Thursday, December 20, 2018

2018 Was Tough Year for Chevron On $12b Ecuador Case; Board Asked To Investigate CEO Wirth

Chevron had a tough year in 2018 as it dug itself an even deeper hole on environmental issues across the globe, most notably on the landmark pollution case where the company faces a $12 billion liability for causing the "Amazon Chernobyl" in Ecuador.

Chevron's massive expenditures on that litigation -- now up to $3 billion in legal fees to pay 2,000 lawyers -- are intended to try to crush impoverished Ecuadorian Indigenous peoples and farmer communities who won the landmark pollution judgment. Those expenditures are also a telltale sign of the company's increasing anxiety. No matter how you cut it, 2018 was a bad year for Chevron and its pollution profiteers at major law firms who work hard to keep the victorious Ecuadorian communities tied up in court for no good reason.

First, consider the many setbacks suffered by Chevron CEO Michael Wirth in 2018:

**Chevron's own shareholders are rebelling over the company's Ecuador liability. Thirty-six institutional shareholders representing $109b in assets wrote a stunning letter demanding that the hard-headed Wirth explore a settlement. Two shareholder resolutions criticizing Wirth's mishandling of the Ecuador litigation received overwhelming support at the 2018 annual meeting. (See here for background.)

**Civil society is also rebelling against Chevron after it received the ignominious Public Eye Award for being the worst global company. Almost 1 million citizens signed an on-line petition from Avaaz blasting Wirth for failing to comply with the Ecuador judgment. In Canada, 653 aboriginal groups signed a protocol with Ecuador's national federation to hold Chevron accountable for its environmental misconduct. Chevron is becoming persona non grata in the Indigenous world. But wait -- some of the world's most valuable oil reserves sit above Indigenous lands!

**In Canada, Chevron's attempts to shut down the Ecuador judgment enforcement action continue to fail. Canada's Supreme Court has backed the Ecuadorians in a unanimous opinion. Chevron's latest gambit to evade that decision -- to hide its Canadian assets in a wholly-owned 7th-tier subsidiary -- is now before the Canada Supreme Court. Regardless, Chevron faces an embarrassing trial where its star witness Alberto Guerra will face questioning for his lies and corrupt acts and Chevron's American lawyers will be asked about their apparent witness bribery.

**Chevron also faces major tax liabilities in Canada related to billions of dollars of suspicious payments made by the company's Canadian subsidiary to the governments of Nigeria and Indonesia. Chevron's lawyers in Canada, led by Larry Lowenstein, have tried to hide these payments. Chevron's reputation as a global tax cheat extends well beyond Canada to Australia, Argentina, and the Netherlands.

**Chevron's main defense -- that the Ecuador judgment was obtained thru bribery -- has fallen apart. Not only did that defense depend almost completely on Guerra's lies, but there is credible evidence that Chevron and its lawyers might have engaged in a criminal conspiracy to manufacture evidence as part of  a "kill step" marketing strategy being peddled by the ethically-challenged Gibson Dunn law firm -- a firm already caught fabricating evidence in another case. Lawyers at Gibson Dunn and Chevron officials face a criminal referral letter to the U.S. Department of Justice for their apparent misconduct.

In other parts of the word, Chevron is contending with multiple lawsuits over climate change after Wirth's failure to adjust his business model to mitigate harm to the planet. The company is aggressively fighting crab fishermen in California whose catch has dramatically dropped because of warming waters; has been sued by municipalities over global warming; and has been accused by the Mapuche of polluting their traditional lands in Argentina as part of an earlier corrupt move to kill off an enforcement action of the Ecuador judgment in that country. (See here.) That's just the tip of the iceberg for Chevron, as any Google search will disclose.

Chevron faces increasing resistance from civil society groups for its backward-facing approach to environmental issues. Several such groups have organized to thwart Chevron and other polluters from using the legal system to engage in illegal SLAPP-style attacks on environmental and human rights defenders. Our American friend Steven Donziger, who has fought Chevron for 25 years over the Ecuador pollution, was once sued for $60 billion by Chevron in New York as part of its corporate intimidation campaign. That was before the company chickened out and dropped all damages claims against Donziger to avoid a jury of impartial fact finders.

Prominent groups as varied as Amazon Watch, London-based Global Witness, Rainforest Action Network, Greenpeace, the ACLU, and the Electronic Frontier Foundation have protested Chevron's attacks against human rights defenders such as Donziger, the driving force behind the Ecuador judgment. Several groups have formed a coalition ( to safeguard Free Speech in light of Chevron's and Gibson Dunn's assaults on political activity. It doesn't help Chevron that legendary rocker Roger Waters was just in Ecuador's Amazon in a display of solidarity with the people the company poisoned. (See here for a television report.)

After having spent billions to fight the Amazon communities who won in court, Wirth and Chevron General Counsel R. Hewitt Pate have a lot to answer for. Chevron shareholders just filed two more resolutions challenging the mismanagement by Wirth and Pate of their funds. This promises another contentious annual meeting next May that will be dominated by talk of Wirth's human rights violations in the Amazon. Chevron is also trying to coax Team Trump (after donating $500,000 to Trump's inauguration) to pressure Ecuador's fragile government to turn against its own citizens and side with the oil company in the litigation, another project destined to fail.

Wirth also has yet to account for Chevron's Nazi past (via Texaco) as outlined in Adam Hochshild's excellent book, Spain In Our Hearts. The company's board of directors should commission an independent investigation into this issue. While at it, it should also take an independent look at the broader Chevron human rights violations in Ecuador and in the offices of its hired guns at the U.S. law firm Gibson Dunn.

Oops, that might not happen given that Wirth is Chairman of the Chevron Board and CEO, an antiquated structural relic frowned upon by almost all corporate governance experts.

When the history of Chevron is written, the company will surely go down as one of the most corrupt and criminal ever to rampage across the globe. Governments owe it to their citizens and to the survival of the planet to cease doing business with this destructive company until it pays what it owes to the peoples it harmed in Ecuador and it demonstrates it can be a responsible corporate citizen.

