Monday, December 24, 2012

Served by Chevron, and It Just Warms Us Up

Protesting at Chevron's Annual General Meeting

Reposted from Eye on the Amazon

Last Wednesday morning, I opened my front door to take my two small children to preschool and before I could take a step a man shoved subpoena papers at me from Chevron. At that moment, I knew Amazon Watch had been doing something right in our relentless campaign to hold the company accountable for the toxic mess it left in the Ecuadorian Amazon. When a giant corporation like Chevron bothers to subpoena a small nonprofit like Amazon Watch, we know our actions are hitting hard. Never mind their audacity to come to my home, that's the least of their offenses.

Nearly 50 years ago, Texaco (now Chevron) arrived in a pristine region of the Ecuadorian Amazon, and over the course of the next two decades, caused one of the worst oil-related environmental disasters in history. As most readers of this blog know, in February of 2011 Chevron was found guilty in Ecuadorian courts for massive environmental contamination, and fined upwards of $18 billion for its crimes. Instead of owning up to its toxic legacy in the Amazon – a crime which has caused more than a thousand cancer deaths, led to an ongoing public health crisis, and has decimated indigenous cultures – Chevron has decided to "fight the verdict till hell freezes over."

What does a "fight till hell freezes over" strategy look like? Well, it's ugly. It involves high-powered (and unprincipled, often morally depraved) law firms. It involves smart (and equally twisted and cynical) public relations firms. It involves a herd of big-oil lobbyists. It involves near limitless resources (it's estimated that Chevron is spending several hundred million dollars a year to fight the Ecuador lawsuit). And it also involves a plan – in military terms known as "scorched-earth" – to destroy everything and everyone that is valuable to the people of the Ecuadorian Amazon in their pursuit of justice.

In order to execute this plan, Chevron has launched a massive worldwide litigation effort designed to convince courts across the world that the plaintiffs, famers and indigenous people of the Amazon, are engaged in a massive global conspiracy to defraud and extort one of the largest multinational corporations on the planet. The company has filed racketeering charges against the named plaintiffs in the lawsuit, subpoenaed and deposed the lawyers of the thirty thousand affected people of the Amazon, won discovery of over 600 hours of outtakes from the film Crude, intimidated large-institutional investors of the company, attempted to quash preferential trade agreements between the US and Ecuador…and the list goes on.

And now, they're coming after Amazon Watch. On December 12th Chevron filed a subpoena, which if complied with, would require Amazon Watch to turn over hundreds of thousands of emails, documents and internal communications related to the historical struggle for justice in the Amazon. They are accusing Amazon Watch of playing a role in an alleged conspiracy to defraud the company, and are using this make-believe theory as a pretext to gain access to our confidential information. They want the blueprints of our campaigns against Chevron, internal strategy documents, our communications with anyone and everyone that has ever been involved in the long-running trial. 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.

Although we view Chevron's subpoena as a calculated effort to silence us, we will not back down; we will continue to support the people of Lago Agrio who seek justice and clean water.

The company's actions – their "fight till hell freezes over" strategy – is actually proving us right. They are criminals and they are cowards. Their crimes in the Amazon have caused the deep and undeniable suffering of thousands of people. And their litigation strategy, designed to destroy any organization or individual involved in supporting the farmers and the indigenous people of the Amazon, is nearly as wicked as their original poisoning of the rivers and streams of one of the greatest rainforests on earth.

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.

– Paul Paz y Miño

Friday, November 9, 2012

Shareholder Shocker: Chevron's Assets Frozen in Argentina

Reposted from Eye on the Amazon

Hell frozen overIf you're a Chevron shareholder, you must be wondering at this point WTF is going on over at corporate headquarters. The internet exploded Wednesday with news that an Argentinian judge ordered seizure of Chevron's in-country assets in what could be the first of many rulings enforcing a $19 billion judgment from an Ecuadorian court on behalf of indigenous and farmer communities who have suffered decades-long contamination, health problems, and rights abuses stemming from the company's Amazon drilling operations. Chevron shares closed down $1.64 on Thursday and may keep nose-diving over the long term.

Judge Adrian Elcuj Miranda froze 100% of Chevron's capital in Argentina, 100% of dividends, all of its share in pipeline operator Oleoductos del Valle SA, 40% of Chevron sales to Argentine refineries, and 40% of Chevron bank accounts in Argentina. The move was a major victory for the 30,000 plaintiffs who have been forced to scour the planet seeking Chevron assets because the oil giant has refused to pay the $19 billion damage award ordered by Ecuadorian courts after it was found guilty for spilling over 18 million gallons of crude and dumping billions of gallons of toxic waste water into the fragile rainforest ecosystem, poisoning local indigenous and farmer communities. The verdict was handed down by a court of Chevron's own choosing and based on much of the company's own evidence after almost two decades of litigation which includes some 64,000 soil and water samples.

For any Chevron shareholder, the news must have been shocking, because senior management has long downplayed – or outright failed to disclose – the potential financial impact of the verdict. Since 2008 the company has recycled the same language in its 10-K, misleading shareholders on the legal and factual merits of the case, selectively disclosing only favorable court rulings, and refusing to disclose material impact of enforcement actions against its assets in multiple countries. In essence, downplaying and dismissing any impact the case could have financially on the company.

However, in a sworn affidavit presented to the New York's Second Circuit Court, Chevron Deputy Comptroller Rex Mitchell stated that efforts by plaintiffs to recognize and enforce the judgment would cause "significant, irreparable damage to Chevron...irreparable injury to Chevron's business reputation and business relationships," and that "seizure of Chevron assets, such as oil tankers, wells, or pipelines, in any one of these countries, would disrupt Chevron's supply chain and operations; and seizures in multiple jurisdictions would be more disruptive."

