Burdened with a series of intractable problems, Chevron CEO John Watson announced this week that he is stepping down after seven years at the helm of America's second-largest energy company. He will be remembered far more for saddling Chevron with huge environmental liabilities than for delivering value to shareholders.
Watson's legacy is to leave Chevron with a bleak long-term prognosis. While the fossil fuel industry faces unprecedented structural pressures, Chevron is arguably in a worse position than its peers. Watson made a disastrous bet in Australia on the Gorgon natural gas project, a move that landed him in major trouble with tax authorities and saddled Chevron with at least $20 billion in cost overruns.
But let's focus on Watson's most obvious mistake, Ecuador.
Ecuador is the place where Watson literally has blood on his hands for failing to address the fallout from Texaco's deliberate dumping of billions of gallons of toxic waste into the rainforest when it operated six huge oil fields from 1964 to 1992. The dumping -- called the Amazon Chernobyl by locals -- decimated indigenous nationalities and continues to kill scores of innocent people as confirmed by multiple academic studies and various court rulings.
While Chevron left Ecuador in 1992, the company's toxic legacy -- including roughly 1,000 open-air toxic waste pits -- continues to cause grievous harm to the local population. Under Watson's recommendation, Chevron bought Texaco in 2001 and now owns the Ecuador problem.
A successful litigation brought by local communities to repair the damage has captured the imagination of the world. The legal battle led to a $9.5 billion judgment in Ecuador in the venue where Chevron accepted jurisdiction and where it had insisted the trial be held. Chevron could have settled the claims for a relative pittance years ago. But under Watson, the Ecuador liability has now ballooned to $12 billion (with interest) in Canada, where the villagers are enforcing their judgment.
In Canada, the country's Supreme Court in 2015 unanimously backed an effort to try to seize Chevron assets to pay for the clean-up. Major international law scholars and civil society organizations, including Amazon Watch, also have backed the villagers.
Watson was the Chevron executive in charge of merging with Texaco back in 2001. At the time, environmental groups such as Amazon Watch warned him about the massive pending liability in Ecuador; he ignored the warnings, which perhaps explains why he doubled down and started attacking his victims and their lawyers. He also ordered a $2 million payment be made to a witness to lie in order to help the company cover-up its disastrous policy.
At the time Watson was director of Chevron's acquisitions, Chevron grossly overpaid for Texaco's assets given that there was no accounting for the Ecuador clean-up costs. But arrogance is Watson's hallmark personality trait.
Angry at being challenged by shareholders and activists, Watson and his General Counsel R. Hewitt Pate launched the most expensive corporate "defense" in history. They threatened the Ecuadorian villagers with a "lifetime of litigation" if they persisted. They had five shareholders arrested at an annual meeting after they challenged the company's Ecuador policy. Chevron's lawyers even fabricated evidence to secure a favorable "judgment" in a farcical non-jury trial in U.S. federal court, making a mockery of justice in the process.
A Chevron official wrote an email saying Watson's main litigation strategy was to "demonize" Steven Donziger, the tenacious Harvard-educated human rights lawyer who has led the fight against Chevron for years. Donziger personally deposed Watson in 2013 in New York. Although the pro-Chevron judge sealed the deposition -- a ridiculous and unnecessary move -- we can assert with certainty that Watson came across as an angry and petty man.
Watson even told Forbes he would stop the Ecuador litigation only when Donziger and the lawyers "give up" and quit the case. That's an intimidation strategy, not a litigation strategy worthy of a major public company that purports to behave ethically.
Watson tapped into shareholder resources to hire at least 2,000 lawyers and 60 law firms to try to beat back the courageous indigenous villagers -- another massive cost suck that suggests Gorgon was not Watson's only spending problem. In his latest maneuver, Watson has ordered his lawyers to illegally try to collect $32 million in legal fees from longtime nemesis Donziger.
Chevron's refinery in the California town of Richmond is another example of Watson's short-sightedness. Major fires at the refinery have spewed so much toxic waste that 15,000 local residents have been forced to receive medical attention. Rather than shut down or at least update the refinery, Watson tried to take over the town by financing a slate of candidates for city council while secretly funding an on-line newspaper to spew pro-Chevron propaganda.
Under Watson's leadership, Chevron has tried to buy its way out of its litigation problems by spending heavily in the political world rather than compensate the company's victims. Watson ordered Chevron to be a major donor to the Trump inauguration and other Koch-funded initiatives designed to increase corporate power. Watson also donated millions of Chevron dollars to the Clinton Foundation and the U.S. State Department during the Obama Administration at the same time his team was inappropriately lobbying to try to kill off the Ecuador liability.
Watson was willing to take extraordinary risks for the leader of a public company. His corrupt witness payments to Guerra and another Chevron employee, the infamous Diego Borja, continue to this day. With Watson's blessing, Chevron also spent at least $15 million on the corporate espionage firm Kroll to spy on Donziger and his colleagues and to try to enlist independent journalists to go undercover in Ecuador on the company's behalf.
Chevron's next CEO will need to clean up Watson's dastardly mess in Ecuador. Indigenous people are still dying in the Amazon because of the company's failure to address its toxic legacy. It's long past time for Chevron's Board to admit that Watson only has made matters worse both for the people of Ecuador and the company's own shareholders.