Friday, November 23, 2018

Statement From Ecuadorian Communities About Support From Musician Roger Waters

The following is a statement regarding Roger Waters released today from Carmen Cartuche, the President of the Front for Defense of the Amazon (FDA), the grass roots organization in Ecuador that is the beneficiary of the historic environmental judgment against Chevron:

Rumors that Roger Waters received money to come to Ecuador or that he might profit from the historic litigation are based on lies propagated by Chevron. Roger has generously supported the local Ecuadorian communities in their legal battle with donations just as he has many other social justice movements around the world. Roger has never expected to profit from the affected communities should they collect on their judgment against Chevron.

The document being circulated by Chevron to supposedly show Roger was entitled to a minuscule percentage of the Ecuador judgment should there be a collection is wholly misleading. The Chevron document reflects what the affected communities aspired to give Roger in exchange for his donation. Roger never asked to be an investor, is not an investor, and will never be an investor.

To be clear, the use by the affected Indigenous and farmer communities in Ecuador of third-party investor funds to finance their lawsuit against Chevron has allowed us to achieve great success. Many of our supporters around the world have participated in this funding model, which is entirely proper and laudable even though Chevron obviously would much prefer that its victims rely only on “charity” to press their legal claims. The funding model is also a paradigm-shifting breakthrough for the human rights movement. Outside funds in relatively modest amounts have allowed the Ecuadorians to win their case and sustain their campaign against Chevron for 25 years. Without funds provided by investors and donors, Chevron’s victims would never stand a chance against the estimated $2 billion the company has spent on its army of 60 law firms and 2,000 lawyers.

The funding model used by the affected communities in Ecuador has enabled a historically unprecedented level of accountability for corporate criminality and fraud committed by a major oil company, Chevron. The model is one of many that human rights advocates can use to increase accountability for corporate wrongdoers. We also believe the model we use can enhance access to the justice system for all who are victimized by private companies that perpetrate human rights abuses.

We again thank Roger Waters and all donors and investors for their continued support of our campaign in the face of Chevron’s unethical and illegal attacks on our right to seek just compensation for the company’s environmental pollution.

Carmen Cartuche
President, Frente de Defensa de la Amazonia (Front for the Defense of the Amazon)
November 23, 2018

Thursday, October 11, 2018

Chevron Appears To Be A Global Tax Cheat As Well As Serial Human Rights Abuser

In the battle between Indigenous peoples and Chevron over the company's massive toxic dumping in Ecuador, one thing has become increasingly clear: the human rights abuses committed by the company in the Amazon are not unique. They are in fact indicative of an internal culture that clearly flouts the law as part of the company's customary business practices. And the victims of this culture extend way beyond the people of Ecuador.

Chevron's history of toxic dumping in Ecuador and its subterfuge to avoid paying damages is widely known and undisputed. The company's global tax avoidance practices -- tax cheating -- are less well known but are becoming more evident. Think of that New York Times story on the Trump family's tax fraud, and one can quickly understand what Chevron is doing on a global scale.


Australia: Chevron maintains its largest foreign investment in the Gorgon natural gas project off the northern coast of Australia. It sold Australians on the promise that it would pay billions annually in tax revenue to the country so it could build things like hospitals and schools. Instead, Chevron for years paid zero taxes in Australia despite making huge profits. It did this by having its Australian subsidiary pay back a high-interest 9% loan provided by a Chevron subsidiary in Delaware in what is clearly an illegal "related company" transaction designed to evade tax laws.

The loan repayments "wiped out" all Chevron profits in Australia and the company never paid taxes. Chevron ended up being caught and authorities forced it to pay a massive tax bill; company officials who orchestrated the scheme are the same officials who have refused to pay the Ecuador judgment after dumping billions of gallons of cancer-causing waste into the Amazon. They were not personally prosecuted, fined, or punished. See here for part of the background.

Canada: Chevron pays almost no tax in Canada despite generating billions in revenue from its wholly-owned Canadian subsidiary, Chevron Canada. In the course of the judgment enforcement action brought by Ecuadorians in Canada to force compliance with the $12 billion Ecuador pollution judgment, we learned that Chevron Canada pays billions each year to the governments of Indonesia and Nigeria in an obvious tax-avoidance scheme orchestrated at Chevron headquarters in California.

That is, Chevron uses its Canadian subsidiary as a vehicle to lower its tax bill in a country where it maintains an estimated $25 billion in assets. Other oil companies also see Canada as a major tax haven, but Chevron takes the cake in terms of taking advantage of the country's tax laws. This article from The Guardian captures part of the problem.

Netherlands: A bombshell complaint filed days ago by several unions documented how Chevron uses the Netherlands to funnel billions of dollars of profits made through its subsidiaries in other countries (among them Argentina, Venezuela and Nigeria) to lower its tax rates in the places it actually operates. Although we don't have the complaint, we do have this Reuters story that documents what's in it. The article explains how Chevron is once again taking the lead in using the laws of an unsuspecting country to screw populations throughout the world who stand to benefit from the proper payment of taxes in the locales where production actually takes place.

Corporations like Chevron often claim that "tax avoidance" is perfectly legal. While we won't grant the company that much credit, "tax avoidance" seems to have migrated into the realm of "tax cheating" when it comes to Chevron's business practices in Australia, Canada, and the Netherlands.

In our experience, this is par for the course for Chevron CEO Michael Wirth and General Counsel R. Hewitt Pate. This duo and their lawyers from the U.S. firm Gibson Dunn have paid bribes to witnesses and created fraudulent evidence to rip off the Indigenous peoples and farmer communities of Ecuador whose cultures Chevron has decimated. Speaking of cultures, Chevron's is clearly rotten.

We will continue to follow the Chevron "tax cheat" story as information emerges.

