Chevron's Legacy

Chevron's Legacy
The Pollution Chevron Left Behind...Shushufindi pit 38. Chevron's scientists found no contamination at this pit.

Tuesday, September 30, 2014

Chevron Faces Rising Business Risk From Ecuador Judgment

Inside Counsel, a magazine for corporate lawyers, recently published an article by New York attorney Steven Donziger outlining Chevron's rising global business risks stemming from its $9.5 billion Ecuador environmental liability.

Donziger writes that Chevron's scorched earth litigation strategy in the Ecuador matter should serve as a "cautionary tale" for corporations facing major environmental liabilities.

Risks faced by Chevron include diplomatic resistance to the company by several governments in Latin America; an open political war with Ecuador's government, an OPEC-member nation; enforcement actions targeting strategic assets of the company in three overseas jurisdictions, including in Canada where Chevron's asserts are worth an estimated $15 billion; the likelihood that more enforcement actions will be filed against the company; and an expected reversal next year of the flawed RICO ruling by controversial U.S. Judge Lewis A. Kaplan, who admitted corrupt evidence and was openly  hostile to the Ecuadorian villagers.

Chevron CEO John Watson and General Counsel R. Hewitt Pate -- despite hiring some 60 law firms and 2,000 legal personnel to battle the villagers -- have done little other than waste shareholder funds in a doomed campaign to evade their legal obligations, said Donziger.  The judgment against Chevron was affirmed by Ecuador's Supreme Court last November in a 5-0 decision.

Watson also suffers from a major conflict of interest given that he vetted the purchase of Texaco in 2001 as a top-level Chevron executive.  However, he failed to recognize the enormous potential liability. For more on Watson's conflict, see the post "Way Down Watson" by Amazon Watch.

"Watson is still chasing his tail as a result of his utter failure to understand Texaco's horrific behavior in Ecuador when Chevron made its purchase," said Donziger. "As a result, Chevron paid far more for Texaco than it should have. The only way Watson thinks be can erase this major blot from his record is through endless litigation against impoverished indigenous groups. But that is producing a wave of additional risk for the company that continues to multiply across jurisdictions."

In the article, Donziger makes it clear that claims by Chevron that the corporation is in the clear because of a favorable decision by Kaplan are misguided. Kaplan never had the legal authority to issue his ruling against the Ecuadorians or their counsel.  The case had many other legal and factual flaws; Chevron had so little confidence in its own evidence that it dropped billions of dollars of potential damages on the eve of trial to avoid a jury of impartial fact finders.  (See this document for background on Kaplan's flawed decision and here for Donziger's appellate brief that addresses all of Chevron's arguments.)

 In sum, Donziger asserts that Chevron faces the following risks:
  • Enforcement actions filed by Ecuadorian rainforest communities are targeting billions of dollars of company assets in Canada, Brazil, and Argentina. In Canada, the company is in particular trouble with a likely trial next year that could result in the recovery of 100% of the liability.
  • Chevron's hardline approach to the litigation is causing major diplomatic fallout and increased business risk in Latin America. Several countries -- including oil-producing Venezuela, where Chevron maintains its largest investment in the region -- have joined with Ecuador's government to condemn the American company for flouting the Ecuador court judgment.
  • The villagers have been able to recruit some of the most prominent litigators in the world to seize Chevron's assets. They include Alan Lenczner in Toronto, Sergio Bermudes in Rio de Janiero, and Enrique Bruchou in Buenos Aries.
The article in its entirety can be read here.









Sunday, September 28, 2014

How Reporter Paul Barrett Got It Wrong On Chevron’s Calamity In Ecuador

Chevron's $9.5 billion environmental liability in Ecuador, affirmed by eight separate appellate judges, has been haunting company CEO John Watson and his shareholders for years. In a new book on the litigation -- one replete with factual errors and lacking even a single footnote -- Businessweek reporter Paul Barrett largely adopts the myopically narrow perspective of the U.S. business community.

Barrett's analysis in the book, called Law of the Jungle, falls far short of a balanced assessment of the dispute even though it has one good chapter on the company's extensive contamination of Ecuador's rainforest. (For a summary of the overwhelming evidence against Chevron relied on by Ecuador's courts, see here.)

That's not suprising given Barrett's sympathies. He recently testified in favor of Chevron's litigation position before Congress. He also spent only ten days in Ecuador "researching" two decades of litigation. It is clear that he cribbed much of his material from Chevron's legal briefs.  He also failed to convince a single lawyer involved in the litigation to grant him an on the record interview.

Barrett does not speak Spanish nor the languages of the affected indigenous groups. Not surprisingly, he talked to virtually nobody in the 80 or so rainforest communities devastated by the oil pollution.  

Barrett clearly wants to cash in on the high-profile case and become the resident "expert" on the issues involved. But he does this by giving Chevron every benefit of the doubt.  He also adopts almost wholesale the company's narrative that it was the victim of the indigenous groups and their lawyers.

Aside from its many factual errors  -- outlined in a "notice of defamation" letter cited below -- the fundamental problem with Barrett’s book is its obsessive focus on American human rights lawyer Steven Donziger rather than on Chevron’s systematic toxic dumping and fraudulent remediation.