Randy Mastro, Chevron's hit man from the legal firm Gibson, Dunn & Crutcher pleaded to a New York judge at a February 2011 hearing, "It seems obvious to us that there will be irreparable harm from seizing boats, seizing ships, seizing tankers, disrupting the distribution stream of Chevron that will affect it not only in the one jurisdiction but around the world…[It] could end up being one of the biggest forced asset seizures in history and could have a significant disruptive impact on the company's operations…Your Honor, it is obvious [that Chevron will suffer] irreparable harm both in terms of disruption of operations, business reputation and good will, and an inability to ever get that money back…So we are definitely right now in a position of that nightmare is here, irreparable harm is imminent…[We] are facing the ultimate Sword of Damocles, and it is over our heads…The Sword of Damocles is not over our heads, it's touching our foreheads.”

If you are a Chevron shareholder, don't you want to know that? Don't you have the right to hear that? So which is it Chevron – an irreparable threat, or a non-issue? Chevron is either lying to its shareholders, or the New York judiciary. Is Chevron committing perjury or investor fraud? Either way, someone at Bollinger Canyon Road has some explaining to do.

The long arm of the law is finally catching up to Chevron, and its executives and legal team knew it was coming. The company even argued before the same judge in New York that the communities may use the Inter-American Convention on the Execution of Preventive Measures, a treaty that allows for the automatic freezing of assets of a defendant that fails to abide by the law and refuses to pay a final foreign judgment. Indeed, this treaty from the 1970s, is exactly what Judge Miranda used as the basis of his order. Seems that would have been important information to tell your shareholders.

Several other Latin American countries have signed the treaty and may present new vulnerabilities for Chevron across the region. The communities have already filed enforcement and seizure motions in Brazil and Canada, with more to come. And, despite Chevron claims to shareholders that it has no assets in Ecuador, a judge recently awarded what plaintiffs believe to be up to $200 million in company assets in the country.

Even more stunning is the reaction of Chevron spokesman James Craig to the Argentine embargo, who feigned ignorance saying that he was "unaware of a filing by the plaintiffs or a court order in Argentina," but if there was one, it wouldn't be applicable to Chevron's subsidiary assets. Craig is either lying through his teeth, or so woefully unaware of the fate that is befalling his own company that it's astounding he still has a job. Of course, Chevron continues to reward the laundry list of folks who have managed to put the company in this position.

The order from Judge Miranda is just that – similar to an order to garnish the wages of a deadbeat dad. There wasn't a hearing, or a retrial of the case, and there won't be. The case has happened. Chevron was found guilty, and the judgment was upheld on appeal. Despite having every opportunity over 19 years of litigation to defend itself in a forum of its own choosing, Chevron thumbed its nose at the verdict, and simply refuses to pay, forcing communities to go anywhere and everywhere to collect funds they desperately need for an environmental clean up, clean water, and health care.

Even more ridiculous was Craig's statement that the plaintiffs had no right to go after Chevron's subsidiaries. Of course they do. The embargo order from the Ecuadorian court clearly states the plaintiffs' right to seek Chevron subsidiary assets, and explicitly mentions its Argentinian assets. More than 80% of Chevron's assets are subsidiaries, which is why the company counts them and their revenues as part of the parent company. See here and here. Maybe Craig contracted Romnesia after Chevron's $2.5 million donation to a GOP SuperPAC.

It's hard to tell who is more out of touch with reality – Chevron management or advisors and pundits that guaranteed a Mitt Romney victory. But as we saw with Tuesday night's election and Wednesday's Argentinian announcement, reality has come crashing down on insular, inside-the-bubble mentality.

There are only two explanations – and neither provides confidence for Chevron shareholders. Company management is either in total denial, living blissfully with its collective heads in the sand, and got caught with its pants down after underestimating the resolve and mettle of the rainforest residents. Or, there is a concerted effort to keep shareholders in the dark about the true fallout the company faces as the Ecuadorians move country by country to collect what is rightfully theirs.

As we've suggested here before, this $19 billion liability is the giant albatross around CEO John Watson's neck, and it's of his own making. After all, he oversaw the purchase of Texaco and its Ecuador's liability as head of Mergers and Acquisitions. His poor handling of the case is now a major threat to his legacy, and to the survival of his company.

Chevron spokesperson Donald Campbell infamously said in 2009 that the company would fight the case "until hell freezes over, and then we'll fight it out on the ice." Sounds like John Watson should start looking for his skates.

– Kevin Koenig

Friday, November 2, 2012

Don't Cry for Me, Argentina

Visiting the cemetary

Reposted from Eye on the Amazon

It's been another rough week for Chevron, the second largest U.S. oil company. The San Ramon oil giant reported this morning that its third quarter earnings had dropped by a third. But that's not the worst of it.

Chevron got a rude awaking Wednesday morning with news that Ecuadorian indigenous and farmer communities will seek to freeze some $2 billion of the company's assets in Argentina. This latest legal action is part of the communities' efforts to force Chevron to pay a $19 billion damages award handed down from Ecuadorian courts that found Chevron guilty of massive environmental contamination and rights abuses in the country's Amazon rainforest.

Ever since the 2011 decision – from a court of Chevron's choosing and based on much of the company's own evidence – Chevron has been on the lam, running from the law, and forcing some 30,000 Amazonians to go global to get the long fought justice they deserve. Between 1967 and 1991, the company deliberately dumped more than 4.3 billion gallons of toxic waste water, 18 million gallons of crude, and left behind some 1,000 super fund style sludge pits full of carcinogens. The result? Indigenous communities and their rainforest lands devastated, a public health crisis with no clean drinking water, and an epidemic of cancer and other ailments that have plagued the region for the last three decades. The communities are seeking a full environmental clean up, potable water, and funds for health services.