Saturday, September 8, 2018

Here Are The Three Secret Trade Arbitrators Undermining Indigenous Groups In Ecuador's Rainforest

The three men above are being used by Chevron as a secret kangaroo court to try to undermine enforcement of the landmark $12 billion Ecuador pollution judgment resulting from the company's deliberate dumping of billions of gallons of cancer-causing oil waste into the rainforest. This so-called "court" is widely seen as a joke: it uses arbitrators who actually are private lawyers who charge commercial rates and reap enormous fees. They meet in secret and in this case repeatedly refused to let the Indigenous peoples of Ecuador participate or even attend as observers.

The discomfiting scenario of a private court for corporations might be the future look of "justice" in a world where the Koch Brothers and their allies wish to hide the gruesome details of corporate wrongdoing and corruption. It is also where outcomes easily can be rigged against human rights victims, as Chevron's lawyers tried to do here. The proceedings were held mostly in secure conference rooms of luxury hotels. (See here for how Chevron's law firm Gibson Dunn uses fraud to attack the Ecuador judgment; here for a blistering critique of the secret trade court by Ecuadorian community leader Carmen Cartuche and two lawyers for the affected communities.)

In the Chevron case against Ecuador's government, the names of the conflict-ridden trade arbitrators who work faithfully in service of the corporate class are Grigera Noan, Vaughn Lowe, and V.V. Veeder. Each made an estimated $25 million by charging standard commercial rates of $1,000 per hour to oversee Chevron's secret arbitration, which began in 2009 and is ongoing. These men for years have refused to disclose the exact amount of riches they have reaped by undermining the claims of the rainforest communities of Ecuador.

In short, these white males enriched themselves at the expense of the Indigenous peoples Chevron decimated with cancer as a result of its systematic and deliberate toxic dumping of 4 million gallons of produced waste water daily into rivers and streams. Notably, the trio have ignored demands by several civil society groups to disclose details of their inner workings. U.S. lawyers Max Gitter (see here), R. Hewitt Pate (see here) of Chevron, and Randy Mastro (here) and Ted Boutrous of the ethically-challenged Gibson Dunn firm are also on the growing list of those who have profited personally courtesy of Chevron's big money assault on the rainforest communities.

This week the arbitrators predictably carried out one of the final acts of their solemn duty to try to deliver impunity to a major corporate human rights violator. They purported to "rule" -- in contradiction to the robust findings of four layers of public courts in Ecuador -- that the judgment against Chevron achieved after two decades of litigation should be nullified. They relied on a fake "fraud" narrative Chevron concocted that was based largely on the testimony of an admittedly corrupt witness (Alberto Guerra) paid $2 million by the company to lie in open court. Chevron's lawyers coached Guerra for 53 consecutive days before he told his made-up story; Guerra later admitted under oath that he had lied while a forensic report proved he lied.

Most importantly, they refused to hear from the Indigenous peoples against whom this judgment is ultimately directed. No wonder they wanted to keep it secret. Could any "court" process be any more illegitimate than this one?

Guerra's testimony -- which resulted in a criminal referral letter of Chevron and its lawyers to the U.S. Department of Justice -- utterly destroyed Chevron's claim about the supposed "ghostwriting" of the judgment. "Money talks, but gold screams," Guerra had told Chevron's lawyers in 2011 as he demanded exorbitant and illegal fees for his witness testimony. Guerra is still on Chevron's payroll years later, living in a luxurious house near Chicago. We estimate he's made at least $5 million from the company after his last salary in Ecuador was $6,000 annually. Chevron even pays his income taxes. But the arbitrators in their decision almost completely ignored these credibility problems.

The three lawyer-arbitrators tried to overturn 17 separate appellate judges in Ecuador who affirmed the pollution judgment based largely on 105 technical evidentiary reports and reams of witness testimony. Ecuador's Constitutional Court validated Chevron's responsibility for its toxic dumping in a unanimous decision issued in July of this year. But the secret arbitrators have also done the world a favor of sorts. Their ruling vividly illustrates why the public needs to get rid of these anti-democratic, pro-corporate trade courts once and for all. No trade treaty should ever again have a provision for allowing private arbitration for the corporate class.

The double standard of the private trade court concept is amazing, if not patently racist as applied to the current situation in Ecuador. Chevron loses a case in a regular public court where it had accepted jurisdiction and then gets another bite at the apple in a Kafkaesque proceeding where the opposing party -- in this case Indigenous peoples and impoverished farmer communities who have the most important interest in the dispute  -- can't participate.

The morally bankrupt trade process uses indecipherable standards rather than actual laws. Until Chevron came along, no trade arbitration panel in history had tried to "reverse" a ruling by the highest court of a sovereign nation involving a litigation between private parties. To do so is an open assault on Ecuador's sovereignty and its independent judiciary and is illegal as a matter of international law, according to dozens of scholars. For this reason and others, we believe the latest trade court ruling is unenforceable and Chevron will look foolish if it tries to use it to block the ongoing judgment enforcement actions to seize company assets in Canada. (Canada's Supreme Court already has backed that effort of the rainforest communities in a unanimous opinion.)

Speaking of double standards, exceptions to the normal rules of justice apparently must be made when Indigenous groups turn the tables on a powerful oil company. Commercial companies get a free pass to the secret arbitration when they can't win in public courts by the normal rules of evidence. But not real human rights victims. According to the arbitrators, these dangerous Amazonian peoples who apparently never merited even a seat in the hotel courtroom must be stopped cold in what seems like a modern-day version of the Indian Removal Act passed in 1830 by the U.S. Congress. While we believe this secret trade court cannot stop the enforcement of the Ecuador judgment, it is still a disgusting example of the state of our world in the age of Trump and the Koch Brothers.

We remember that day way back in 2009 when Chevron General Counsel Charles James initiated the secret arbitration as he was about to lose the pollution judgment in the company's preferred forum of Ecuador, where it had insisted the trial be held. It made the request under the supposed authority of the U.S.-Ecuador bilateral investment treaty. This treaty came into effect in 1997 even though Chevron already had fled the country in 1992.

