Recent Decisions On the $19b Ecuador Judgment Do Little to Decrease Chevron’s Enormous Risk

For indigenous and farmer communities, the fight continues

Supporters of the heroic two-decade effort to hold Chevron accountable for its indisputable toxic dumping and destruction of the Amazon rainforest in Ecuador should not despair over recent court rulings that have slowed the seizing of the oil giant’s assets in Argentina and Canada.

The fight is far from over and overall trend lines still favor the affected rainforest communities, who have suffered from Chevron’s toxic dumping for decades. (For a summary of the evidence, see here; for a video about the case see here or this 60 Minutes segment.)

In Toronto, in an unusual decision without any precedent in Canadian law, a court found that because Chevron operates only through subsidiaries then the case must be stayed.  That decision is now on appeal.  The court decision this week in Argentina to lift a freeze on Chevron’s assets will have little impact on a parallel judgment recognition action which is proceeding.  That action will allow the rainforest communities to seize up to $3.5 billion of assets if successful.

Chevron has roughly $15 billion in assets in Canada and another $4 billion in Brazil that are being targeted in court actions based on the valid Ecuador judgment.  That’s real risk no matter how Chevron’s management team – including its conflicted CEO, John Watson -- try to spin it.

Under oath in court, where company officials are obligated to tell the truth, a Chevron comptroller recently claimed such asset seizure actions will cause the oil giant “irreparable harm” and disrupt its global business operations.  Chevron also operates via its subsidiaries in dozens of countries around the world that could be targeted.

There is also a deeper reality to the reasoning behind the recent Canada and Argentina decisions that should disturb concerned citizens everywhere.  In effect, based on legal technicalities, these courts are flirting with a total grant of impunity to human rights violators like Chevron.

Let us explain.

In Canada, a trial judge ruled that Chevron is a separate company from its local subsidiary even though that subsidiary is 100% owned by Chevron.  Yet Chevron itself operates only through its many subsidiaries around the world.  The company does not even own its own building housing its headquarters near San Francisco.

It was also Chevron officials (operating under the Texaco brand) who made the decision to deliberately dump billions of gallons of toxic waste in Ecuador, decimating indigenous groups and farmer communities.  Chevron itself stripped almost all of its assets from Ecuador in recent years in anticipation of losing the case.  It then refused to pay the judgment.

The upshot is this:  when Chevron wants to increase its profits by dumping toxic waste, it can deliver a high level of fake value to its shareholders by externalizing the costs of pollution to impoverished local residents.  But when it comes time to pay the hefty tab for that dumping, it plays the corporate shell game and hides behind its subsidiaries.

That's Chevron's conception of impunity. The question is whether courts will let the oil giant get away with it.

The cultural mindset that it produces in a large oil company leads to excessive risk-taking and arrogance.  And that explains why Chevron always seems to be dealing with a massive number of environmental problems around the world, including in the U.S. where it is currently under criminal investigation for a recent refinery fire in Richmond, CA.

Courts in most countries would not allow Chevron to get away with this brazen mockery of the rule of the law.  Many of Chevron’s own shareholders are also disturbed enough to have sternly rebuked Watson for mishandling the fallout from the Ecuador judgment.

Knowing it cannot win the Ecuador battle on the merits, Chevron also cleverly tries to exercise improper political influence over governments and courts.  In Argentina, after the freeze order became a viable possibility, Chevron suddenly decided to “invest” $1.5 billion in a large gas field with the local state-owned oil company, YPF.

Chevron also took out full-page advertisements in Argentine newspapers claiming impending national doom if the Ecuador judgment were to be enforced.  Its local representative publicly announced Chevron would only follow through on its investment if the freeze order was lifted.  Suddenly, after some furious behind the scenes lobbying, Argentina’s Attorney General recommended the freeze order be lifted.  Voila!

We think Canada’s appellate court will see Chevron’s rope-a-dope for what it is: a sneaky attempt to play the corporate shell game to escape justice.  Ultimately, we feel Argentina’s courts will see it the same way.

Chevron should not take too much comfort from these latest rulings.

The evidence against Chevron for committing a horrific level of environmental contamination in Ecuador is strong.  It has been documented not only by the company’s internal files and a 220,000-page trial record, but by independent journalists the world over who have visited the disaster zone.