Chevron's top legal representative in Ecuador, Rodrigo Perez Pallares, admitted openly during the eight-year trial in Ecuador that the company deliberately and systematically discharged more than 15 billion gallons of bezene-laden toxic oil waste into the rainforest during roughly two decades of operations. It would be hard to find such a frank admission by a major American corporation of industral homicide on a mass scale. Multiple peer-reviewed health studies -- largely ignored by Barrett -- confirm dramatically high rates of cancer in the region where Chevron operated.

Yet Barrett suggests Chevron should not pay the $9.5 billion Ecuador court judgment even though it insisted the trial take place in that venue. In contrast, back in his home country, Barrett seems totally unbothered by BP's $46 billion liability for its far smaller and accidental spill in the Gulf of Mexico. (For an analysis of Chevron's stingy behavior in Ecuador compared to BP's large payouts in the U.S. for its Gulf spill, see here.)

Making indigenous persons invisible or treating them as second class citizens is the sort of colonial mentality that got Chevron in trouble in Ecuador.  Barrett falls into the same trap.  He continues Chevron's pattern of arrogance by conceding he never read the 220,000-page Ecuador evidentiary record.  Nor did he attend a single day of the Ecuador trial from its start in 2003 to its finish in 2011. But that did not stop Barrett from issuing "reports" from the trial in his book by describing scenes from the documentary film Crude without citation in the text.

Even the book's title suggests Barrett runs too easily in the world of stereotypes.   In his mind, it appears most Ecuadorians are little more than savages incapable of running their own affairs who are constantly being manipulated by gringos, be they oil companies or lawyers.

Barrett's overwrought focus on Donziger undermines the upside from his one decent chapter on Chevron’s contamination. Yet even this chapter -- where Barrett interviews Cofan indigenous leader Emergildo Criollo -- serves as little more than a foil for the author's later assault on Donziger's integrity and his distortion of the scientific evidence.

Donziger was hardly alone in battling Chevron.  But you would never know it from Barrett's account, where Ecuadorians simply disappear.

Donziger worked closely with lead lawyer Pablo Fajardo and a team of Ecuadorian scientists, lawyers, and community leaders whose names don't make it in to Barrett's book.  Two of the local leaders – Fajardo and Luis Yanza – were recipients in San Francisco of the prestigious Goldman Environmental Prize and its $150,000 cash prize. The award, considered the “Nobel” of the environment, so angered Chevron that it took out full-page newspaper ads in the San Francisco Chronicle accusing the Goldman jury of being duped by the villagers.

Consider a few more of the shortcomings in Barrett's account:
  • There is nothing in the book about the scientific evidence against Chevron in its two internal environmental audits that confirm the company’s extensive contamination at 158 of 163 well sites inspected.  These reports -- both paid for by Texaco, Chevron's predecessor company -- are readily available in the trial record but were ignored by Barrett.  
  • There is nothing about how Chevron scientists John Conner and Sarah McMillan designed and executed a plan to cheat Ecuador’s courts by secretly pre-inspecting contaminated sites to identify “clean” sampling areas. When the judge showed up later for the official judicial inspection, the company would act like it was engaging in random sampling.  In reality, it was lifting soil from places it knew would turn up clean.  
  • Barrett also ignores the entirely inappropriate – it not outright corrupt – attempts by Chevron lawyers Ricardo Reis Veiga and Jaime Varela to use the U.S. embassy Quito to float various bribe offers to Ecuador’s government to coax it to illegally kill off the case. This has been confirmed by wikileaks cables and Chevron’s own internal documents.  (Reis Veiga was later indicted by Ecuador's government for fraud on a sham remediation.)
  • Barrett also ignores the appeal by the Ecuadorians and Donziger of the deeply flawed RICO decision by U.S. Judge Lewis A. Kaplan that purports to overturn a unanimous decision by Ecuador’s Supreme Court affirming Chevron’s liability. (Donziger’s brief appealing that decision, which shreds Chevron’s fallacious factual arguments, can be seen here).
  • Barrett is silent on the fact that 43 prominent U.S. civil society organizations have blasted Chevron for abusing the racketeering statute to target the human rights advocates defending the Ecuadorian communities.  He tries to leave the false impression that Donziger and his colleagues lack support, when in fact support for the case and its lawyers is strong and growing stronger.
  • Finally, Barrett appears to have a myopically provincial perspective. He barely acknowledges that the final decision on recovery will be made not in the U.S., but by courts in various enforcement jurisdictions (including Canada, Brazil and Argentina) that are being asked to seize Chevron's assets to pay for the court-mandated clean up. There is no evidence Barrett traveled to those countries or read the relevant legal papers.
  • Barrett also ignores or mischaracterizes the intense pressure Chevron’s management is under from its own shareholders to settle the Ecuador case, given the huge risk of business disruption around the world. Chevron CEO Watson has been strongly rebuked over the case by a series of shareholder resolutions.
Boiled to its essence, Barrett’s book is a corporate perspective on a successful American plaintiff’s lawyer who with his Ecuadorian colleagues pioneered a new model of funding for a mass-scale human rights litigation. The fact the lawyers had the trial judgment affirmed unanimously by two separate appellate courts in Ecuador -- including by the country's highest court -- only seems to infuriate Barrett all the more.