But like the NAFTA treaty, this bilateral trade treaty allowed "investors" to sue host governments for any "complaint" they might conjure up. In this case, Chevron's "investment" was not drilling for oil and then dumping its toxic waste; it was the very fact of its lawsuit brought after the treaty came into effect. Could anything be more unfair? Would you believe us if we told that the Ecuador government official who sold out his country to corporate interests by signing the treaty (Benjamin Ortiz) has served as Chevron's spokesman in Ecuador on the environmental litigation for several years? That's how Ortiz has enriched himself since he left his government post.

Ecuador under a prior government opposed the entire arbitral process as illegitimate. But the three arbitrators claim they can determine their own jurisdiction with millions of fees waiting in the wings. Guess how they ruled? They granted themselves jurisdiction in yet another example of a conflict-ridden process. Nothing about this deserves any respect from any real court. And Ecuador's President, Lenin Moreno, should strongly defend his nation's citizens in light of this vicious and illegal Chevron assault clothed as an arbitral ruling.

Ecuadorian community leader Carmen Cartuche, who helped bring the lawsuit against Chevron, appropriately summed up the secret court decision as follows:
The decision by three male arbitrators who claim they have a right to "judge" Amazonian Indigenous peoples and impoverished farmers secretly from the comfort of luxurious hotel conference rooms in the United States and Europe is outrageous. This decision is an attempt by the global corporate establishment to use unfair trade agreements to block legitimate social movements. This decision is legally irrelevant and will be ignored as the travesty of justice that it is. It will not block our litigation to hold Chevron accountable in Canada so that just compensation can be paid to the thousands of people who died of cancer or otherwise been harmed by the slow genocide the company is imposing on our country.


Monday, June 11, 2018

Chevron's $12b Ecuador Pollution Liability: Where It Stands After New Canada Court Decision

It is clear that two recent court decisions in Chevron's $12 billion "Amazon Chernobyl" pollution case -- in Canada and Gibraltar -- have led new CEO Michael Wirth to issue yet more misleading statements to distract attention from the company's environmental liability. Wirth's approach suggests increasing frustration inside Chevron's executive suites as the case enters its 25th year and the Indigenous peoples of Ecuador show no sign of letting up in their historic accountability campaign.

Chevron has spent an estimated $2 billion on its "corporate intimidation" campaign (see this article from Greenpeace's Rex Weyler) targeting the Ecuadorian Indigenous peoples and the lawyers who won the landmark court judgment ordering a clean-up of what is widely considered the worst oil-related disaster on earth. Instead of complying with the law, Chevron threatened the Indigenous peoples with a "lifetime of litigation" if they persisted.

How poorly this strategy is working can be seen by the fact close to 1 million people signed an on-line petition from Avaaz calling on Chevron's largest shareholder (Vanguard) to challenge company management on the issue. Chevron shareholders slammed Wirth at the company's annual meeting on May 30 over his "material mishandling" of the Ecuador liability and his ham-fisted approach to climate change and environmental issues generally. Chevron is increasingly out of step with the world at large and even many of its industry peers on these critical issues.

Despite Wirth's massive spending, a lawsuit filed by the Indigenous peoples of Ecuador against Chevron to enforce the $12b judgment is heading again to Canada's Supreme Court. That's after an astounding win by the Ecuadorians before the same court in 2015. The stakes could not be much higher for human rights victims the world over and for corporate polluters like Chevron who continue to use legal maneuvering and tricked-up corporate structuring to evade liabilities for environmental harm. More on that below.

At Chevron's recent annual meeting, 36 institutional investors who manage $109 billion in assets urged Wirth to seek settlement of the Ecuador matter as a way to minimize future shareholder risk. Several shareholders directly confronted Wirth at the meeting about the company's failure to address its legal obligations to the people of Ecuador given that cancer rates have skyrocketed and legendary nurse Rosa Moreno and thousands of others have died. Two resolutions challenging management over the case received overwhelming support at levels significantly higher than last year. Zevin Asset Management and Newground Social Investment sponsored the resolutions.

New CEO Michael Wirth gives shareholders the proverbial "middle finger".
Wirth's response to shareholder concerns was to hold up the equivalent of the middle finger. He refused to meet with representatives and then blamed "trial lawyers" like Steven Donziger (the human rights lawyer who has advised the Ecuadorians) for what has to be one of the oldest cliches in the book for corporations caught in major wrongdoing. He also claimed Chevron "cleaned up" its toxic mess in Ecuador -- including its 1,000 open-air waste pits -- when it created an obvious sham remediation that has been rejected by three layers of courts in Ecuador.

In all, the Chevron shareholder meeting was a stunning rebuke for a CEO who has staked a good portion of his company's reputation on one enormous litigation. Chevron has spent at least $2 billion to hire 60 law firms and 2,000 lawyers to attack lawyers for the Indigenous groups whose lands and waterways it poisoned. Yet the company already has lost multiple court decisions in Ecuador (three layers of courts) and in Canada (before the country's Supreme Court and twice before the Ontario Court of Appeal) while Wirth and his management team have dehumanized the very people they continue to harm, as Paul Paz y Miño of Amazon Watch pointed out in this captivating post.

Chevron did win once in 2014 before a sole U.S. trial judge (Lewis A. Kaplan) who relied on false testimony from a witness paid $2 million by the company, who refused to hear evidence of Chevron's pollution, who held undisclosed investments in Chevron during a farcical trial called a "Dickensian farce" by prominent U.S. trial attorney John Keker, and who later issued a "fraud" finding against Donziger and his clients that has been wholly discredited by admissions from Chevron's key witness that he lied under oath. For background, see here and here.

Thus far, that's not a very good litigation record for an army of high-priced Chevron lawyers fighting some of the most vulnerable people in the world. We are surprised Chevron General Counsel Hew Pate, one of the architects of this scorched-earth strategy, was not fired years ago for his incompetence. Yet Wirth -- installed in February after the disastrous reign of CEO John Watson -- shows no signs of changing course, at least for now.