Only in an unjust world can a corporation get away with murder by hiding behind legal fictions created by bean counters.  As this battle rages on, everybody concerned about accountability for corporate human rights abusers should take note and demand that judges stand up for the fundamental principle that polluter pays.

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In Rare Occurrence, Chevron's CEO & Chair, John Watson, Will Be Deposed

Stop the presses! 

Even though he has characterized every aspect of Ecuador -- its people, culture, government and courts -- as corrupt, dysfunctional or a joke, U.S. Judge Lewis Kaplan finally ruled in favor of a motion filed by a group of Ecuadorians and their U.S. legal adviser.




The Ecuadorians may depose the oil giant's CEO and Chair, John Watson.  

It is rare that a CEO & Chairman of the Board is required to sit for a deposition, which will take place this month. Watson, though, has been intimately involved in the 20-year-old lawsuit, originally filed against Texaco in the U.S. but later re-filed in Ecuador against Chevron for massive oil contamination of the Amazon rainforest. Chevron purchased Texaco in 2001. In 2011, an Ecuador court delivered a $19 billion judgment against Chevron.

As the architect of the plan to purchase Texaco, Watson knew about Texaco's admission that it had dumped 16 billion gallons of toxic production water into the Ecuador rainforest's waterways. He knew about the 900 unlined pits that Texaco built to store pure crude. He knew about the internal audits Texaco conducted that showed massive contamination.  Yet, he pushed the merger and, as a result, inherited the largest environmental lawsuit in the world's history and urged a trial in Ecuador, only later to cry foul when he, his lawyers and his private investigative firm, Kroll, failed to undermine the Ecuadorian judicial system.  

Having lost in Ecuador, Watson and his 2,000 lawyers and legal assistants turned to the U.S. and found in Lewis Kaplan a federal judge only happy to take their spurious charges seriously. See this Chevron Pit for more background on Kaplan's bias against the Ecuadorians.

Meanwhile, the Ecuadorians are focusing their resources and energy where it matters:  in countries where Chevron has assets. They have filed lawsuits in Argentina, Canada, Brazil and Ecuador to seize assets as payment for the judgment Chevron refuses to acknowledge. Currently, $2 billion has been frozen in Argentina.

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U.S. Appeals Court To Hear Request To Remove Biased Judge In Ecuador Case

The Second Circuit Court of Appeals -- the same court that stopped cold Chevron's effort to block enforcement of the $19 billion Ecuador judgment in 2012 -- has agreed to hear arguments by the Ecuadorians on why U.S. trial court judge Lewis A. Kaplan is continuing to engage in acts of insubordination from the bench.

The decision by the appellate court to hear the arguments is bad news for Kaplan, who already has been overturned once by the Second Circuit for imposing an unprecedented “global injunction” that purported to prohibit indigenous and farmer communities in Ecuador from enforcing a judgment from their own courts anywhere in the world. Kaplan had become the target of worldwide derision for trying to dictate rulings to the courts of other countries. (See press release here.)

The Ecuadorians say Kaplan’s efforts to orchestrate a show trial warrant the reassignment of the case, as documented by this previous posting on The Chevron Pit.

Chevron is using the remaining fraud counts it filed against the Ecuadorians and their counsel to try to chill fundamental human rights advocacy that attempts to hold the oil giant accountable for its discharge of billions of gallons of toxic waste into the Amazon, as found by an Ecuadorian court based on overwhelming scientific evidence. Steven Donziger, a longtime American lawyer for the communities, has countersued Chevron for lying and engaging in fraud to cover up its misconduct. (See Donziger’s counterclaims here.)

Chevron suffered a major setback recently when a California judge ruled that the environmental group Amazon Watch – known as Chevron’s “sharpest critic” – was engaged in First Amendment-protected activity when it criticized the company for its refusal to clean up its contamination in Ecuador. Chevron had tried to subpoena the group’s documents, claiming its advocacy was part of an improper pressure campaign. (See an article explaining the decision here.)

The Ecuadorians, meanwhile, have denied Chevron’s outrageous charges. The company is desperate to distract attention from advancing seizure lawsuits targeting billions of dollars of assets in Canada, Brazil, and Argentina – with more such actions to come, according to lawyers for the communities.

Kaplan had shocked legal observers with his rants and prejudicial statements from the bench about Ecuador, a longtime U.S. ally where Chevron itself has won multiple lawsuits against the country’s state-owned oil company. He derided Ecuador’s government and judiciary. He refused to recognize the fundamental humanity of the impoverished indigenous victims, referring to them as the "so-called plaintiffs" and urging Chevron to file a racketeering and extortion case.  See this previous Chevron Pit.