Even worse for Barrett is that Chevron's 60 law firms and 2,000 legal personnel have been unable to halt the march toward recovery. Barrett's genetic code as a longtime business reporter does not account for even the possibility that indigenous groups could amass scientific evidence and use it to humble America's third largest corporation in court.  

We might add that while BP already paid out billions in the U.S., Chevron continues to seek a taxpayer-funded bailout of its clean-up costs by suing Ecuador's government in international arbitration.  Imagine the outcry from U.S. citizens if BP did the same to the Obama Administration.

Again, you won't hear this perspective from Barrett.

(For more background on the flaws in Barrett’s book, see this critique and Donziger’s “notice of defamation” letter to the author and his publisher. For balanced reporting on the case, we recommend this recent article by Alexander Zaitchik in Rolling Stone, this 2007 article about Fajardo by William Langeweische in Vanity Fair, or this segment about Chevron's deliberate toxic dumping in Ecuador on 60 Minutes. For the human impact, see this compelling photo essay by Lou Dematteis in The Huffington Post documenting Chevron's cancer epidemic in the affected area.)

Wednesday, September 24, 2014

NYT Columnist Joe Nocera Hides Major Conflict of Interest Over Chevron's Ecuador Case


We have long known business writer Joe Nocera to be the resident lightweight of the NYT op-ed page. He clearly lacks the supple analytical insight often seen in the writing of his colleagues Maureen Dowd, Thomas Friedman, Charles Blow, David Brooks, and Paul Krugman.

It was no surprise, then, when Nocera decided to use his column to help his Businessweek buddy Paul Barrett promote his one-sided new book on Chevron’s ecological calamity in Ecuador. Barrett's thesis -- which Nocera adopts wholesale -- is that a good legal case against Chevron was spoiled by the hubris of New York human rights attorney Steven Donziger. The truth is far more complicated.

Because of the tenacious lawyering of Donziger and his colleagues, Chevron lost the case in Ecuador and now faces the potential seizure of billions of dollars of strategically important company assets in Canada, Brazil, and Argentina. Eight separate appellate judges in Ecuador -- the venue where Chevron wanted the trial held -- have ruled against the company. This includes a unanimous five-judge panel from Ecuador's Supreme Court.

Barrett ignores virtually all of this in his book. So does Nocera in his column.

(For more on Donziger's perspective that Nocera and Barrett ignore, see this op-ed published today on the website of Inside Counsel magazine. Donziger also wrote a highly detailed letter to Barrett and his publisher documenting the writer's shoddy reporting, fictional scenes, lazy technique, and factual errors. That letter can be read here.)

Nocera obviously tried to help salvage Barrett's credibility problems by attacking Donziger. What is surprising is how Nocera blew off the overwhelming evidence of Chevron's liability in Ecuador. Here's an email Donziger sent to Nocera before he wrote. Virtually none of this highly relevant information made it into the published column.

Also surprising – no, inexcusable – is how Nocera failed to disclose in the column that his spouse is a lawyer and public relations director for a prominent New York litigation firm hired by Chevron to work on the Ecuador environmental case. The main adversary of the firm? None other than Donziger, the lawyer Nocera attacks. Oops!

We have since learned that there is a disturbing pattern to Nocera's conflicts. Consider:
  • Nocera’s wife, Dawn Schneider, is the communications director for the Boies Schiller law firm headed by well-known litigator David Boies. Chevron hired the firm to work on critical discovery issues related to the Ecuador case. Here are legal briefs [HERE and HERE] that demonstrate the firm's deep involvement in defending Chevron against corruption allegations. Nocera did not disclose his wife's connection to this law firm in his column.
  • In 2006, Nocera was roundly criticized for writing a cover story for the New York Times Magazine on the tobacco company Altria (formerly Phillip Morris) that was surprisingly soft. The public relations person for Altria who worked directly with Nocera on the article? None other than the erstwhile Dawn Schneider.  
  • On another occasion, Nocera wrote in his column about a litigation dispute between Oracle and SAP in which he passed judgment in favor of Oracle. But Oracle also was a client of David Boies, the immediate boss of Dawn Schneider. Nocera failed to disclose this fact as well. Details of that embarrassing episode -- which caused the NYT to publish a clarification  -- are here.
Nocera’s latest column attacking Donziger relies heavily on the findings of activist U.S. judge Lewis A. Kaplan that purports to overturn a unanimous decision by Ecuador's Supreme Court on questions of Ecuadorian law. Kaplan himself disparaged the Ecuadorians from the bench and made a mockery of justice as this document explains in some detail.

Nocera also ignored evidence of Chevron’s bribes, witness tampering, and cooking of evidence in the Ecuador and U.S. trials – all readily available in public documents, including in Donziger’s 130-page brief.

