How Chevron Squanders Big Bucks on Ecuador Case

Want a good example of how the lawyers at Gibson Dunn & Crutcher rip off their wealthy client Chevron?

It is becoming increasingly obvious that Chevron CEO John Watson and General Counsel R. Hewitt Pate are unable to stop the Gibson Dunn "rescue team" from squandering shareholder money to flout the company’s $19 billion environmental liability in Ecuador.

In a sickening example of overkill that might explain why people hate the legal profession, Chevron recently reported that it has employed 41 different law firms and almost 500 lawyers and legal assistants to fight the indigenous groups in Ecuador. These groups -- including the Cofan, Secoya, and Siona -- have been victimized by Chevron's deliberate dumping of billions of gallons of toxic waste into the precious Amazon ecoysystem that the tribes depend on for their survival.

See this video for background on the case and this summary of the evidence against the oil giant.

In New York federal court this week, Gibson Dunn sent 11 lawyers to a relatively inconsequential hearing on a subpoena given to a non-party in its far-fetched “RICO” conspiracy case against the indigenous groups and their lawyers who are fighting to hold Chevron accountable. 

The firm dispatched five high-billing partners from various offices around the country – Randy Mastro (New York), Lauren Elliott (New York), Peter Selig (Washington, D.C.), William Thomson (Los Angeles), and Richard Mark (New York) – along with six other associates.

It was only Mastro, however, who stood up and argued to Judge Lewis A. Kaplan while the others seemed to sit around churning their billable hours while occasionally giving Mastro a cite to the record, a task any secretary could do.

Gibson Dunn obviously has some underutilized senior partners trying to jack up their billable hours at the expense of Chevron shareholders.

Let’s run the numbers.

Five partners, billing an average rate of $800 per hour, amounts to $4000 per hour. The hearing took several hours over two days, not to mention significant preparation time, travel time, and the writing of the subpoena itself. The six associates probably billed an average of $400 an hour to sit in the gallery and essentially do little but fetch coffee while watching the proceedings.

That’s roughly $6,400 per hour billed to Chevron shareholders for doing a whole lot of nothing. The entire proceeding easily could have been handled by Mastro and one associate. This reminds us of how 10-20 Chevron lawyers and technical staff would show up to watch American lawyer Steven Donziger be deposed for 15 days in 2010 and 2011. One person would ask questions, while the rest would watch. Various other Chevron lawyers around the country would bill for watching a live internet stream of Donziger’s testimony. 

The total bill for that exercise in overkill was at least $100,000 per day.

Chevron admitted it polluted Ecuador, but it claims it spent $40 million on a “remediation” that was nothing more than a fraudulent cover-up of its toxic waste pits. In the meantime, Chevron has spent an estimated $1 billion on its defense in the case, with Gibson Dunn’s per-partner profits in 2010 jumping 20% during a sharp downturn in the legal profession -- largely because of the wasteful billing practices that we saw this week in New York.

Chevron shareholders should not expect CEO Watson and top lawyer Pate to do much about safeguarding the company's assets when it comes to the Ecuador gamble. They double down on the company's increasingly futile defense almost weekly, so it means little to squander another $100,000 of shareholder money on a day in court so Mastro can renovate his house in the Hamptons over the winter.

Watson almost lost part of his job over his mishandling of the Ecuador litigation at the company's last annual meeting.

With waste like this and the increasing risk that billions of dollars worth of Chevron assets around the world will be seized, expect an even more forceful push by shareholders against Watson next year.


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BP, Chevron, and the Gulf spill: Lessons for CEO John Watson

Chevron CEO Watson: Open to new lessons?

Lost in the news about BP's Gulf spill is that Chevron has admitted dumping billions of gallons of oil sludge into Ecuador's Amazon, on purpose. Unlike BP, Chevron's executives, led by CEO John Watson, have not acknowledged they have any responsibility for the disastrous impacts on the environment and the damage caused to human health.