To top it all off, Chevron lawyer Randy Mastro literally was laughed out of court when he couldn’t answer fundamental questions before the appellate panel. See here. Mastro’s effort to protect Kaplan was an utter failure.

Kaplan’s tendency to engage in judicial imperialism has once again reared its ugly head. He is now setting up Chevron’s so-called “RICO” case as nothing more than a show trial, stripping the ability of the plaintiffs to put on evidence of Chevron’s toxic dumping and fraudulent cover-up while purporting to rule (in defiance of the earlier Second Circuit order) on the legitimacy of Ecuador’s judiciary.

That’s the same judiciary that Chevron praised when it fought for ten years to venue the trial there after the Ecuadorians originally filed the case in New York.

A trial by jury has been set by Kaplan for October 15th. But we say that neither Chevron nor Kaplan really have the guts to risk a full-blown trial before a jury where the truth can come out. Kaplan and Chevron will try to figure out a way to prevent jurors from hearing the case – possibly by dropping monetary claims for damages, thereby allowing a bench trial.  If jurors do hear the case, Kaplan won’t let the Ecuadorians put on evidence of Chevron’s crimes and fraudulent cover-up.
 
But wait – isn’t a bench trial by Kaplan what the Second Circuit vacated the first time?

Kaplan and Chevron are now operating from a smaller and smaller box, with their options to impede a final recovery constricting almost weekly. Meanwhile, Mastro and his team of 114 lawyers at Gibson Dunn & Crutcher are on a roller coaster ride of unprecedented billing excess, subsidized by Chevron shareholders who themselves are being duped by Chevron management, as this devastating report by securities lawyer Graham Erion points out.
 
Gibson Dunn lawyers are laughing all the way to the bank while piling up a string of setbacks for their client, whose management is either too obtuse or personally conflicted to understand the peril they are facing.

In their petition, the Ecuadorians argue that in the earlier reversal the appellate court found that Kaplan did not have jurisdiction to rule on the Ecuador judgment unless the Ecuadorians sought to enforce the judgment in a New York court -- a legal move that the Ecuadorians have not taken and have said they will not take. Yet Kaplan continues to claim in various rulings he can still so dictate, in defiance of the appellate court.

We remind Judge Kaplan of the words written by the Second Circuit in 2011:

“The (Ecuadorians) hold a judgment from an Ecuadorian court. They may seek to enforce that judgment in any country in the world where Chevron has assets. There is no indication that they will select New York as one of the jurisdictions in which they will undertake enforcement efforts . . . . It is unclear what is to be gained by provoking a decision about the effect in New York of a foreign judgment that may never be presented in New York. If such an advisory opinion were available, any losing party in litigation anywhere in the world with assets in New York could seek to litigate the validity of the foreign judgment in this jurisdiction. . . . Chevron can present its defense to the recognition and enforcement of the Ecuadorian judgment in New York if, as and when the (Ecuadorians) seek to enforce their judgment in New York.”"

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What Happens When Big Oil Freaks Out

Chevron Spending $400 Million A Year On Ecuador Case, Subsidized By U.S Government?

Since 2011, when an Ecuadorian court found Chevron guilty of widespread contamination of the Amazon rain forest and ordered the oil giant to pay $19 billion in damages, Chevron has been spending around $400 million annually on 2,000 legal experts from 60 law firms to evade paying the judgment, according to a recent court filing.

But, for all the money and all the lawyers, Chevron is facing enforcement actions in four countries -- Ecuador, Canada, Argentina, and Brazil – where the Ecuadorians could seize their billions from Chevron’s assets. And, Chevron continues to lose in U.S. courts on the merits. See here.

Meanwhile, the New York Times reports today that Chevron has received $2.6 billion in federal tax-free bonds to expand a refinery in Mississippi. The New York Times said Chevron has received more than any U.S.-based corporation and described it as "sweetheart rates for corporations."

What this means is the U.S. federal government is subsidizing Chevron's legal bills as a result of its misconduct in Ecuador, not to mention litigation and accusations Chevron has been defending in Brazil, California, Angola, Nigeria and other places across the globe. See here. 

