Ecuador's highest court. In any event, we are happy to recognize good journalism when we see it.

Even though it wanted the case tried in Ecuador, Chevron now has sour grapes and won't pay up. Thousands of lives are at risk due to the refusal of Chevron management to address the company's legal obligations.

For those counting, a total of nine judges in Ecuador who reviewed the scientific evidence ruled against the company. Contrast that to the ruling in New York by one activist trial judge (Lewis A. Kaplan) who refused to hear any of the scientific evidence of Chevron's contamination and who openly mocked and denigrated the Ecuadorians and their U.S. legal advisor, Steven Donziger.

One might assume that Kaplan – who denied Donziger and his clients a jury trial – knows far less about Ecuadorian law than the judges on the Ecuadorian Supreme Court, which affirmed the decision against Chevron. Deepak Gupta, Donziger's esteemed U.S. appellate lawyer, called Kaplan's trial a shocking example of "judicial imperialism" designed to dictate to all of the world's courts how they should view the judgment against Chevron.

The Rolling Stone article, which gives Donziger and the Ecuadorian lawyers kudos (calling Donziger a "warhorse lawyer") for standing up to Chevron's intimidation campaign, can be read here in full.

Next up for Chevron is argument before the Supreme Court of Canada on December 11. That court will determine whether the rainforest communities can try to seize a sizable portion of the $15 billion worth of Chevron assets in Canada. A separate enforcement action in Brazil is also moving at a far faster clip than Chevron CEO John Watson is disclosing to his company's shareholders.

The immediate objective of these actions is to obtain the funds necessary to fix the massive environmental damage in Ecuador. The larger issue is for courts worldwide to show Chevron and its army of 2,000 lawyers that they are not above the law, as company lawyer Sylvia Garrigo famously asserted to Scott Pelley of 60 Minutes. (Garrigo: "We didn't want to get sued, period. We don't want to be in any court, much less a court with respect to this kind of claim, which we consider to be frivolous.")

None of this sprawling litigation would be necessary had Chevron lived up to its original promises.

Chevron fought from 1993 (when the case was filed in New York) to 2001 to have the trial moved to Ecuador. At the time, it filed 14 separate affidavits praising the fairness of Ecuador's judicial system and promised to abide by any adverse judgment in Ecuador. The promises went out the window when the scientific evidence during the trial pointed to the company's guilt and Chevron realized Ecuador's courts were able to resist its efforts to corrupt the process.

Chevron's big problem in 2015 is that the rule of law is catching up to it. Not only are two foreign courts proceeding against Chevron's assets with a third (Argentina) and possibly others waiting in the wings, but Judge Kaplan's ruling is at great risk of being reversed by a three-judge panel on appeal as Donziger's appellate brief makes clear. Aside from trying to meddle in the judiciary of a foreign country, Kaplan let Chevron pay a corrupt fact witness about $2 million in cash and benefits.

Given Chevron's diminishing returns, is a settlement between the parties now possible?

After two decades of Chevron's litigation abuse, the villagers are publicly insisting that they will not stop until they collect the entirety of the $9.5 billion judgment. We can understand why. For one thing, interest is running. For another, Chevron won't be able to pressure or corrupt the courts of Canada like it thinks it can do in many countries around the world.

The other factor working against Chevron is that the amount of the Ecuador judgment is miniscule compared to BP's enormous liability (now approaching $50 billion) for the far smaller Deepwater Horizon spill in the Gulf of Mexico. Unlike BP's raging spill, what Chevron did in Ecuador was intentional and not an accident. And it has lasted for almost five decades, not five years.

The reality is that Chevron has gotten off easy in Ecuador, given the magnitude of what it did.

We hear that CEO Watson is emitting smoke signals about some sort of exit strategy. We can't say we blame him. If Chevron really wants lasting peace, we strongly suggest to Watson that he not make the same mistake Texaco made in the 1990s by trying to "settle" with Ecuador's government while ignoring the communities.

That mistake by Texaco led only to endless litigation and Chevron's worsening reputation as a leading rogue actor in the oil industry. It also led to huge legal fees – estimated at $2 billion over several years – and major distractions for upper-level management. There is also potential exposure down the road for conspiring to interfere with court proceedings. (Watson himself was deposed under oath in the case while two high-level Chevron officials were indicted in Ecuador for fraud.)

While on the topic of journalism, we want to give a big shout out to William Langewiesche, the writer for Vanity Fair whose brilliant 2007 article on lead Ecuadorian lawyer Pablo Fajardo was the first by a major American magazine to capture the context of Chevron's awful track record in Ecuador.

Like the Rolling Stone article, the earlier Vanity Fair piece is must reading for anybody who wants to understand the reality of Chevron's venality in Ecuador.