Adding insult to injury, Chevron deployed every legal tactic in the book to kill the case, and then extra judicial Michael Clayton-style tactics like threatening the judge, intimidating witnesses, and collaborating with Ecuador's military to stop inspections on contaminated sites. But, the global dragnet to hold Chevron accountable is closing in.

Unfortunately for the company, its assets are hiding in plain sight. Armed with an order from Ecuador's appellate court demanding Chevron pay up and comply with the sentence, the communities have filed in Canada, Brazil, and now Argentina to enforce the judgment, which could freeze bank accounts, dividends, oil sales income, or other assets as a way of meeting part of the $19 billion damage award. According to lead Ecuador lawyer Pablo Fajardo, winner of a CNN Hero Award and Goldman Environmental Prize, the process is more advantageous in Argentina due to the Inter-American Convention on the Execution of Preventative Measures, which allows for the automatic freezing of assets of a defendant that fails to abide by the law and refuses to pay a final foreign judgment. A judge can authorize seizure without even a hearing for Chevron.

As Enrique Bruchou, the highly regarded Argentine council for the Ecuadorians explains, "We will win this case. And it's going to set an example for the world that we in Latin America have grown up now and that we need to be treated as equals."

Left with little wiggle room, Chevron has signed a MOU with state run YPF to explore for unconventional crude, a move many see as a way to curry favor with the government of Cristina Fernandez.

Bruchou continued, "We don't want this politicized. This has nothing to do with the Republic of Argentina. This is the communities of Ecuador going against Chevron," he said. "I don't think we will see interference because frankly this is a civil matter, combined with the human rights abuses, which is an issue very dear to the heart of the Argentines."

What is shocking is the egregious mismanagement of the case by Chevron executives, who instead of resolving the issue years ago – to great relief of communities and company shareholders – has doubled down on a losing litigation strategy, even rewarding counsel with millions in bonuses after losing the case. While Chevron cared little about Ecuador because it is no longer producing petroleum here (though the courts gave the communities their first victory in ordering some $200 million of Chevron assets in country be turned over), the company has major upstream and downstream assets in Canada, Brazil, and Argentina, as well as other countries that communities may attempt to confiscate Chevron holdings.

The global enforcement efforts of the communities are now jeopardizing major Chevron growth plans, access to future reserves, and putting the company at a competitive disadvantage. Which is why outraged shareholders are urging the company to resolve the issue, and lambasting senior management for its bungling of the case. The company's public response to the Argentine filing was laughable: a few targeted purchases on Google news to try to offset the negative headlines and press stories, and a whiny statement attempting to claim that the judicial systems of countries like Canada, Brazil, and Argentina were inferior to those of the United States. What Chevron doesn't seem to realize is that the law is on the side of the communities, and there are more than 180 countries around the world where Chevron assets are now liabilities.

In this global game of cat and mouse, the playing field favors the plaintiffs, where Chevron must bat 1000%, and it's already 0 for 1. And, in a recent blow, the U.S. Supreme Court recently refused to hear a Chevron appeal to block Ecuadorian efforts to enforce the judgment around the world.

However, it has been a long and winding road toward justice, and many of the afectados-those affected by Chevron's reckless drill and dump practices – have lost their lives in the fight. Today in Ecuador is Dia de los Difuntos, or Day of the Dead, and tomorrow marks the 19th anniversary of the year the case was first filed in New York courts. To remember and celebrate the lives of those who have passed away, and commemorate their historic David vs. Goliath struggle, the communities will be holding a memorial in the town cemetery of Enokanqui.

– Kevin Koenig

Tuesday, October 9, 2012

U.S. Supreme Court Squelches Chevron Appeal on Ecuador Case

Reposted from The Chevron Pit

The U.S. Supreme Court today rejected Chevron's latest attempt to block global enforcement of a historic $19 billion environmental judgment from Ecuador's courts, removing another hurdle for rainforest indigenous groups as they continue their efforts to seize billions of dollars of Chevron assets around the world.

Chevron's losing petition was prepared and signed by Ted Olson, one of the top Supreme Court litigators in the country and the former Solicitor General of the United States under the last Bush Administration. Olson works at Gibson Dunn & Crutcher, Chevron's lead outside law firm on the Ecuador matter and itself the subject of judicial rulings that it has committed ethical violations on behalf of the oil giant.

Jim Tyrrell of Patton Boggs and John Keker of Keker & Van Nest signed papers for the Ecuadorian rainforest communities and their counsel.

The Supreme Court decision represents the latest of numerous courtroom setbacks for Chevron as the company tries to evade paying the Ecuador judgment, which was issued in early 2011 after an eight-year trial found that the oil giant deliberately dumped more than 16 billion gallons of toxic waste into the Amazon. A three-judge appellate panel in Ecuador later affirmed the decision, criticizing Chevron harshly for threatening judges and filing frivolous motions to delay the proceedings.

Several pro-business groups who are funded in part by Chevron, including the U.S. Chamber of Commerce and National Association of Manufacturers, had weighed in on the oil giant's behalf before the Supreme Court.

When Chevron refused to pay the Ecuador judgment, lawyers for the 30,000 affected villagers this summer hired prominent law firms to file seizure actions targeting billions of dollars of Chevron assets in Canada and Brazil. They have promised to file more seizure actions soon in other countries, potentially creating significant operational problems for the oil giant, according to Chevron's own court filings. See here.

Chevron's use of substandard operational practices in Ecuador – it operated there from 1964 to 1992 under the Texaco brand – decimated indigenous groups and caused an outbreak of cancer that has killed or threatens to kill thousands of people, according to findings of the court. A summary of the evidence against Chevron can be found here, a video about the case can be seen here, while a summary of the cancer deaths can be found here.

Independent journalists, such as 60 Minutes and a prominent Australian news show, also have confirmed Chevron's extensive pollution in Ecuador.