Barrett’s book is largely an apologia for Chevron’s atrocious behavior in the Amazon rainforest. He spent only a handful of days in Ecuador. Barrett also failed to interview anybody of import on either side of the litigation. And he topped it all off by repeating many of Chevron’s talking points in testimony this summer before the U.S. Congress where he sat next to a partner from Chevron’s lead outside law firm. See here for the details.
Nocera is also friends with Fortune writer Roger Parloff, another full-throated advocate for Chevron trying to masquerade as an independent journalist. For more about Parloff’s own lack of ethics and his own feeble attempt to help Barrett, read this recent blog post.

We have asked Nocera to disclose the conflict of interest over his wife’s role in the law firm involved in the Ecuador litigation. He will have a chance to do so in his next column.

We're not holding our breath.


Friday, September 19, 2014

Fortune's Roger Parloff Now Helping Chevron's Smear Campaign

Fortune legal reporter Roger Parloff seems upset over Chevron's diminishing prospects of evading its $9.5 billion environmental liability in Ecuador.

We have written previously about Parloff's slanted reporting in favor of Chevron. For months, with no conceivable justification, he has refused to print our detailed letter to the editor pointing out the many flaws in his reporting about Chevron's claims of "fraud" in the Ecuador judgment.

Chevron's claims have been rejected by no fewer than eight separate appellate judges in Ecuador and six separate federal appellate courts in the U.S. But Parloff, relying on an outlier decision by an activist U.S. judge who already has been reversed on appeal in humiliating fashion, continues to stand by Chevron's claims.

Lest there be any doubt, Parloff this week outed himself as a full-throttled apologist for Chevron's human rights abuses in Ecuador. He also jumped on the Chevron bandwagon to help push the company's strategic "demonization" campaign against its main litigation adversary, New York human rights lawyer Steven R. Donziger. (An email in 2009 from Chevron public relations consultant Chris Gidez was explicit: Chevron's "long term strategy is to demonize Donziger.")

In defense of a deeply flawed book by his friend, reporter Paul Barrett of Businessweek, Parloff claims Donziger uses "mendacity" and "intimidation" to achieve his goals in holding Chevron accountable for dumping billions of gallons of toxic waste into the Amazon ecosystem. While an estimated 1,400 people have died of cancer in Ecuador courtesy of Chevron's dumping, it is none other than Donziger who Parloff claims should be thrown in jail.

Tellingly, Parloff is completely silent about Chevron's admission that in Ecuador it deliberately dumped 15 billion gallons of toxic oil waste into streams and rivers relied on by local indigenous groups for their drinking water. Or that the company repeatedly tried to sabotage the Ecuador trial, corrupt the evidence, bribe witnesses, and intimidate judges who would not bend to its will.

What Parloff won't tell his Fortune audience is how unqualified he and Barrett are to serve as judge and jury about the Ecuador matter or Donziger's role. Neither attended even a single day of the eight-year trial. Neither read the 220,000-page evidentiary record relied on by Ecuador's courts to find Chevron liable. Neither is familiar with the country's civil code. Neither will cite to Donziger's appellate brief (prepared by Deepak Gupta of the fast-rising Gupta Beck law firm) that rips apart all of Chevron's fallacious arguments.

Both also fail to mention critical information that does not fit Chevron's "demonize Donziger" narrative. This information includes the fact that two separate appellate courts in Ecuador unanimously affirmed the trial court judgment. And that the villagers are enforcing their judgment against Chevron's assets in four countries in one of the most important accomplishments of indigenous groups against the power of Big Oil in history.

Instead, Parloff and Barrett join Chevron's public relations firms in focusing on a minor and fabricated issue that is largely irrelevant to the underlying litigation. The particular issue, however, can be quite useful to damage Donziger's reputation before an American audience unfamiliar with a foreign legal system.

Parloff and Barrett claim that Donziger's role in having U.S. consultants prepare one of the 106 technical reports submitted to the Ecuador court was improper. The particular report in question – which Ecuadorian law experts say was prepared consistent with local practice as well as the methodology used by Chevron's lawyers – was discarded by the judge at the end of the trial. He concluded he did not need it to find Chevron liable given the overwhelming weight of the evidence against the oil company in the other 105 technical reports submitted.

No harm, no foul. Donziger and the Ecuadorian legal team stand by the report. Chevron disagrees. It doesn't matter.

Parloff also repeats the Chevron canard that Donziger bribed a judge. But that information came from a crooked witness to whom Chevron admitted paying an estimated $1 million in salary and benefits, including $48,000 in cash out of a suitcase in Quito. The witness changed his story to suit Chevron's needs each time the company paid him more money. See here for more of the disturbing details that point to witness tampering and possible criminal wrongdoing by Chevron.

To defend Barrett's dishonest book, Parloff continually cites to the only thing Chevron has left. That's the deeply flawed RICO decision by federal judge Lewis A. Kaplan. A former corporate defense lawyer, Kaplan seems unable to leave aside his obvious sympathies for the powerful when he takes the bench. We might also add that Kaplan is invested in mutual funds that own Chevron stock. Tellingly, he did not disclose this fact to the parties during the trial.

Kaplan turned over his New York courtroom to Chevron last fall for an abusive show trial where the company's army of high-priced lawyers turned their demonization campaign against Donziger into high art.