Now, let's examine the recent court decisions in Gibraltar and Canada and assess whether Wirth and the Chevron Board are telling the truth to shareholders.

In the lead-up to Chevron's annual meeting, Wirth issued a press release touting a $38 million "default" judgment Chevron recently won in Gibraltar against an empty bank account held by some rainforest villagers. Gibraltar is a British territory that has only 34,000 people and three judges; it might be the smallest court system in the world.

The Ecuadorian villagers had intended to use the Gibraltar account to hold clean-up funds outside of their own country (should they ever be collected) as a sort of safety valve given Ecuador's disastrous banking crisis in the late 1990s. The account has been dormant for years and never held funds. Chevron's legal attack on the account, given its absolute irrelevance, was never defended and "default" judgements under these circumstances have almost no legal effect.

The upshot is that the Gibraltar judgment -- about one-300th the size of Chevron's environmental liability -- is unenforceable against people in the rainforest with no money, although it does show the lengths Chevron will go to try to intimidate its adversaries. It also shows how desperate Wirth is to chalk up some sort of tiny public relations "victory" to try to distract shareholders from the company's $12 billion loss in Ecuador. Nice try, but shareholders are not that stupid.

In Canada, the case will be heading to the Supreme Court on the issue of whether corporations can evade paying their environmental liabilities simply by placing assets in a wholly-owned subsidiary. Chevron has an estimated $15 billion to $25 billion worth of assets in Canada, or more than enough to pay the Ecuador judgment. All are held by a 7th-tier subsidiary whose shares are owned in their entirety by Chevron.

The huge risk of these assets being seized to pay for a real clean-up of Chevron's damage in Ecuador is why the company flooded a Toronto courtroom in April with about 40 lawyers for argument before the Ontario Court of Appeal (OCA).

Chevron already had tried to block the litigation by imposing an outrageous $1 million costs order on the impoverished indigenous groups. That effort was overturned unanimously by the OCA last October, clearing the way for argument on the company's last remaining technical defense: that its assets in Canada should be immunized from collection because they are held in that wholly-owned subsidiary. Chevron admits it profits billions of dollars annually from the subsidiary, but claims those same profits cannot be used to pay the Indigenous groups in Ecuador.

In what can only be described as a narrow-minded decision with dismal implications for Indigenous rights, two members of the three-judge panel on the OCA recently handed a victory of sorts to Chevron (and all corporate polluters) by ruling that environmental liabilities can be evaded by a polluter simply by placing assets in a wholly-owned subsidiary whose shares are owned 100% by the parent company. Think about that: Chevron owes a $12 billion debt to the people of Ecuador, yet under the logic of the two judges, the company will never have to pay the Ecuador judgment even though it profits billions of dollars annually from the same subsidiary.

Why is that various legal fictions emanating from "corporate law" always seems to take precedence over the rights of Indigenous peoples and other communities when their press their fundamental human rights to live in an environment free of toxic waste? This legal regime has to evolve, and it will be up to Canada's Supreme Court to ensure that it happens.

It can't be that we live in a world where corporate polluters that lose legal cases to communities they harm can simply stiff their victims through an asset structuring maneuver. This approach clearly over-incentivizes corporations to pollute and will end up not only harming and killing numerous rainforest residents in Ecuador, but likely will spell disaster for our planet over the long run by encouraging yet more reckless extractive activity without the use of proper safety measures.

The problematic ruling, written by Justice C. William Hourigan (a former commercial litigator), rewards Chevron's bad faith and allows oil and mining companies a license to engage in inherently dangerous resource extraction with little fear of the environmental consequences. The good news is that the decision is so rigid in its approach that it is likely to be overturned; a third judge on the panel essentially took apart Hourigan's logic and exposed his dishonesty in a concurring opinion. We believe it likely that Canada's Supreme Court will course-correct.

Canada's Supreme Court in 2015 delivered a fabulous victory for the Ecuadorians against Chevron on a jurisdictional question.  It is clear that Chevron is running out of technical defenses; the company's entire fraud "defense" likely will collapse once Canadian courts force the company to present its false evidence before a neutral judge. What a tragedy it would be if Canada's courts buy into Chevron's desperate attempt to avoid that moment by making it impossible to collect the company's substantial assets in the country to force it to comply with the rule of law.

As CEO Wirth prevaricates and disrespects his own shareholders, the Indigenous peoples and farmer communities of Ecuador march on. Their motion seeking Supreme Court review in Canada will be filed in the coming weeks. We will report on that event when it happens.

Tuesday, April 10, 2018

Chevron Should Be Booted From Transparency Initiative Over Corruption Concerns, Say Civil Society Groups

Several civil society groups, including London-based Global Witness and Oxfam America, are seeking to boot Chevron from the board of a major international transparency initiative designed to combat oil industry corruption. This seems like a long overdue step for what has to be one of the most morally bankrupt oil companies on earth. Readers of the Pit might remember that in 2015 in Davos, Chevron won the Public Eye Award for being the world's worst corporation over its Ecuador environmental disaster.

Chevron is now well into its seventh year of trying to stiff Ecuadorian indigenous peoples and farmer communities out of their $12 billion environmental judgment, won in 2011 after an 8-year trial delayed repeatedly by the company's strategy of subterfuge. Three layers of courts in Ecuador, where Chevron had insisted the trial be held, found the company deliberately dumped billions of gallons of toxic oil waste onto rainforest ancestral lands and abandoned roughly 1,000 open-air toxic waste pits prior to fleeing the country in 1992. (See here for the overwhelming evidence of what is now considered the world's worst oil-related environmental disaster.) 

The very idea that Chevron -- which later fabricated evidence and bribed a witness with $2 million to try to evade its liability to the people of Ecuador -- could be leading any type of anti-corruption initiative is laughable.