Chevron had asked the Supreme Court to salvage an unprecedented injunction imposed in March 2011 by New York federal judge Lewis A. Kaplan purporting to bar worldwide enforcement of the Ecuador judgment. That injunction provoked outrage in much of the legal community and was overturned unanimously in September 2011 by the Second Circuit Court of Appeals, the ruling the Supreme Court declined to review.

Over the last two years, federal courts at every level in the United States – trial courts, intermediate appellate courts, and now the Supreme Court – have now rejected Chevron's attempts to block or undermine the Ecuador judgment. The oil giant claims the judgment was procured by fraud, a charge the villagers and their lawyers say is a smokescreen invented by Chevron to cover-up its own criminal behavior in Ecuador as found by various courts.

"Chevron's latest loss before the Supreme Court is an example of the company's increasingly futile battle to avoid paying its legal obligations in Ecuador," said Aaron Marr Page, a lawyer for the Ecuadorians.

"Chevron is running from justice while its toxic dumping continues to create an imminent danger of death to indigenous peoples in Ecuador," said Page.

Chevron's losses in U.S. courts on the Ecuador case are mounting fast.

In the last two years, 18 U.S. trial courts and four appellate courts have either rejected or declined to consider Chevron's campaign to paint the Ecuador judgment as a product of "fraud", according to an analysis of court data by representatives of the rainforest communities. That analysis can be read here.

Even Judge Kaplan, who has been subject to withering criticism for his biases against the Ecuadorians, further gutted Chevron's strategy when he dismissed or stayed three of Chevron's fraud claims and its unjust enrichment claim against the rainforest communities in a racketeering case pending against them in New York.

In its public relations materials, Chevron continually tried to claim U.S. courts have found "fraud" in the Ecuador proceedings. In reality, three different Ecuadorian courts have heard Chevron's allegations and rejected them, while no U.S. court has found fraud on the merits after an evidentiary hearing or trial.

In the handful of courts where judges made such a preliminary finding, it was done in the context of simple discovery proceedings and later was overturned by federal appellate courts.

A panel of federal appellate judges in Philadelphia, for example, blasted Chevron for attacking Ecuador's courts – calling its comments "disparaging". Another federal judge in New Orleans accused the oil giant of using "hyperbole" and trying to make "a mountain out of a molehill." See here.

This was the second time in the long history of the Ecuador lawsuit that the Supreme Court declined to hear a Chevron petition for review. In 2009, the court declined to review a decision that denied Chevron's attempt to force Ecuador's government into a private arbitration over who should pay for the clean-up in Ecuador.

For that petition, Chevron used high-profile lawyer Paul Clement, another former U.S. Solicitor General. Clement argued the losing side in the famous case last year over the Obama Administration's health care law.

Just last week, the Gibson Dunn law firm was criticized for overbilling Chevron by sending 11 lawyers to a relatively minor court hearing.

Thursday, October 4, 2012

From Assets to Liabilities

Are CVX shareholders ready for global cat and mouse?


Reposted from Eye on the Amazon

Mr. Watson: What Will You Do About Ecuador?

Earlier this week, we reported on the extraordinarily vulnerable position that Chevron is in due to CEO Watson's poor oversight and mismanagement of multiple crises threatening the company's shareholder value. The Richmond refinery debacle. Millions in fines and suspended operations in Brazil. And a $19 billion damage award in Ecuador that has made Chevron a global fugitive, running from the law while its assets are hiding in plain sight.

Watson's bungling of these issues has caused major ripples among his own shareholders. At this year's Annual General Meeting, Watson faced a shareholder revolt spurred by the $19 billion guilty verdict and asset seizure efforts now underway by the Ecuadorian indigenous and farmer communities.

And understandably so. A report on the Ecuador litigation by prominent corporate accountability strategists details an eyebrow-raising web of financial and operational risks posed by the lawsuit – which seem to be either highlighted or downplayed depending on the company's audience.

In court filings in New York, representatives of Chevron gave sworn testimony that the case presented "irreparable injury to [its] business reputation and business relationship" and was a major threat to the company. However, its 10-K statements filed with the Security Exchange Committee (SEC) continue to downplay it. So which is it Watson? The company's doublespeak is misleading either the New York judiciary or its stockholders. Either way, executives are flirting with felonies or perjury charges, and an SEC investigation seems right around the corner. In fact, both shareholders and Congresswoman Jan Schakowsky (D-IL.) recently sent letters to the SEC asking the institution to determine whether Chevron is violating securities laws related to the court finding that it deliberately dumped billions of gallons of toxic waste into the Amazon rainforest. None of the above is good for business.

Another report documents Chevron's deceit of its own shareholders and outlines the misrepresentations that the company has made in its public findings.

At the company's annual stockholders meeting last May, shareholder resolutions requesting a separation between CEO and Chairman of the Board received 38%, and New York State Comptroller Thomas P. DiNapoli joined with 39 other investors, with a combined total of $580 billion in assets under management, in calling on Chevron to settle its two-decade-long legal battle in Ecuador.

Who would expose its company and its shareholders to this kind of risk? Why is CVX so entrenched? While the board may be guilty of turning a blind eye, it's elementary what's really going on here. Watson's dug in not to protect his company or its investors, but to protect his legacy and cover up his ignorant and/or arrogant botch of the Ecuador issue. The Ecuador liability is all on Watson. And he could have made it go away years ago for a lot less, or at least done his due diligence and discounted it from the inflated price he paid for Texaco. But instead, Watson chose to cover it up, cover his trail, and try to convince everyone that he's the smartest guy in the room. Ken Ley and Bernie Madoff would be proud.

