Thursday, October 1, 2009

Chevron CEO forced out?

Crossposted from San Francisco Chronicle.

By Cameron Scott:

Dave O'Reilly, the CEO of San Ramon-based Chevron Corp., announced a surprise retirement earlier today, a move that seems related to growing publicity about Chevron's likely liability for environmental destruction of the Ecuadorian Amazon wrought by Texaco, which Chevron purchased under O'Reilly's watch in 2001.

Chevron's refinery in Richmond, CA.

If Chevron is found liable for the full $27 billion estimate in a pending lawsuit, it would lose 20 percent of its market value. (A documentary about the case, Crude, opened in San Francisco this week.)

"O'Reilly is either trying get out of Chevron before the Ecuador judgment comes down and further embarrasses him, or he was hounded to retire so Chevron could try to bury an obvious corporate governance problem given its failure to properly vet Texaco," said Chris Lehane, a lawyer and political consultant working for the Amazonian communities suing Chevron.

Local environmental group Amazon Watch, which is supporting the plaintiffs in the suit, issued an open letter to Chevron shareholders earlier this year, alleging that O'Reilly had not properly evaluated Texaco's Amazon problem before purchasing the company.

"There is no evidence that Chevron's management ... independently vetted Texaco's representations at the time about the nature of the lawsuit or the limitations of its [release] which no court of law in either the U.S. or Ecuador has ever accepted as valid in reference to the civil lawsuit," said the letter, signed by Atossa Soltani, the executive director of Amazon Watch. (Chevron has claimed that a release issued by the Ecuadorian government protects it from any lawsuits, while the backers of the lawsuit claim that the release only applied to government-brought suits.)

An investigation opened by New York attorney general Andrew Cuomo lends credence to plaintiffs' allegations: It seeks to determine whether Chevron misled shareholders about its financial liability in the Ecuador case. In the company's SEC disclosures, it claims the lawsuit is "frivolous" and refuses to estimate a potential loss.

Chevron's press release credits O'Really with leading "two of the industry's most significant and successful transactions — the 2001 merger with Texaco and the acquisition of Unocal in 2005." Current vice-chair John Watson will succeed O'Reilly.

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