Chevron faces this backlash in part because of its refusal to disclose tax payments in compliance with the standards of the Extractive Industries Transparency Initiative (EITI), which was founded in 2003 with the backing of the British government to root out corruption in the oil industry. The EITI has created model anti-corruption laws now adopted by 51 countries (including Canada) that require oil, gas, and mining companies to disclose any payments to foreign governments. 

The U.S. Congress passed the EITI standards into law in 2010 as part of Dodd-Frank, but Chevron for years has worked with industry lobbyists to block the rules required for implementation. Now that the Trump Administration is doing the oil industry's bidding, the EITI rules opposed by Chevron and the American Petroleum Institute are all but dead in the United States. Several American oil companies still comply voluntarily with the rules, but not Chevron or Exxon.

Chevron and Exxon sought to weaken the transparency rules while serving on the Board of the EITI and professing to support them. They then cynically blamed the absence of a rule in the U.S. whose implementation they blocked for their own failure to comply with the EITI standards. 

Here's what 12 civil society leaders from around the world wrote in seeking to boot Chevron (and Exxon) from the EITI Board:
"We urge that the ... EITI Board meeting include a discussion about the refusal of ExxonMobil and Chevron to disclose their tax payments through the terms of implementation of the EITI Standard in the United States. We believe strongly that the refusal to engage in the most basic aspect of compliance constitutes a repeated and willful violation of the EITI Code of Conduct ... and an act of bad faith that is counter to the spirit of the EITI movement itself. These actions not only contributed to the demise of the U.S. EITI process, but damaged the credibility of the EITI both in practice and in the eyes of the global community.

Our advice to the EITI: given Chevron's horrendous record of toxic dumping in Ecuador and its burgeoning tax problems in Australia, the company never should have been part of the EITI leadership to begin with. That's like putting the arsonist in charge of the firehouse.

We at the Chevron Pit know that abusive and hypocritical behavior is deeply rooted in Chevron's management culture. Company officials like General Counsel R. Hewitt Pate actually receive large bonuses for committing corrupt acts against the Ecuadorians and then losing legal cases against them based on the evidence. CEO John Watson had five shareholders who criticized his Ecuador policy arrested at the 2010 annual meeting. Pate in 2013 also served subpoenas on more than 100 civil society advocates, journalists, and activists who were trying to help the Ecuadorian communities.

Last year, Chevron was slammed with a $1 billion fine in Australia for ripping off the company's tax authorities. Chevron had set up a tax-avoidance scheme whereby a Chevron subsidiary in Delaware loaned money at exorbitant interest to a Chevron subsidiary in Australia. Payments on the loans from the Australian subsidiary to the Delaware subsidiary then "disappeared" the company's sizable Australian profits. This enabled Chevron to avoid taxes in Australia entirely even though it made billions of dollars annually from its operations in the country.

In the Ecuador pollution case, Chevron desperately wanted the litigation over its toxic dumping in the Amazon heard in Ecuador even though the villagers originally sought relief in U.S. courts. That was, until it started to lose the case and began attacking Ecuador's courts while selling off all of its assets in the country to evade any eventual liability. A Chevron official recently threatened the Ecuadorian indigenous peoples with a "lifetime of litigation" if they continued to pursue their claims. That forced the villagers into Canadian courts where they are trying to seize some of the company's estimated $15 billion worth of assets in the country to force compliance with their judgment.

Even with these intimidation tactics, it is becoming apparent that Chevron is losing the enforcement action in Canada despite deceitfully trying to downplay the risk in its public filings. Journalists in the industry are recognizing Chevron is in serious trouble. (See here.) Appellate courts in Canada have delivered three straight unanimous decisions in favor of the villagers. Now, the Canadian public is beginning to see how Chevron can be a very ungrateful guest when it comes to respecting tax laws.

This is highly relevant after Chevron recently disclosed that its wholly-owned 7th-tier subsidiary in Canada (Chevron Canada) was funneling billions of dollars annually to the governments of Nigeria and Indonesia. Not only are these payments from a low-level foreign subsidiary to foreign governments highly suspicious from a corruption standpoint, they undercut Chevron's legal argument in the enforcement case that the assets of its Canadian subsidiary should be off-limits to the villagers given that it is only a Canadian company. A critical legal argument on that issue is scheduled for April 17-18 in Toronto.

Chevron's disingenuous claim that its shareholders should be allowed to reap huge profits from Chevron Canada while its assets should be immunized from any liabilities has never held much water legally. But we can thank EITI for requiring the rather stunning Chevron disclosure that Chevron Canada is not what the company had claimed, but is in fact at the epicenter of a global profit-making machine that spreads into Asia and Africa.

Canadian tax authorities and the U.S. Department of Justice -- which already has a criminal referral letter about Chevron over the Ecuador pollution case -- might want to find out just why Chevron is sending huge payments via a 7th-tier subsidiary in Canada to foreign governments that are themselves known for tolerating and even encouraging corruption.

These are not the only problems faced by Chevron over the Ecuador pollution matter.

Chevron's main defense to enforcement in Canada is a retaliatory U.S.-based "racketeering" case attacking the villagers that supposedly found "fraud" in Ecuador's courts. But that case -- handled by a woefully biased U.S. judge who refused to seat a jury -- has collapsed after it turned out company lawyers at the Gibson Dunn law firm paid a Chevron witness to lie on the stand, among other problems. No fewer than 21 appellate judges in Ecuador and Canada, including the Supreme Courts of both countries, have either rejected or ignored those findings. (For more detail about Chevron's corrupt and even criminal acts in that U.S. case, see this excellent analysis by human rights lawyer Aaron Page and this analysis by Marissa Vahlsing of Earth Rights International.)