In a desperate attempt to stop enforcement of the $19 billion judgment, Chevron has accused the Ecuadorian villagers and their lawyers for “fraud” and sued them in about 20 different U.S. court jurisdictions, filing hundreds of legal motions and millions of pages of discovery documents and taking over 40 depositions from experts and consultants -- all designed to distract from the 16 billion gallons of toxic production water it dumped into the Ecuadorian rainforest and the 900 unlined pits Chevron built to store permanently pure crude oil. 

For more details, read this press release.

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Telling The Truth About Chevron in Ecuador

It's no conspiracy, says Paul Paz y Miño of Amazon Watch in his blog about the subpoena Chevron served on Amazon Watch, one of the most effective environmental advocacy organizations in the country.

It's truth telling, and, last time we checked, that wasn't against the law.


Chevron, though, could care less, writes Paz y Miño.


"Not only is this invasive subpoena request a flagrant attack on our first-amendment rights, it is also an attempt at miring our organization in a protected and tangential lawsuit, designed to burden our resources and distract us from our goal: justice in the Amazon."


Amazon Watch, dedicated to helping communities in the Amazon region protect their lands, has been an outspoken defender of the Ecuadorians who recently won a $19 billion judgment against Chevron for massive contamination in the rainforest. Because Chevron has refused to pay the judgment, the Ecuadorians have filed lawsuits in Canada, Brazil and Argentina to freeze and seize Chevron's assets there. See here. (Chevron has few assets in Ecuador.)


In turn, Chevron has filed lawsuits in the United States to stop enforcement of the judgment. The Second Circuit Court of Appeals and the U.S. Supreme Court put a stop to that, but another lawsuit seeks to show that the Ecuadorians, their lawyers and supporters "conspired" through a "racketeering" campaign to force Chevron to pay a settlement.


In that effort, Chevron has intimidated and harassed hundreds of people, including its own shareholders, who favor Chevron being held accountable for its misconduct in Ecuador.
Subpoenaed for documents or depositions include environmentalist advocates, like the people who work for Amazon Watch, law students who spent a summer in Ecuador working on the case, others who had little to do with the litigation and even shareholders, an action that drew criticism recently from a New York Times business columnist.


Paz y Miño, though, hits the nail on the head when he calls Chevron's "conspiracy" theories nothing more than what other environmental groups did when Exxon spilled oil in Alaska and BP on the U.S. Gulf Coast; what consumer groups and advocates for homeowners did when banks ripped off home buyers with predatory loans and then ripped them off again with illegal foreclosures; what gun control advocates are doing now to stop the killing of innocent people:  they are exercising their First Amendment rights, telling the truth about how Chevron's intentional contamination destroyed what was once a pristine rainforest.


"What we are witnessing now is the last chapter of a 50-year campaign of human rights abuses by Chevron. And if they are successful in their desperate subpoena of hundreds of thousands of Amazon Watch documents, what they will find, ironically, is not that AW has been part of any alleged conspiracy, but rather nothing more than the spirit, the resolve, the compassion, and the intellect that we have brought to telling the truth about what Chevron did in Ecuador, and that in turn has helped bring the company to its knees."


Click here for the entire blog.


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A Race For Time? Chevron Desperate to Extort Its Way Out of Paying $19 Billion Ecuador Judgment

An Argentine newspaper La Nacion reported that Chevron is in a "race for time" to convince a court in Argentina to lift a freeze of its assets as payment of the $19 billion judgment for oil contamination in the Ecuador rainforest. Chevron is trying to scare Argentina government officials by saying its subsidiaries there will go bankrupt and, as a result, have to close down its operations unless, of course, the government pressures the courts to unfreeze their assets. Or, in other words, extortion: If you don't tell your courts how to rule, we'll shut down our investments.

Meanwhile, back in the United States, Chevron has filed an ethics complaint against New York State Comptroller Tom DiNapoli, who has had the courage to stand up to Chevron and question its misconduct in Ecuador and its use of shareholder funds in regard to the historic, long-running lawsuit. 

Interestingly, Chevron is filing the complaint more than two years after obtaining emails that the oil giant falsely bases its complaint on. Why did Chevron wait so long? If it's so concerned about ethics, why not two years ago? Or one year ago? Do you think it might have anything to do with Argentina, Brazil and Canada, where lawsuits have recently been filed to seize company assets as payment for the judgment?