As background, thousands of indigenous persons and farmers from Ecuador's Amazon have been in litigation against Chevron over the damage for almost two decades. The case was filed in U.S. federal court in 1993, but shifted to Ecuador at Chevron's request as part of its stratagem to evade accountability. Now that the trial in Ecuador is almost over and the evidence clearly stacks up against Chevron, the oil giant is looking for what it hopes will be greener courtroom pastures.

Chevron is accused of deliberately discharging more than 18 billion gallons of "produced water" (salty water which contains chemicals, including at times the carcinogen benzene) into the rivers and streams of this once pristine ecosystem covering an area roughly the size of Rhode Island. Texaco, now owned by Chevron, operated a large oil concession there from 1964 to 1990 and was the mastermind of the polluting scheme that Chevron now defends. (When Chevron bought Texaco in 2001, Watson was the young Chevron executive in charge of the integration of the companies.)

In a classic example of corporate colonialism, Chevron's public relations flaks have called the indigenous leaders behind the lawsuit everything from liars to con men. Chevron has even claimed that the higher incidences of cancer, spontaneous miscarriages, birth defects, and other diseases are due to a lack of "sanitation" and the poor personal hygiene of the local residents. It's the theory that body odor causes cancer.

Creepy, to say the least.

Chevron has admitted that it had dumped more than 15 billion gallons of "produced water" into the Ecuadorian Amazon rainforest. "Produced Water" is ten times saltier than ocean water. In Ecuador, it equates roughly to 2% pure crude oil, meaning that Chevron had admitted dumping more than 30x the amount of oil spilled in the infamous Exxon Valdez disaster.

Yet the Valdez disaster (like the BP situation in the Gulf) was still an accident -- in Ecuador, the disaster was deliberately planned by Chevron as a mechanism to save costs.

Click to take a look at the advertisement placed by Chevron during the trial in a leading Ecuadorian newspaper. In the ad, the company admits that it dumped billions of gallons of produced water in to the Amazon – with the admission highlighted.

The advertisement – which was purchased by Chevron lawyer Rodrigo Perez Pallares – translates to: "3. While in Ecuador, the consortium poured 15.834 billion gallons between 1972 and 1990 during the entire period of Texaco's operation of the consortium, i.e. an annual average of 880 million gallons."

Talk about an admission of guilt. With lawyers like Perez Pallares, it is no wonder Chevron is having a hard time evading its liability in Ecuador.

In the advertisement Perez Pallares plainly admits that Chevron discharged toxic waste – and experts advising the plaintiffs have estimated, based on well records, that Chevron is undercounting the amount of produced water it dumped. The real number is over 18 billion gallons.

Chevron tries to blame Petroecuador for the problem, given that Texaco turned over this substandard operating system to that company in 1992. Yet Texaco was the party that exclusively designed, engineered, constructed and operated this system – sort of like of building the Valdez with a big hole in its hull, thereby guaranteeing it would gush oil as it cruised the world's oceans.

Petroecuador has now converted over to "reinjection wells" and is no longer discharging produced water. That is, this cash-strapped company already has done far more to protect the environment than cash-flush Chevron ever did with its First World technology.

Chevron won't cop to its misconduct. Instead, the oil giant claims that the "produced water" is safe to discharge into the sensitive ecosystem of the rainforest – no matter what alarm bells scientists ring. Perez Pallares and Chevron's other lawyers have made this preposterous claim during the trial while sipping bottled water imported from Quito.

Chevron needs to understand is that it is not legally or morally permissible to dump billions of gallons of cancer-causing industrial run-off into the drinking water of your neighbors just so you can inflate your profits. In this case, the drinking water was that of indigenous groups in Ecuador that had lived prosperously in the rainforest for centuries until Texaco showed up.

In its 26 years in Ecuador, Chevron never conducted a single environmental impact study or health evaluation. It never released any test results to determine the level of toxicity of the sludge it was discharging. That's either outright deception, or willful blindness. It is still practiced today by Chevron's executives, none of whom have visited the disaster zone in Ecuador.