Here's the backstory. Texaco came with what was originally seen as roughly a $1 billion liability – legacy issues in the Ecuadorian Amazon where the company designed, built, and operated an oil extraction system for close to three decades that led to the systematic contamination of the region and decimated local indigenous peoples and farmers.

The lawsuit, Aguinda v. Texaco (now Aguinda v. Chevron), was first filed in New York courts within a year after the company's departure from Ecuador where the company's headquarters in White Plains, New York, where the company made the criminal decision to use sub standard, cheap technology that had been outlawed in the United States since the early 1940s.

But, Texaco, who by all means was seen as the industry scoundrel, balked. It argued that Ecuador was the more proper forum, its courts transparent and independent, and that Texaco – now Chevron – would be bound by any decision rendered in Ecuador.

Fast forward to a warm, spring day at the downtown Los Angeles Marriot in 2001. The Executive Director of Amazon Watch and I physically handed Watson, as head of M & A, two massive binders filled with documentation of over 500 toxic sites left by Texaco. We warned Watson and the company that they were buying a problem. It's now a $19 billion problem. Oops.

While repo men have yet to descend upon the company's headquarters and start hauling out the furniture, one has to ask: Is the company really ready for a global game of cat and mouse? Chevron has been able to abuse to Ecuadorian legal system and thumb its nose at verdict and jurisdiction because it has no assets here. But it's a different ball game when the plaintiffs, armed with a verdict from a court of Chevron's own choosing and based on much of the company's own evidence, head to countries where the bulk of Chevron upstream assets are – which account for the great majority of the company's revenue stream. What were once major assets in 120 countries around the world are now liabilities, hidden in plain sight. Offshore, onshore, well sites, bank accounts, refineries. And the plaintiffs only need to win once, while Chevron must bat a thousand.

And that doesn't even get at competitive advantages issues, where Chevron is risking losing out to other companies on new opportunities (back to Drucker's Five Business Sins) not only because of its reckless treatment of Ecuadorian indigenous people and farmers, but for its abusive litigation and dragging Ecuador – the host country – to arbitration hearings and trying to pass the $18 billion clean up price tag on to the state. This could be incredibly damaging for future Chevron prospects. As Watson's predecessor, former Texaco CEO Peter Bijur said, "If you're not drilling now, you're bankrupt in ten years."

Chevron investors should be hoping that the Wall Street scrutiny that has befallen Jaime Dimon and Bob Diamond spreads to San Ramon. Certainly, the thousands of farmers and indigenous people that continue drink poison water and live amidst one of the worlds worst oil disasters are hoping for the same. Chevron has stated that they will fight the case until hell freezes over, and then fight it out on the ice. Doesn't seem a very strategic attitude when Chevron assets and bank accounts are what are on the verge of being frozen. Watson seems to be more interested in protecting his own hide than shareholder value, feeding the liability and starving opportunities. If Watson can't let go, maybe it's time shareholders let Watson go.


– Kevin Koenig

Monday, October 1, 2012

Way Down Watson

Reposted from Eye on the Amazon

Wanted: John Watson

Bad two weeks for Chevron and its head-in-the-sand CEO John Watson. First, last week the San Francisco Chronicle reported that Chevron is under criminal investigation by the EPA for intentionally flaring contaminants and deceiving regulators. No accidental discharge, Chevron literally built a separate pipeline designed to circumvent monitoring equipment, belching contamination into the airspace above the densely populated city of Richmond, CA.

Then, as the Chronicle reported, the initial investigation expanded. And both of these aren't even related to the Aug. 6 refinery fire, which has already produced civil suits, and sparked a new probe from California legislators.

To top it off, Chevron got hit with an injunction by Brazilian courts on Sept. 27 ordering the company to stop operations within thirty days until the investigations of two oil spills off the coast of Rio de Janeiro are resolved. The oil giant was forced to pay $17.3 million in fines last week, and still faces up to $22 billion in potential civil suits.

But the sand is only so deep. Normally, when an executive makes a major mistake that threatens shareholder value and the financial health of the company, they get fired. Just ask the former head of JP Morgan Chase's chief investment office after losing $2 billion in a May trading loss. And now that the loss is ballooning towards $9 billion, some are calling for CEO Jamie Dimon's head. We also saw the resignation of Barclay's chief executive who succumbed to intense shareholder and political pressure over an interest rate setting scandal, with questions about the bank's corporate culture in the daily headlines.

But, far from the cutthroat world of Wall Street in the idyllic valley of San Ramon, CA, things are apparently done differently. Here, at the Chevron Corporation (NYSE: CVX) if you make an $18 billion mistake, you get a promotion. What?

Just look at John Watson, Chevron CEO. Watson rose through the ranks of the US's second largest oil company, cutting his teeth as vice president charged with mergers and acquisitions. He orchestrated and oversaw what was thought to be a major coup for his career ascension and potential pillar of his legacy – the purchase and integration of Texaco for $36 billion.

But what Watson overlooked, underestimated, or outright ignored, was the ongoing litigation against Texaco brought by Ecuadorian indigenous people and settlers for egregious environmental crimes and rights abuses. With its purchase of Texaco, Chevron inherited this liability. And now, under Watson's watch as CEO, this legacy has turned into a $19 billion judgment against Chevron, with asset seizure efforts underway in Canada and Brazil, and potentially more to come.

Chevron management, entrenched as ever, has lost control of the case. The guilty verdict against the company has gone global, leaving the confines of a small Amazonian courtroom in Ecuador's rainforest (where Chevron has no assets) to countries critical to its existing production and upstream growth. Chevron's global reach has always been touted as an advantage, but the company suddenly seems very exposed as the rainforest residents contemplate actions in any number of the 120 countries where Chevron has assets. And yes, that's $19 billion – roughly half of what Chevron paid for Texaco. Talk about buyer's remorse.