Chevron's case was preposterous from the get go. There was no legal basis for it, as Donziger's appellate brief makes clear. In a state of agita over its lack of evidence, Chevron dropped all damages claims on the eve of trial to avoid a jury. Kaplan repeatedly disparaged the Ecuadorian villagers, tried to meddle in Ecuador's judiciary, and refused to consider any of the extensive evidence of Chevron's contamination in Ecuador. He also treated every witness from the Global South like a second class citizen and worse.

Given that Kaplan reverse-engineered the result, his decision is highly likely to be reversed on appeal. That already happened with Kaplan's unprecedented decision in 2011 purporting to block the villagers from enforcing their judgment anywhere in the world. That provoked the ire of legal scholars from numerous countries and deeply embarrassed the federal judiciary. For detailed background on Judge Kaplan's latest abuse of the trial process, see this document.

Parloff and Barrett seem to have forgotten an important lesson. Those who live in glass houses should not throw stones. Particularly not at Donziger, who has proven himself to be tough as nails and has survived what is probably the most well-financed corporation retaliation campaign in history.

This retaliation campaign is funded, we might add, by an oil company that advertises in the very publications that sign the paychecks of Parloff and Barrett.

Like most trial lawyers, Donziger is far from perfect. But he rightfully is seen by many human rights advocates around the world as a role model. Donziger and his Ecuadorian colleague Pablo Fajardo found funders who helped them pioneer a new model of legal accountability for oil companies that had enjoyed virtual impunity. For two decades Donziger has worked alongside his indigenous clients to chase Chevron as it tries to run from the law.

The legal team has braved anonymous death threats and constant public attacks from the oil company and its allies. Donziger and Fajardo have been followed, harassed, and spied on by Chevron operatives both in the U.S. and Ecuador. Chevron has even extended its intimidation campaign to the lawyers in foreign jurisdictions.

As part of this intimidation model, Chevron has filed court actions against at least 100 supporters of the villagers as well as three separate funders. It also sued Ecuador's government in international arbitration to seek a taxpayer-funded bailout of its pollution. But the team remains undeterred.

The advocacy of Donziger, Fajardo, and others helped lead to the criminal indictment of two Chevron lawyers in Ecuador for fraud. The underlying case produced the largest environmental judgment ever against an American company from a foreign court.

Worst of all for Chevron, the Ecuador judgment came from the very court system where the company insisted the trial be held. In the 1990s, Chevron lawyers submitted 14 sworn affidavits to a U.S. judge praising the independence and fairness of Ecuador's courts. That was Chevron's position until the overwhelming evidence of its wrongdoing started to come in. Then the company switched gears and started to trash the very courts it previously had praised.

Parloff apparently forgets the meaning of "mendacity" and "intimidation" when applied to corporate misconduct.

Reporters – even those working for business publications – should not help corporations smear the people who held them accountable. But that appears to be the modus operandi for Parloff, Barrett, and Chevron: attack the lawyers and create a smokescreen to divert attention away from those responsible for the atrocities.

It's an awful litigation model that ultimately will cost Chevron dearly, as this blog post points out about BP's estimated $50 billion liability for its accidental Gulf of Mexico spill.

For some balanced and independent reporting on the case, one must move well beyond Parloff and Barrett.

We recommend this article published recently by Alexander Zaitchik in Rolling Stone, this 2007 article about Fajardo by William Langeweische in Vanity Fair, or watch this segment about Chevron's deliberate toxic dumping in Ecuador on 60 Minutes. For the human impact, see this compelling photo essay by Lou Dematteis in The Huffington Post documenting Chevron's cancer epidemic in the affected area.

These journalists provide a powerful counterpoint to Parloff and Barrett's zeal to defend a corporate polluter and cash in on its unethical demonization campaign.

Wednesday, September 10, 2014

Chevron Racism Toward Ecuador Highlighted by Court Decision In BP Case

A legal decision handed down last week by U.S. federal Judge Carl Barbier found that BP's "gross negligence" caused the Deepwater Horizon blowout in the Gulf of Mexico.  The decision increased the company's liability to roughly $50 billion.

For our purposes, Judge Barbier's decision – which sets an important benchmark for corporate accountability – has a deeper meaning.

Judge Barbier's finding underscores the obvious racism behind Chevron CEO John Watson's claim that the company's $9.5 billion judgment in Ecuador represents some sort of gouging by that country's courts. While BP pays for its spill, Chevron has obtained effective impunity for decades of contamination resulting in disease and death in the rainforest of Ecuador.

Chevron has refused to pay any part of the judgment whatsoever. The company chooses instead to spend many millions on law firms to carry out its threat of a "lifetime of litigation" for the villagers.

It gets worse. BP's liability for the less impactful Gulf spill in the U.S. is now five times higher (and still growing) than Chevron's in Ecuador. Yet Chevron's contamination in Ecuador is more widespread, has lasted far longer, was deliberate, has severely impacted indigenous groups, and is afflicting the world's most delicate ecosystem. Further, responsibility was adjudicated after a long trial.

So what gives?

Well, let's speak the unpleasant truth about environmental racism in the oil industry today.