They have tried and failed to get U.S. courts to stop enforcement of the judgment.

They have tired and failed to get negative press coverage in these three countries to pressure their governments and courts to stop enforcement.

Maybe the Albany, NY press corps will come to Chevron's defense.

But, wait, this article basically says the complaint against DiNapoli is a lot of nothing.

Read the press release below for more details about Argentina:

Chevron Threatens to Shut Down Argentina Operations Over Ecuador Lawsuit

Buenos Aires, Argentina – In a clear effort to apply political pressure to judges, Chevron is threatening to bankrupt the company’s subsidiaries in Argentina unless an asset freeze order issued against $2 billion of the oil giant’s assets is lifted, according to news reports. 

The order was imposed last week because Chevron refuses to pay a $19 billion judgment in Ecuador for systematically dumping toxic waste into the streams and rivers of the rainforest, decimating indigenous groups and causing an outbreak of cancer. 

For background on the overwhelming evidence against Chevron in Ecuador, see HERE; a video on the case can be seen HERE.

La Nacion, a leading newspaper in Argentina, is reporting  that desperate Chevron executives are giving Argentina’s national government until December to force a court to reverse the freeze order before facing “operational problems” that could shut down two subsidiaries that produce an estimated $600 million in revenue annually for the parent company.

The newspaper reported that “a host of Chevron lawyers and executives in Miami were analyzing alternatives in a race against time” given that they expect funds to run out in several weeks – a prospect that the plaintiffs in the case call a “manufactured scare tactic” designed to apply pressure to Argentina’s courts.

Representatives of indigenous rainforest villagers in Ecuador had little sympathy for the company, calling Chevron’s threats another example of “improper political pressure” used to avoid being held accountable under the law.

“Chevron has been running from the law for years in Ecuador, where out of pure greed it deliberately created what is probably the world’s worst oil contamination,” said Graham Erion, a Canadian lawyer advising the rainforest communities.  “It is not surprising that the company’s illegal behavior is finally catching up to it.

“The pollution Chevron intentionally caused in Ecuador is an assault on all of Latin America,” he added. “Chevron would never commit such atrocities in its own country.”

The Argentina embargo prohibits Chevron from disposing of any interests in concessions, pipelines, or other projects without the court’s consent and diverts 40 per cent of the company’s annual revenue to an escrow account controlled by the court.  The court chose to garnish less than half of the revenue to allow Chevron’s subsidiaries to operate with flexibility, said Erion.

Chevron also was planning to invest $1.8 billion over the next three years in Argentina to build 120 new oil wells, and was exploring an investment in a huge oil shale project called Vaca Muerta.

“The threat by Chevron CEO John Watson to pull out of Argentina endangers the company’s interests in a country that should be a key driver of future growth in the region,” said Karen Hinton, U.S. spokesperson for the rainforest communities in Ecuador. “This is not in the interests of Chevron shareholders.”

Chevron’s woes in Argentina were compounded this week when Spain’s Repsol oil company sued the oil giant in Spain on the grounds that  it was trying to profit from operations that had been expropriated by Argentina’s government.

Reports out of Argentina were quick to show that Chevron has already begun to lobby furiously for an extra-judicial solution. 

La Nacion reported that the governor of the oil rich province of Neuquén publicly stated that he hopes Chevron succeeds in fighting the embargo, which was imposed pursuant to an international treaty in Latin America that allows for the reciprocal recognition of foreign judgments. 

Chevron’s attempts to enlist political allies in Argentina are directly out of the oil giant’s playbook, with documented  attempts to bribe Ecuadorian government officials, use the U.S. embassy in Quito to undermine the case, and lobby the U.S. government to cut Ecuador’s trade preferences for refusing to intervene in the case.  

Pablo Fajardo, the lead Ecuadorian lawyer for the affected communities, told La Nacion that Chevron is trying to “extort” Argentina.

“Chevron has options,” he said. “You can pay the judgment or offer bail in Argentina bail to replace the embargo. It seems that Chevron intends to act outside the law and is choosing to attempt to extort Argentina. If the company suspended its operation, it is demonstrating that it is only interested in working when it has impunity."

One of the consequences of the freeze order is that any future investments Chevron makes in Argentina will also be subject to seizure, up to the full amount of the $19 billion Ecuador judgment.

Chevron also faces asset seizure actions over the Ecuador judgment in Brazil , Canada, and Ecuador. 

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