You'd think someone like Watson would be familiar with Peter Drucker's "Five Deadly Business Sins." Drucker, who BusinessWeek dubbed the "man who invented management", lays out five business mistakes that can sink even the mightiest of companies. Sin #5 has Watson written all over it: Feeding problems, starving opportunities.

Watson, perhaps in a vain attempt to cover up his egregious error in not factoring in the litigation to Texaco's sale price and gross mismanagement of the case along the way, has doubled down. During his tenure, Chevron has employed some 39 law firms on the Ecuador issue – billing what one can only guess is in the hundred of millions a year, cutting checks to the tune of $75 million a year to DC lobbyists deployed to Capital Hill to persuade lawmakers to punish Ecuador and strip it of its unique trade preferences with the U.S. for allowing the case to proceed. The latter failed spectacularly.

In the meantime, experts have started to chime in. Fidel Gheit, the top energy analyst for Oppenheimer – after years of silence on the issue – has started to speak out. He made a personal visit to Chevron's San Ramon headquarters to meet with Watson. Speaking about recently setbacks the company has faced in the case, Gheit commented, "[Watson's] not a happy camper right now. It's not great news for Chevron..." Gheit also stated that he thought Chevron should seek to resolve the litigation through a settlement, because it has become a "distraction" and drag on Chevron's stock price. A New Yorker blog entitled "Why Chevron Will Settle in Ecuador" suggested the same. And, an influential investor website suggests a "hold" on Chevron stock due in part to its failure to resolve the issue.

What does this mean for CVX shareholders? Stay tuned for Part II...


– Kevin Koenig

Thursday, September 27, 2012

Dishonest Reporting: Fortune's Roger Parloff Delivers A Hit Job for Chevron

Reposted from The Chevron Pit

Fortune writer Roger Parloff has used dishonest reporting to help Chevron cover its tracks in the wake of its horrific human rights disaster in Ecuador – a disaster where Chevron admitted that predecessor company Texaco deliberately dumped more than 16 billion gallons of toxic waste into the water supply of rainforest indigenous groups as a cost-saving measure, and then tried to cover up this crime with a sham remediation and attempted bribes to the Ecuadorian government to kill off the lawsuit seeking compensation.

If Chevron's executives had pulled this stunt in the U.S. and our citizens were the victims, they likely would have landed in jail. Certainly there would be a multi-billion fine – see BP, which faces a $40 billion liability for the far smaller Deepwater Horizon disaster in the Gulf of Mexico.

But in Ecuador, Chevron has gotten off relatively easy – a $19 billion judgment after an eight-year trial but no criminal charges for top executives related to their cover-up of the world's worst oil-related ecological problem. Evidence shows the dumping was part of a deliberate plan to enrich Chevron shareholders at the expense of the health of the local population, which has suffered an epidemic of cancers and other oil-related diseases. Chevron wanted the case tried in Ecuador and moved it there from U.S. federal court, claiming repeatedly that Ecuador has a fair judicial system – a fact confirmed by prominent experts.

Given that a prominent American oil company was found liable for this type of gross misconduct – no less a company under the cloud of another criminal investigation in the U.S. for illegal toxic gas flaring at its San Francisco-area refinery – one would think Parloff would treat Chevron's latest claims with at least the basic level of skepticism taught to college freshmen in Journalism 101.

Instead, Parloff's latest 5,000-word blog repeats almost word for word Chevron's fake narrative. He hides behind Chevron legal papers to claim the venerable U.S. law firm Patton Boggs tried to cover up a fraud in Ecuador. The blog is exhausting to read, but it is a fabulous case study in dishonest reporting that should leave Fortune editors and Time Warner executives shaking their heads.

Parloff fails to report – even as opinion – that Chevron's fundamental narrative is false: Patton Boggs never tried to "cover up" a fraud because there was no fraud by the plaintiffs in Ecuador. There is extensive evidence of a massive environmental crime and fraudulent cover-up by Chevron in Ecuador, but Parloff didn't touch that evidence even though it is readily available in thousands of pages of legal papers, is summarized in the 188-page Ecuador court judgment, and he has been told about it repeatedly by representatives of the plaintiffs.

The fact Parloff fell far short in his ethical duties as a journalist is undeniable.

First, Parloff never called Karen Hinton, the spokesperson for the plaintiffs, to get the other side of the story. He never mentioned (much less reported the details of) U.S. lawyer Steven Donziger's devastating counterclaim against Chevron recently filed in U.S. federal court, that in 214 meticulous paragraphs puts the lie to Chevron's fake narrative. He also never cited in any depth to any of the thousands of pages of legal briefs filed by the plaintiffs and Donziger in Ecuadorian and U.S. courts disputing ever aspect of Chevron's allegations.

Parloff never reported that the relatively inconsequential "hearing" on the Patton Boggs subpoena (which was the "news hook" for Parloff to repeat Chevron's fake narrative and go after Patton Boggs in his blog) – which is related to the equally far-fetched "RICO" case Chevron filed against Donziger and his colleagues – is being conducted by none other than federal judge Lewis A. Kaplan, whose earlier work on the Ecuador case was vacated by the Second Circuit Court of Appeals and who has been widely discredited for his blatant personal biases against the Ecuadorians, documented in this legal brief.