The truth is that in Ecuador, the victims of Chevron's contamination are Ecuadorian indigenous peoples and poor villagers. In the U.S., the victims are Americans. While there is certainly extensive environmental racism in our country, the discrepancy between BP's payout and Chevron's extraordinary conceit and greed in the face of intense human suffering is a clear illustration of something gone profoundly awry.

This is not to take away from the loss of 11 lives on the Gulf Coast. At the same time, at least 1,400 Ecuadorians have died from cancer and other diseases linked to the contamination and thousands more have had serious illnesses. Far more will likely die if there is no clean-up.

We would submit that there is no way on God's Earth that CEO Watson and the members of the Chevron Board of Directors would dare to treat American victims of the company's pollution as viciously as they treat their victims in Ecuador. If they did, they would be booted out of their country clubs, banished from their churches, and shamed in the town square.

Here's another illustration of this phenomenon. At the same time that Chevron's predecessor company Texaco was systematically discharging billions of gallons of toxic waste into Amazonian waterways, in the U.S. the company was properly re-injecting the same waste into deep underground wells. This was to ensure there were only minimal environmental impacts in the U.S. But clearly the company felt it could get away with NOT doing it in a place where there was little oversight.

Chevron also proposed that the Ecuador court adopt a clean-up standard for oil field hydrocarbons 100 times greater than that used in its home state of California. Put another way: in Chevron's view, an Ecuadorian life is worth 100 times less than an American life in California.  If that is not some form of extreme racism, we would like to know what is.

Of course, Chevron's victims in Ecuador are indigenous and Latino farmers in an isolated region of a Third World country. Unlike the American victims, they do not have a law like the Clean Water Act that if used properly can lead to a penalty that begins to fit the magnitude of the transgression.

Nor do they have an elected president willing to call out the corporate polluter publicly in the strongest possible terms. President Obama, just days after the spill in the Gulf began, said repeatedly that BP would pay dearly – and that's exactly what happened. When Ecuador President Rafael Correa did the same to Chevron decades after the fact, Chevron's legal and public relations machine attacked him mercilessly for "interfering" with legal proceedings.

Chevron has spent years trying to sabotage the trial that it wanted to take place in Ecuador precisely because it thought it could manipulate the result through corrupt means. (For some examples of Chevron's corruption and delaying tactics in Ecuador, see this declaration by Ecuadorian lawyer Juan Pablo Saenz.)

Judge Barbier's finding triggers up to $18 billion in additional penalties for BP under the Clean Water Act. That's on top of the $28 billion BP already has doled out to clean up the environment and to compensate its victims.  Wow.

Chevron's executives must read that number and get down on their knees to thank the gods of corporate greed for their good fortune. Chevron has yet to clean up properly even one of its estimated 1,000 waste pits sitting on the jungle floor in Ecuador that to this day continue to contaminate soils and groundwater.

CEO Watson knows Chevron is getting off easy in Ecuador. But he still presses on with a scorched-earth strategy that includes 60 law firms and 2,000 legal personnel. He wants to send a broader message to restless natives the world over who might have claims against the company. The case will end, he told Fortune magazine, when the lawyers "give up" and go home. That's an effort to buy impunity.

BP still faces lawsuits from various Gulf states such as Alabama and Mississippi that could increase its liability for the Gulf spill to $75 billion or more. To underscore how profitable the oil majors are – and how easily Chevron could pay the Ecuador judgment – BP is still producing profits and dividends for its shareholders.

When Watson (who makes around $25 million in annual compensation) and Chevron General Counsel R. Hewitt Pate claim the Ecuadorian verdict is too high, what they mean is it is too high for the particular people who won it. Consider these facts:
  • Chevron lawyer Rodrigo Perez Pallares admitted during the Ecuador trial that the company deliberately discharged 15 billion gallons of toxic water into fresh water sources in the Amazon rainforest. The amount is an estimated 85 times more oil waste than BP discharged into the Gulf.
  • Chevron's dumping in Ecuador was done by design to increase profits. BP's spill – even though the result of gross negligence – was still an accident.
A case involving Anadarko's recent settlement over 2,700 contaminated sites in the U.S. also underscores Chevron's inexcusable double standard. In that case, Anadarko inherited the polluted sites from Kerr McGee when it bought the company, just like Chevron inherited Texaco's pollution liabilities when the companies merged in 2001.

Like Chevron has done with Texaco, Anadarko tried to spin off the environmental liability into a separate shell company that had little capital. A U.S. bankruptcy judge rejected Anadarko's subterfuge and ordered it to clean the sites. In Ecuador, three layers of courts rejected Chevron's use of the same legal trick to evade liability.

But in the courts of Ecuador, according to Chevron's double standard, that amounts to a violation of "due process" and is an example of a "fraud" against the company.  That reminds us of what a Chevron lobbyist once told Newsweek in reference to the legal claims of the Ecuadorian villagers: "We can't let little countries screw around with big companies like this."

