Tuesday, September 27, 2011

New York State Comptroller Thomas Dinapoli: What Chevron Owes the People of Ecuador

Today, New York State Comptroller Thomas DiNapoli escalated his public effort to demand Chevron seek an equitable settlement with the communities of the Ecuadorian Amazon over the oil giant's devastation of their rainforest lands.

In an oped in the Huffington Post entitled 'What Chevron Owes the People of Lago Agrio', Comptroller DiNapoli writes:

There's a bitter irony in the voices of residents of Lago Agrio, or 'Sour Lake' in Spanish, when they mention the name of their northeast Ecuadorian hometown. Once a prosperous base for Amazonian drilling operations for sulfur-rich 'sour crude' petroleum, Lago Agrio is now the center of what amounts to an industrial cancer zone larger than the state of Rhode Island. Its population is surrounded by poisoned farmland and heavily polluted waterways and burdened with elevated rates of disease.

Now, the battle over responsibility for this region's current condition is at the center of an expensive and extensive legal struggle between Chevron, the giant multinational energy company, and Lago Agrio's persistent indigenous people. A U.S. Appeals Court decision last Monday in New York makes it more likely than ever that Chevron will be forced to make a massive payout to the people of the Ecuadorian Amazon.

While Ecuador is nearly 3,000 miles away from New York, the final outcome of this case could have an impact on the New York State pension fund. As Comptroller, I serve as trustee of New York's $146.9 billion Common Retirement Fund which holds nearly $780 million worth of Chevron stock. The Fund benefits when its portfolio companies remain profitable by pursuing responsible and sustainable business policies in the communities in which they operate. Chevron is no exception.

The Lago Agrio oped expands on the Comptroller's previous calls for Chevron to take a new approach to the "marathon litigation," as he calls it. Back in May, in the lead-up to Chevron's 2011 shareholders meeting at the company's headquarters in San Ramon, CA, Comptroller DiNapoli circulated a sign-on letter amongst Chevron institutional investors. The letter, with more than twenty signatories representing over $155 billion in assets under management, was sent to Chevron's management and board of directors. The New York State Office of the Comptroller also issued a press release detailing DiNapoli's efforts, in which the the Comptroller wrote, “It’s time for Chevron to face reality.”

New York State Comptroller Thomas P. DiNapoli

Today, Comptroller DiNapoli is giving a keynote luncheon speech at the Council of Institutional Investors fall meeting in Boston. I don't know whether he will mention the Chevron case in his address but you can bet that the oped will be making its rounds amongst the attendees, along with the news of last week's U.S. appeals court ruling that dealt a severe blow to Chevron's efforts to avoid paying the court-ordered multi-billion dollar damages award to clean up its disaster in Ecuador.

In the oped, the Comptroller recounts previous efforts to use his clout as a major investor and convince Chevron to shift its approach:

Since taking office as New York State Comptroller four years ago, I have asked Chevron's board of directors to settle this marathon litigation and spare the company's battered reputation any further damage. The board has chosen to ignore the wishes of the many investors and observers who supported my call.

That second link ("...the company's battered reputation...") takes the reader to a fascinating letter, made public today for the first time; a November 2008 private letter from Comptroller DiNapoli to then-CEO David O'Reilly, in which the Comptroller writes:

As a significant and long-term institutional investor, I am deeply concerned by Chevron's actions in litigating this case and the repercussions those actions will have on the company's finances. It appears that Chevron's strategy remains that of denying responsibility for the contamination and, instead, protracting the legal proceedings. I question whether that strategy best serves the company and its shareholders.

Comptroller DiNapoli continues:

I am also troubled by what I perceive as a lack of adequate disclosure of the potential financial liability Chevron is facing. It is my understanding that, until its 10-Q filing of May 2008, Chevron did not disclose the magnitude of its potential liability in the event of an adverse outcome.

That letter was written nearly three years before Chevron's recent legal setback that clears the way for the Ecuadorian communities to pursue enforcement of the $18 billion judgment against the company. It was written over two years before that judgment even came from an Ecuadorian court.

Comptroller DiNapoli and his office have taken great pains to warn Chevron of the liability it faced, and the risk that poses to the company's investors, including many thousands of current and former public employees of New York State. But to extend an appropriate metaphor to its breaking point, the Chevron board has been asleep at the wheel while the company's senior management has apparently dropped a few sleeping pills in the back-seat. And somehow, they've all allowed a rabid, out-of-touch legal department and their fee-happy outside lawyers from behemoth corporate law firms to grab the wheel from the passenger's seat and drive the whole enterprise off of a cliff.

The Comptroller concludes his oped:

There's also a broader lesson to learn from Lago Agrio's story. Gulf coast residents are still grappling with the long-term environmental and economic effects of last year's Deepwater Horizon oil spill. The conclusion to draw from Chevron's case in Ecuador, and BP's $20 billion fund to compensate those victimized by the Deepwater Horizon disaster, could not be more clear: short term profits at the expense of environmental protection and human rights often cost companies more in the long term.

It's time for the energy industry to start afresh with a new approach to environmental responsibility and risk management, both domestically and internationally. Chevron must do what's right for its investors, and its future viability, by negotiating a fair settlement that restores the company's reputation. Chevron, its shareholders and the general public have not and will not benefit from a never-ending courtroom drama.