Chevron scientists recently were caught on video trying to defraud the Ecuador court by trying to hide evidence of the company's pollution. Chevron also cheated during the Ecuador trial by using a wholly inappropriate laboratory test (called TCLP) designed to "miss" any trace of toxins in its soil samples that were submitted to the court. (See here for more of Chevron's junk science.) Company lawyers threatened Ecuadorian judges with jail time and once filed 39 motions in 50 minutes to paralyze the proceeding, which took eight long years while untold numbers of people died of oil-related diseases. (See this story on the cancer death of legendary nurse Rosa Moreno). 

Aside from its EITI problems, Chevron is also under real heat from its own shareholdersSeveral have criticized management's "material mishandling" of the Ecuador litigation. Chevron is also under fire for its toxic dumping in Ecuador from the leadership of the Assembly of First Nations, the national indigenous federation in Canada which represents 634 nationalities in the country. Greenpeace co-founder Rex Weyler accused Chevron of committing "ecological crimes" in Ecuador after touring the impacted area last year.

It is clear is that Chevron does not deserve to be on the Board of the EITI or any anti-corruption initiative given its pattern of truly savage behavior toward the people of Ecuador and the shroud of secrecy it maintains over its operations. Interestingly, just days ago the Canadian Broadcasting Company and activist groups (including Friends of the Earth and Amazon Watch) filed motions in Canada to lift Chevron's completely over-broad confidentiality in the enforcement case brought by the Ecuadorians. Chevron imposed that order to hide huge chunks of what must be a very embarrassing court record.

That court record apparently includes details from a recent deposition of a Chevron Canada official by a lawyer for the Ecuadorians. The official likely was asked why a 7th-tier wholly-owned subsidiary that Chevron claims should not be responsible for paying court-ordered compensation to the people of Ecuador is instead paying billions of dollars to foreign governments on the other side of the world. 

Chevron should be booted from the EITI Board and Canadian courts should lift the secrecy order post haste from this important public interest litigation. Courts need to shine a bright light on a company that appears to be in a class by itself when it comes to disrespecting indigenous groups and using corrupt tactics to evade its legal obligations. More public scrutiny -- both in and out of court -- is absolutely critical to ensure real accountability for Chevron in the Ecuador litigation.

Monday, March 26, 2018

Chevron Hurting Again As Shareholders Show Renewed Anxiety Over $12B Ecuador Pollution Judgment

R. Hewitt Pate Randy Mastro

Chevron's management team, led by new CEO Michael Wirth and longtime General Counsel R. Hewitt Pate, faces deepening problems in Canada as Ecuadorian indigenous peoples and farmer communities continue what is fast becoming a very realistic campaign to seize company assets to collect on their historic $12b pollution judgment.

Clear indications of Chevron's deteriorating litigation position: many Chevron shareholders are expressing deep anxiety about the company's scorched-earth approach when dealing with indigenous peoples. In the meantime, Canadian courts continue to rule in favor of the villagers and against Chevron on several critical issues.

This press release from the Front for the Defense of the Amazon ("FDA") -- the community-based group in Ecuador's rainforest that brought the claims against Chevron in 1993 and has led the campaign to hold the company accountable -- captures some of the recent developments. But there is much more to suggest Chevron's management team is under bone-crushing pressure on Ecuador and that it might get even worse.

That management team -- including Pate, the architect of the company's scorched-earth litigation policy since 2009 -- have spent (or squandered) huge sums of shareholder funds to hire 60 law firms and 2,000 lawyers to try to beat back the indigenous groups and farmer communities. The Chevron effort has been led by the Gibson Dunn law firm. Gibson Dunn has used hundreds of lawyers to bill Chevron an estimated $1 billion over the last five years.

These Chevron expenditures, as large as they are, now appear to be largely for naught. The company surely thought they would be enough to kill off the claims. But what is arguably the world's most important corporate accountability campaign and indigenous rights litigation continues to pick up steam.


**Chevron's RICO Judgment Is Backfiring: The Ecuadorians won their historic judgment against Chevron in 2011 after Chevron insisted the trial be held in Ecuador and accepted jurisdiction there. But Chevron's high-water mark in the case took place in 2014 when controversial U.S. judge Lewis A. Kaplan presided over a farcical non-jury civil "racketeering" (known as "RICO") trial financed by Chevron and designed -- in clear violation of international law -- to attack the Ecuador judgment from the company's hometown court. Chevron's case was led by Randy Mastro, a notoriously nasty lawyer from Gibson Dunn who once fanned the flames of racial discord in the early 1990s for right-wing New York City Mayor Rudy Giuliani.

It is now undeniable that Kaplan's ruling for Chevron was the product of the company's fabricated evidence and paid-for witness testimony, a fact which earned Chevron and Mastro a criminal referral letter to the U.S. Department of Justice -- something the company has yet to disclose to shareholders. A RICO judgment that the company once thought was its best defense has now arguably become one of its worst liabilities. And Pate, who is up to his neck in financing this Gibson Dunn-led corruption, is shockingly still using the ethically-challenged Mastro as the company's lead lawyer on the case.

How effective has the Pate/Mastro alliance been? At least 21 appellate judges in Ecuador and Canada have rejected or ignored the Kaplan RICO ruling, including the entire Supreme Courts of both countries which issued separate unanimous decisions in favor of the villagers affirming all or parts of the underlying judgment. These decisions have rendered Kaplan's judgment a nullity for purposes of blocking enforcement. Let's not forget that Pate's entire objective in bringing the RICO case was to block enforcement of the Ecuador judgment. (For a full explanation of Chevron's corruption of the RICO case, see this report.)

**Canadian Courts Have Little Love For Chevron: Chevron's litigation position in Canada is faltering despite having hired four of the country's best law firms on top of the 60 law firms Chevron hired in the U.S. The Canada Supreme Court in 2015 unanimously rejected Chevron's attempt to block the villagers from collecting company assets on jurisdictional grounds. The Ontario Court of Appeal also ruled against Chevron twice, including on a preposterous attempt by Pate to impose a $1 million costs order on the impoverished villagers. Chevron also faces a possible major tax fraud issue in Canada involving the transfer of billions of dollars from its subsidiary to the governments of Nigeria and Indonesia, which will do little to endear it to authorities or the public.