Watson and his army of lawyers have ruthlessly attacked Ecuador's government for not cleaning up Chevron's contamination in Ecuador.   Their goal is a taxpayer funded bailout (in Ecuador) of their own pollution.  But for decades the U.S. government did not lift a finger  to address Kerr McGee's contamination – largely because the issue of liability was still being contested. In the end, Kerr McGee settled the matter for $5.6 billion.  That amount underscores how major polluters routinely pay out large sums to settle their liabilities.

That is, unless you are a major oil company run by predators like Watson and Pate and a Board of Directors that fails to hold its management team accountable for flouting the law.

Let's sum up.

In one country (Ecuador), a U.S. oil major has refused for almost 50 years to clean up its contamination, compensate its victims, or engage in meaningful settlement discussions with the affected communities. In another country (the United States), a British oil major put up $20 billion within days of its spill to compensate its victims and engaged in settlement discussions with the victims that resulted in further liability.

BP has put aside $40 billion in cash to deal with the Gulf spill. Chevron has put aside zero to pay off its Ecuador liability.

Watson and Chevron's Board of Directors owe the people of Ecuador – not to mention their own shareholders – an explanation for this thoroughly disturbing behavior.

Friday, September 5, 2014

Rolling Stone Nails Chevron for Corrupt Acts In Ecuador Litigation


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, July 31, 2014

Conflict of Interest: Businessweek's Paul Barrett Now An Advocate for Chevron In Ecuador Dispute

With his track record of bias in favor of Chevron already part of the historical record, Businessweek’s Paul Barrett appears to have become a full-blown public advocate for the oil giant in its legal dispute with Ecuadorian villagers over the massive contamination of their ancestral lands.

Just this week, Barrett testified about his take on the litigation before the House of Representatives in a hearing that was arranged in part by Chevron lobbyists. He appeared at the side of a lawyer from the oil giant’s controversial outside law firm, Gibson Dunn & Crutcher. And he repeated the usual Chevron talking points about the Ecuador case that have been rejected by three layers of courts in Ecuador, including that nation’s highest court in a unanimous opinion last November.

Barrett’s testimony in favor of Chevron – completely improper for any independent journalist – follows multiple reports that Chevron is quietly helping to promote his forthcoming book about the case, Law of the Jungle. We can’t say we are surprised after reviewing an advance copy from a source who indicated Barrett is trying to flog it in Hollywood.

The effort by Barrett to cash in on the misery of Ecuadorian villagers by promoting Chevron’s campaign to evade accountability is hardly surprising. His book falls far short of fact-based responsible journalism. Barrett adopts wholesale most of Chevron’s fraudulent plot points and ignores the overwhelming scientific evidence – most provided by the oil company itself during an eight-year trial in the court of its choosing in Ecuador – that was relied on to determine liability for the dumping of billions of gallons of toxic waste into the rainforest.

(For background on the overwhelming evidence against Chevron relied on by the Ecuador courts, see this document; for an explanation of Chevron’s human rights abuses in Ecuador, see this video; for how Chevron deliberately discharged toxic waste, see this 60 Minutes segment; for a letter signed by 43 civil advocacy groups criticizing Chevron over Ecuador, see here.)

Barrett’s obsession with (and personal animus toward) Steven Donziger, the main U.S. legal advisor to the villagers and the principal target of Chevron’s demonization campaign, drips off the cover jacket and permeates almost every chapter.

Law of the Jungle suffers from some of the same egregious flaws often found in Barrett’s reporting on the Ecuador litigation: sloppy or non-existent research resulting in numerous factual errors; cribbing material from other journalists and court filings; creating fictional scenes that never happened; and demonstrating a shocking disregard of the extensive scientific evidence that contradicts Chevron’s self-serving narrative.

The book reads like a novelist’s re-purposing of Judge Lewis A. Kaplan’s deeply flawed 487-page RICO decision, which is currently hanging on life support during the appellate process. Barrett’s book is as much an affront to serious journalism as Kaplan’s decision is to serious legal reasoning.

A more comprehensive critique of Barrett’s book is forthcoming. Here is a preview of some of its flagrant flaws:

  • Barrett did almost no independent reporting. He let Chevron’s lawyers do almost all of his work for him, effectively letting the oil giant subsidize his so-called “independent” research. Most of the book re-writes Chevron’s court filings and adopts almost wholesale the oil giant’s narrative that it was “victimized” by the very indigenous groups that held it accountable.
  • Barrett spent almost no time reporting on conditions in Ecuador. He never interviewed a single member of the legal team for the villagers. He does not quote any current Ecuadorian government officials. He never attended even a day of the eight-year trial that resulted in a judgment against Chevron. According to his source notes, Barrett never read the 220,000-page Ecuador trial record. Barrett also spent no more than a few days reporting from Ecuador, the epicenter of the two-decade legal dispute and the place Chevron's predecessor company Texaco operated for decades. The book epitomizes secondhand armchair journalism.
  • Barrett’s book reads as though the Ecuadorian people do not exist. Consistent with Chevron’s imperialist and arrogant behavior in Ecuador, there is virtually no mention by Barrett of a single Ecuadorian other than Cofan indigenous leader Ermegildo Criollo, with whom he spent a few hours. In Barrett’s eyes, the people who matter most are Americans like Donziger, Judge Kaplan, and the activists at Amazon Watch. He scarcely mentions lead Ecuadorian attorney Pablo Fajardo (who won the CNN Hero Award for his work on the case) and he ignores Luis Yanza (winner of the prestigious Goldman Environmental Prize). Yanza has been the lead community advocate on the case for over two decades. Almost none of the thousands of affected villagers were even interviewed.
  • Barrett misleads the reader about his sources. In a shocking display of poor journalistic ethics, Barrett repeatedly misleads the reader by cribbing material without citation from journalists who did firsthand reporting. One example: Barrett frequently describes scenes from the award-winning documentary film Crude without mentioning in the text that his source is the film. By so doing, Barrett leaves the reader with the false impression he was reporting firsthand from events that happened years ago and where he was not present. (Some of these suspect narrative techniques seem oddly similar to what got James Frey in trouble in his supposedly non-fiction memoir, A Million Little Pieces.)
  • Barrett fictionalizes events and leaves the false impression he interviewed Donziger. Barrett asked Donziger repeatedly for interviews for the book but Donziger refused to cooperate, acting on advice of counsel and for other reasons related to Barrett’s lack of scruples. So Barrett now pretends that Donziger cooperated with him anyway. Barrett quotes Donziger from private notes turned over in discovery and relays what he thinks is on Donziger’s mind, leaving the reader with the false impression that he interviewed Donziger for the book or had some special access to his private thoughts. Barrett also creates fictional scenes involving Donziger – including one where the lawyer supposedly was trailed by Chevron undercover operatives while riding his bike in Manhattan, which did not happen.
  • To create his fictionalized story, Barrett ignores key evidence. Consistent with Chevron’s self-serving version of events, Barrett completely ignores or distorts key scientific evidence to try to claim that the Ecuadorians could not prove their case. This narrative is contradicted by Chevron’s own evidence submitted to the Ecuador court; by three layers of court decisions in Ecuador; and by the recent analysis but a prominent group of U.S. scientific consultants, the Louis Berger Group. He also ignores persuasive evidence that Chevron tried to cheat during the trial to hide evidence of its own contamination. He ignores the fact that more than 35 scientists – including those hired by both litigants and third parties – have confirmed the oil giant’s pollution.
  • The book is skewed by Barrett’s obvious personal animus toward Donziger. Consistent with Chevron’s strategy to “demonize” Donziger, Barrett subjects the main U.S. legal advisor for the villagers to a host of juvenile epithets. Barrett calls Donziger a “loudmouthed gatecrasher,” “master showman,” and describes him as a lawyer “who’d stop at nothing” to win. He then ignores Donziger’s own narrative about what took place in Ecuador by failing to even mention (much less cite) the attorney’s comprehensive 130-page appellate brief that exposes a good number of Chevron’s lies, misdeeds, and unethical litigation practices. Barrett also ignores Donziger’s own lawsuit against Chevron, which comprehensively documents the company’s deceit in U.S. courts and its plethora of criminal and unethical acts in Ecuador.

Perhaps more disturbingly, we have numerous emails from the last two years or so that show Barrett becoming unhinged over Donziger’s refusal to cooperate with his book. Many people also witnessed a bizarre incident in open court recently where Barrett lost his cool and blew up at Donziger’s lawyers. At times, Barrett made explicit threats to those working for the Ecuadorians that he planned to use his book to “take down” Donziger. He warned other lawyers they should stop working with the New York attorney or they would risk damaging their careers.

We have long suggested that Businessweek editor Josh Tyrangiel has let Barrett get away with this unprofessional behavior for far too long. While Barrett was writing a book that is little more than a continuation of Chevron’s hit job on Donziger, he also was reporting “independently” for Businessweek on Donziger’s role in the litigation. That’s a blatant conflict of interest. Businessweek continues to let Barrett use its web platform to promote the themes of his flawed book and to make snarky attacks against Donziger.

All of this might explain why Chevron’s public relations flaks are pushing Barrett’s book and arranging for his congressional testimony. Granted, it’s only a small part of the company’s gargantuan public relations campaign to distract attention from its ecological calamity in the Amazon. But we have seen how Chevron has convinced other formerly reputable advocates, such as human rights academic Douglas Cassel, to take up arms for a corporate polluter in exchange for money. Cassel has so damaged his reputation that his faculty colleagues at Notre Dame ordered his diatribes about the Ecuador case removed from the law school’s official website.

Barrett is the latest bit player to try to boost his profile and make a buck off of Chevron’s billion-dollar retaliation campaign against the Ecuadorian villagers. The company’s strategy to “demonize" Donziger – outlined explicitly in internal Chevron emails dating back five years – is now a cottage industry that includes no fewer than 60 outside law firms, 2,000 legal personnel, ten investigations firms, at least six public relations firms, and now Barrett. It has to be the most robustly financed corporate retaliation campaign in history.

While Barrett hustles his book, the indigenous people of Ecuador continue to suffer. This is partly because a compromised American “journalist” has now made it a little bit easier for Chevron’s management team to evade its court-mandated responsibilities to the people it harmed.

Businessweek’s readers and the public deserve better. So do the affected communities in Ecuador.