Parloff also stripped his story of vitally relevant context that demonstrates that Chevron is clearly on the ropes in the case.
Consider:

  • Because it flouts the rule of law in Ecuador, Chevron now faces something much worse – seizure actions against billions of dollars of strategic company assets in Canada and Brazil. These actions, that in the words of Chevron Deputy Comptroller Rex Mitchell, will cause "irreparable harm" to company operations and disrupt Chevron's global supply chain. Chevron is fast approaching a point where it won't be able to invest in several countries because of the risk its investments could be seized to pay the Ecuador judgment. This is unprecedented in the annals of American business, yet neither Parloff nor Fortune has ever reported this aspect of the story.
  • Chevron shareholders are in open rebellion against company management for its mishandling of the Ecuador case, to the point where CEO John Watson's ability to continue as Chairman of the Chevron's Board is in jeopardy. Again, silence from Parloff.
  • Fair Pension, a London-based shareholder advocacy organization, just issued a blistering report documenting how Chevron is under increasing pressure from shareholders and the media because of the $19 billion judgment. Again, Parloff's fingers apparently seized up at the keyboard.
  • Chevron's lead outside law firm, Gibson Dunn & Crutcher, has been caught engaging in unethical behavior on behalf of Chevron in Ecuador and the U.S. and is engaged in a blatant intimidation campaign against any lawyer who wishes to help the Ecuadorians. Recently, several lawyers reportedly left the firm rather than continue to do Chevron's bidding on the case. Again, nothing from Roger.

The absurdity of trying to tar strong and experienced lawyers like Jim Tyrell of Patton Boggs with defamatory allegations is a joke. A law firm like Patton Boggs – with former Republican Senator Trent Lott as a partner and Douglas Ginsberg, the Republic Party's go-to election law guru as a leading light – would not work for three years on a case if it thought there was even a shred of possibility that it was doing anything improper.

How does Parloff explain all of the other prominent law firms who have rallied to the cause of the plaintiffs and their lawyers? Apart from Patton Boggs, you have Lenczner Slaght in Toronto, Sergio Bermudes in Brazil, Keker Van Nest in San Francisco, Smyser Kaplan & Veselka in Houston, and Miranda & Amado in Lima. All are firms with major corporate clients who enjoy the highest reputations for integrity, unlike the chaps Chevron has bedded over at Gibson Dunn.

Parloff let himself be used to advance Chevron's unsavory, unethical and un-American campaign to deny legal representation to vulnerable peoples because the company knows it cannot win the case on the merits.

Donziger's lawsuit documents in chilling detail how Chevron's own internal audits and expert analyses confirm the claims of the Ecuadorian indigenous communities – and that Chevron, faced with losing the Ecuador case, "decided to fraudulently vilify both the Ecuadorian judiciary and the lawyers" by fabricating evidence, lying about the scientific data, and "leveling false and misleading claims of fraud and other misconduct".

Parloff also ignores the fact that Chevron's own internal reports – by Fugro McClelland and HBT Agra – concluded there was massive toxic contamination at every one of the company's well sites when it left Ecuador in the early 1990s. (Chevron operated in Ecuador from 1964 to 1992.) There was also no mention that Chevron produced thousands of scientific sampling results in the Ecuador trial that found levels of contamination for 15 toxic chemicals well above legal limits at 97% of the 93 Chevron well sites inspected.

Also missing from Parloff's article is the extensive evidence of Chevron's attempts to illegally sabotage the judicial proceedings in Ecuador with pressure, bribes, threats against judges, cooked evidence, and the like. These acts are extensively documented in the sworn affidavit of Ecuadorian lawyer Juan Pablo Saenz. (Chevron has never responded to most of the allegations in the Saenz affidavit.)

Despite the overwhelming evidence against Chevron, Parloff has the temerity to claim that Donziger has never advanced a "benign" explanation to contradict Chevron's claims. Roger, first read Donziger's counterclaim. Second, understand that the "uncontradicted" findings (which were always disputed) of Judge Kaplan have been thrown out along with the rest of that earlier case where a formerly reputable judge engaged in the sad spectacle of trying to put the entire judiciary of U.S. ally Ecuador on trial in his Manhattan courtroom.

To Parloff, it is just inconceivable that indigenous groups in the Amazon have had the temerity to hook up with powerful U.S. law firms like Patton Boggs. To Parloff and the folks at Chevron, it is even more outrageous that Patton Boggs and other lawyers might actually get paid for their efforts. Wow, the idea of poor people from the Amazon and American professionals hooking up to fight for justice is frightening. I mean, nobody should ever get paid for fighting for justice, much less poor people.

We surmise that Chevron and the Koch brothers right now are designing a campaign to prohibit American lawyers from getting paid for holding American companies accountable for their outrageous conduct abroad. Watch for Mitt Romney, the oil industry's favorite son, to unveil the issue during the first presidential debate.

In Parloff's world, its OK for Chevron to have hired and paid hundreds of millions of dollars to its 41 law firms and roughly 500 lawyers being used to try to quash the claims of the Ecuadorian tribes. That's just normal corporate behavior.

Magazines like Fortune and "reporters" like Parloff love the free market as long as it benefits their big advertisers or the very large companies they fawn over. But when dying indigenous groups use the free market to sell part of their last assets to secure strong legal representation – giving them a fighting change to protect their fundamental right to life – suddenly the free market doesn't seem so attractive.

We note for the record that neither Fortune nor Parloff seem to give a damn about the free market in Venezuela and Argentina, where Chevron is in deep cahoots with two governments that have expropriated foreign oil properties of Chevron competitors.

Spare us the hypocrisy.

Tuesday, September 25, 2012

Law and Order: Chevron's Criminal Intent

Reposted from Eye on the Amazon

Oil Companies Should Stop Polluting Our Air: We Agree

For those of you who follow the landmark Aguinda v. Chevron lawsuit and the efforts of thousands of indigenous people and farmers to hold the San Ramon oil giant to account for one of the worst oil disasters on the planet, it would come as no surprise to read that Chevron:

...routed hydrocarbon gases around monitoring equipment and allowed them to be burned off without officials knowing about it.

But what's striking about that statement is that it's not in reference to the company's rainforest operations in Ecuador in the 1970s and 1980s. It's referring to Chevron's oil refinery in Richmond, CA. In 2012.