It is high time for Chevron's executives to accept responsibility for the harm and destruction their company continues to cause in Ecuador. They might start by admitting that Texaco and Perez Pallares used the fraudulent TCLP laboratory test to lie to Ecuador's government about a purported clean-up in the mid-1990s, for which the company received a "release" from certain government officials.

Compared to Chevron's executives, BP's managers are starting to look like saints. They at least grunt about accepting responsibility. BP engineers at least seem to be trying to stem the awful leak.

They have a long way to go, but in the Gulf they are a marathon's distance ahead of Chevron's John Watson in Ecuador.

Visit www.chevrontoxico.com for more information.

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BP: 200,000 gallons per day by accident. Chevron: 4 million gallons per day on purpose.

Try comparing the environmental disaster that Chevron created in Ecuador's Amazon to the oil slick that now threatens the Gulf Coast states.

The disaster at "Deepwater Horizon" is causing an oil well to bleed some 200,000 gallons of oil a day into the ecosystem. And this was a horrible accident.

If you can believe it, this is only a fraction of what Texaco (now Chevron) deliberately dumped in Ecuador's rainforest when it operated hundreds of oil wells there from 1964 to 1990.

Chevron has admitted that Texaco dumped toxic "produced water" into the Ecuadorian rainforest and into the streams and rivers that 30,000 people used for their bathing and drinking water. "Produced water" can contain a toxic mixture of chemicals, including benzene and other components of crude oil. Some believe that approximately 2% of produced water is pure crude oil.

Over the course of 26 years, Chevron has acknowledged that it dumped more than 18.5 billion gallons of the industrial waste into the waterways of the populated and sensitive ecosystem, or 4 million gallons per day at the height of its operation. Put another way, Chevron's dumping of 18.5 billion gallons of produced water is the equivalent of discharging 332 million gallons of crude directly into the rainforest.

Without taking anything away from the tragedy in the Gulf of Mexico, at the rate that the Deepwater Horizon spill is going, it will have to discharge 200,000 gallons per day for 1,660 days to dump as much oil as Chevron deliberately dumped into the Ecuadorian rainforest. That is a little over 4.5 years.

And that only accounts for the pure crude oil Chevron dumped – not the oil it spilled from shoddy operation practices, or the 98% of the "produced water" that isn't pure crude, but encompasses a toxic "cocktail" of industrial runoff, salty water, and other chemicals. If you want to start comparing the Gulf of Mexico oil spill to the entirety of Chevron's dumping in Ecuador (all the produced water it has admitted to dumping, not just the crude oil), consider this: at a rate of 200,000 gallons a day, the Deepwater Horizon spill would have to go on for 92,500 days to spill 18.5 billion gallons into the environment. 92,500 days. 253 years. And no, that isn't a typo.

The worst part? Deepwater Horizon was an accident. But Chevron's actions in Ecuador, through its predecessor company Texaco, were the product of a system designed to dump toxic waste directly into the environment to keep production costs to a bare minimum.

Since the Deepwater Horizon incident happened, BP has taken full responsibility for the spill. More than 2,500 people have been mobilized to respond to the disaster, and the company has insisted that it will pay for a full clean up. Of course, we will see what ultimately happens – but at least it's a good start.

Chevron's response to their disaster in Ecuador? The opposite. Chevron has launched a full-scale litigation war to cover up the disaster and the company's own fraud in a purported remediation in the mid-1990s. It has committed fraud on the court by engaging in deceptive sampling practices and by controlling a laboratory that it represented as independent, according to audio recordings of one of Chevron's longtime contractors involved in the fraud, Diego Borja.

If the Ecuador disaster happened within the U.S., Chevron would be pressured and shamed into cleaning it up. In Ecuador, where the company disregarded the rights of the local indigenous groups on its way to ever higher profits, we see nothing of the sort.

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