Chevron is now hurtling toward an enforcement trial in Toronto where its "RICO" evidence risks a humiliating collapse in front of shareholders and the public. Canadian judges are attuned to indigenous rights and human rights issues in ways that U.S. judges are not, creating a hostile litigation environment for a company responsible for toxic dumping on the ancestral lands of First Nation's groups.

Making matters worse for Chevron, the FDA has attracted extremely competent support, including well-known commercial litigator Alan Lenczner, renowned aboriginal rights lawyer Peter Grant, former National Chief Phil Fontaine (of Canada's Assembly of First Nations), Grand Chief Ed John, and Greenpeace co-founder Rex Weyler. (See here for comments by Fontaine and John and here for Weyler accusing Chevron of committing "ecological crimes" in Ecuador.)

**Chevron's Defense In Canada Rests On A Thin Reed: Chevron's defense in Canada is now down to a very thin reed. The company will claim in a hearing before the Ontario Court of Appeal scheduled for April 17 that its wholly-owned Canadian subsidiary, Chevron Canada, should be immunized from asset collection. The goal is impunity for corporate human rights abuses.

Since Chevron Canada purports to control all of Chevron's assets in the country, if the Canadian court agrees with Chevron then indigenous groups in Ecuador likely will not collect a single dollar on their judgment. Given the extent to which indigenous groups and vulnerable peoples across the planet will suffer from corporate harms if Chevron's extreme argument becomes law,  it is highly unlikely Canadian judges will agree. Chevron's position is just legally and practically untenable in the modern world of globalized commerce.

**Shareholders Angry With Chevron Management: Key Chevron shareholders are again taking note of the increasing risk in Canada. The U.S. firms Zevin Asset Management and Newground Investment have led the fight to hold company management accountable for its "material mishandling" of the case. Last year, two resolutions related to the Ecuador liability received substantial support despite being opposed by management.

Even more shareholders -- including the pension fund from Vermont -- are backing the resolutions this year, where they are likely to garner even more support while indigenous leaders from the rainforest plan to confront CEO Wirth face to face. Shareholders with an estimated $500 billion of assets have urged company management to look for a settlement.

**Chevron's Attacks On Human Rights Defenders Suggest Desperation: When Chevron begins to lose ground in court, it often tries to distract attention by attacking the lawyers for the Ecuadorians. Those attacks are a good barometer of how desperate company management feels at any given time. In recent weeks,  as the company's litigation prospects dim, Chevron has renewed its attacks on U.S. human rights defender Steven R. Donziger, the only lawyer still working on the case who helped to launch the original litigation in 1993. Chevron earlier conceded in an internal email that its long-term strategy was to "demonize" Donziger.

In yet another sign of anxiety, Pate recently ordered Mastro to go back to Judge Kaplan (four years after the end of the RICO case) to try to block Donziger's ongoing efforts to help his clients finance the enforcement litigations. Chevron is trying to claim Donziger should be held in "contempt" for doing his job as a lawyer, which includes ensuring his clients have sufficient resources to pursue their human rights claims in the face of Chevron's attack campaign. Pate's latest move is nothing more than a ruse to try to intimidate supporters of the communities. Chevron once sued more than 100 bloggers, journalists, and activists who have in some way helped the affected communities.

Chevron also has mounted some bizarre attacks on Alan Lenczner and Peter Grant, the two prominent Canadian lawyers representing the Ecuadorians. Chevron is trying to block Grant from arguing the case within the framework of indigenous rights. The company also baselessly accused Lenczner of violating a ridiculously over-broad confidentiality order it imposed on the litigation to try to hide its own bad news from the media and the public.

**Chevron's Lack of Public Disclosure of Its Ecuador Risk: Chevron is also lying again to shareholders. Although we will explain this in more detail in a future blog, the company's response to the Ecuador lawsuit in its public disclosures to the Securities and Exchange Commission -- which regulates public markets in the U.S. -- is, to put it mildly, extremely misleading.

Chevron in its disclosures does not explain how its RICO judgment has collapsed or is the product of its own fraud, as orchestrated by the Gibson Dunn firm; that certain company officials and outside lawyers are the subject of a criminal referral letter for fabricating evidence; that the company faces a humiliating trial in Canada; that appellate courts in Ecuador and Canada have consistently ruled against Chevron; or that company officials appear to be selling off their Canadian assets, possibly to evade the ongoing liability to the people of Ecuador. U.S. and Canadian authorities have every obligation to investigate these evasive actions.

There is little doubt that new Chevron CEO Wirth inherited a litigation disaster when he assumed leadership of the company in February. The question is whether Wirth has the good sense to try to clean it up. To do so, the obvious first move is to muzzle Mastro and find a more reasonable General Counsel to take over from Pate. Wirth also needs to explore an exit strategy before the company's business problems in Canada grow even worse and more indigenous peoples die from cancer in Ecuador in the area where Chevron abandoned and refused to properly remediate 1,000 unlined toxic waste pits.

When it comes to the Ecuador matter, Chevron's litigation department is like a crack addict on a trip gone seriously awry. Each short-term high only leads to a greater desire for another which leads to an unpleasant downward cycle of massive spending producing ever-diminishing returns. This irritates shareholders, harms indigenous peoples, discourages governments from doing business with Chevron, and creates enormous reputational risks. Throw in Chevron's lack of responsiveness to global warming and one sees a business model that is simply not sustainable over the long haul.

In the meantime, Mastro and other lawyers at Gibson Dunn buy new vacation homes and live high off the company's hog of litigation stupidity. Pate receives $8 million in annual bonuses for architecting a failed strategy. Chevron's CEO gets yelled at by indigenous peoples at the annual meeting.

It is clear that the Pate/Mastro gig is almost up. The question is whether Wirth recognizes it.

Oil waste pit left by Chevron in Ecuador