Read: 'What Chevron Owes the People of Lago Agrio', at The Huffington Post.

– Han

Han Shan is Coordinator of Amazon Watch's Clean Up Ecuador Campaign

Tuesday, September 20, 2011

Huge Victory for Ecuadorians Fighting for Justice from Chevron as Oil Giant's Legal Strategy Derails

Yesterday, a 3-judge panel from the 2nd Circuit Court of Appeals dealt a stunning blow to Chevron's abusive and deceitful efforts to evade accountability for its oil disaster in Ecuador.

The appeals court threw out U.S. District Court Judge Lewis Kaplan's injunction that purported to prohibit the Ecuadorian plaintiffs from enforcing the $18 billion judgment against Chevron delivered by an Ecuadorian court in February. It also indefinitely stayed a trial that Judge Kaplan had scheduled for November over a preposterous countersuit filed in his court against the Ecuadorians and their attorneys, at which Chevron hoped to have the Ecuadorian verdict against the company declared unenforceable. The preliminary order from the 2nd Circuit came just one business day after a hearing before the panel on Friday, Sept. 16th, and said that a full ruling looking at the various issues will come "in due course."

Amazon Watch founder and Executive Director Atossa Soltani appears on Democracy Now! with Amy Goodman to discuss the implications of the Ecuadorian plaintiffs' victory in the appeals court.

As legal reporter Alison Frankel writes in her On the Case column:

Monday's stunning two-page order from the panel gave the Ecuadorean plaintiffs their first victory in two years of battling in New York's federal courts. But it was a huge win.

The appeals court order constitutes a harsh rebuke to Judge Kaplan's over-reach in the case, making him Chevron's most valuable legal asset in the company's dirty fight to avoid responsibility for its pollution in Ecuador. The appeals panel didn't remove Judge Kaplan, as requested by the Ecuadorian plaintiffs, but as Marco Simons, legal director for EarthRights International writes on his blog:

"... the appeals court declined to remove Judge Kaplan, who the Ecuadorians believe is biased against them, from the case. But it's possible that, after the court issues its opinion, there won't be any case left for Kaplan to preside over."

The ruling also dealt a humiliating rebuke to the strategy driven by outside law firm Gibson Dunn, and Crutcher law firm and lead counsel Randy Mastro, who was literally laughed out of court at the hearing which led to the order.

After attending hearing after hearing at which Mastro made sweeping fraud and conspiracy allegations against the Ecuadorians and their lawyers supported by the flimsiest of fantasy, theory, and conjecture, it was truly a breath of fresh air for this author to watch the Gibson Dunn lawyer wither at questions from the appellate panel based in logic, common sense, and the rule of law.

Pablo Fajardo, lead lawyer for the plaintiffs, told the Associated Press:

We can now at least dream there will be justice and compensation for the damage, the environmental crime, committed by Chevron in Ecuador.

More than anything, the order from the appeals court represents the most stinging rebuke to the arrogant and deceitful strategy employed by the cabal of lawyers, spinmasters, and seriously-conflicted executives running a mini Orwellian empire within the company devoted to characterizing the Ecuadorian plaintiffs as criminals, and painting the company that poisoned them as victims. They thought overwhelming evidence of the company's crimes in Ecuador could be beaten back with shameless cynicism and an astonishing outlay of cash.

Even 2nd Circuit appeals court Judge Richard Wesley wondered aloud how much money had been spent by Chevron to pursue its legal strategy, and at what cost to shareholders.

Regulators, politicians, institutional investors, and shareholders who have heard Chevron management deny that the company faces any significant liability in Ecuador are going to be asking the most difficult questions that Chevron's lawyers and leadership (if one can call it that) have yet heard, now that the 2nd Circuit has affirmed the rule of law over Chevron's deceptive sensationalism.

Will Chevron management "face reality" as New York State Comptroller Thomas DiNapoli—trustee of the New York State's Pension Fund with $780 million in Chevron stock—demanded during this past May's Chevron shareholder meeting? Or will CEO John Watson, architect of Chevron's takeover of Texaco and the company's toxic legacy in Ecuador, and other senior management allow the entire company to be driven off a cliff by outside lawyers who have no interest in ending a legal saga that continues to line their pockets?

Secoya indigenous leader Humberto Piaguaje (L) and campesino communtiy leader Servio Curipoma (R)—who have both worked tirelessly to demand justice from Chevron—outside of a courthouse in New York on Sept. 16.

Either way, this decision brings the people of the Ecuadorian Amazon one step closer to justice, and we call on Chevron's management to do the right thing by meeting the company's moral, legal and fiduciary obligations to clean up its contamination in Ecuador. Of course, justice delayed is justice denied, and the men, women, and children of the Ecuadorian Amazon have suffered for far too long already.

More coverage:

BBC: 'US court rules against Chevron in Ecuador oil case'

Global Post: 'Chevron must pay for Amazon damage: court'

The Guardian (UK): 'Chevron loses latest stage of Amazon pollution battle'

The San Francisco Chronicle: 'U.S. court rules against Chevron in Ecuador case'

– Han

Han Shan is the coordinator of Amazon Watch's Clean Up Ecuador Campaign