Turns out, Chevron is now under criminal investigation by the EPA for this intentional effort to deceive regulators. The Sunday edition of the San Francisco Chronicle reported:

Federal authorities have opened a criminal investigation of Chevron after discovering that the company detoured pollutants around monitoring equipment at its Richmond refinery for four years and burned them off into the atmosphere, in possible violation of a federal court order, The Chronicle has learned.

Air quality officials say Chevron fashioned a pipe inside its refinery that routed hydrocarbon gases around monitoring equipment and allowed them to be burned off without officials knowing about it.

Some of the gases escaped into the air, but because the company didn't record them, investigators have no way of being certain of the level of pollution exposure to thousands of people who live downwind from the plant.

...The federal investigation centers on Chevron's burning, or flaring, of gases created during the superheating needed to generate fuels from crude oil. Although flaring burns most gases, environmental groups have long maintained that residual gases blowing away from the refinery pose a risk of cancer and respiratory ailments

The federal probe began before the explosion and fire at Chevron's Richmond refinery on Aug. 6, and underscores the company's notoriously lax environmental standards and its callous disregard for environmental protection and responsibility.

As the Contra Costa Times reported, local government officials are outraged at the news:

"How do we ever trust them about anything now? That's where I am," said Richmond Councilman Jeff Ritterman. "Once you are lied to once by somebody, it's very hard for them to establish trust."

"That's a criminal act, intentionally bypassing the monitoring," said Contra Costa Supervisor John Gioia, who is also the chair of the air quality board. "The rule is designed to reduce flaring, and refineries are supposed have a responsibility to abide by it."

Sound familiar?

If Chevron is brazen and arrogant enough to hatch a plan to deceive regulators in 2012, in the state with arguably the toughest environmental standards in the United States, then imagine what it was doing in the remote Ecuadorian rainforest from 1964-1990.

Unfortunately, the disaster in Ecuador is not something of the imagination. It's all in the case file – some 200,000 pages and more than 64,000 water and soil samples in an 18-year litigation that found Chevron guilty and liable for $19 billion in damages.

In Ecuador, Chevron's operations were built to spill. The company designed, built, operated and maintained an oil extraction system intended to dump toxins and pollution into rainforest rivers and lands – the life source of the indigenous and campesino inhabitants – in violation of both Ecuadorian law and standard industry practice. Chevron's type of drill and dump practices had been outlawed in the U.S. for years, and it even had a patent for technology to better dispose of the toxic waste produced by its operations. But Chevron chose not to use that technology in Ecuador. Why?

It was a cold calculus based on one thing. Cash money. To save a couple bucks, Chevron designed an oil extraction on the cheap, using outdated technology that it knew would harm people and the planet. It wasn't a "mistake". It was premeditated, criminal intent. This was executives and engineers sitting around conferences tables, diagraming dangerous deeds on chalkboards, mapping out their crimes against humanity and ecosystems. [I can't confirm whether evil laughter took place, or whether these meetings were followed by long, extravagant Mad Men style lunches with stiff drinks, big steaks, and inappropriate flirting with secretaries. But it was the 1960s.]

These decisions went on for years, and were the subject of memos that show Chevron knew about the human and environmental costs of its operations, but chose profit over people:

Should oil waste or toxic formation waters be re-injected back into the ground? Instead, leave them in waste pits adjacent to streams and tributaries, and build an overflow pipe to carry the contaminants directly to the water source of thousands of people.

Should fences be put around the superfund-style toxic waste pits so animals or children don't fall in? No, too expensive.

Should the pits be lined to prevent leeching into groundwater or migration of contaminants to rivers or streams? No, too expensive.

Should records be kept of any spills? A 1972 memo orders all reports related to oil spills "are to be removed from the Field and Division offices and destroyed," that no reports are to be kept on a "routine basis," and only "major events" that "attract the attention of press and/or regulatory authorities," are to be reported.

And, don't forget about Brazil, where Chevron's recent spill from its Frade field off the coast of Rio de Janeiro has the company facing billions in criminal and civil liability. Like Richmond and Ecuador, Chevron intentionally misled investigators and disregarded regulations. Chevron underestimated the size of the spill, overstated the extent of the spill response, and tried to cover up the fact that it drilled deeper than the depth allowed by its contract – a potential reason for the blow out at the well site.

According to Fabio Scliar, the head of the environment unit of Brazil's federal police department that the deep water well "could not and should not have been drilled under the conditions presented in the area," adding that an "absurd" amount of pressure was used at the site situated off the coast of Rio de Janeiro state. "All indications are that a desire for profits led (Chevron) to take the prohibitive risk" of drilling at the site, Scliar concluded.

Environmental Minister Carlos Minc added, "There was an environmental crime. They hid information and their emergency team took almost 10 days to start acting."

Chevron's Richmond, Ecuador, and Brazil examples [and there are many more] illustrate a premeditated pattern to pollute, and a reckless flaunting of the law that has endangered human health and environment. These examples are also growing liabilities that highlight a pattern of egregious mismanagement by senior executives, which is increasingly apparent to Chevron's own shareholders. Although U.S.-based investor groups have long been pressing the company to clean up its act, global investors are now taking notice.

The highly-respected U.K. advisory Fair Pensions, which leading charities, trade unions, faith groups and individual investors in Great Britain, Europe and Australia, has released a new report calling on Chevron shareholders to demand the company to change course.

The report concludes:

Chevron's aggressive and much criticized management of the Ecuadorian case together with allegations of inadequate disclosure of the risks stemming from the case has highlighted a number of long-standing governance issues at the company which many believe are contributing to an unwise refusal to re-evaluate strategy. These include a lack of environmental expertise among independent directors, the combined role of CEO and Chairman, and restrictions on shareholders calling special meetings.

Chevron's repeated dismissal of valid shareholder concerns highlights the importance of international shareholders engaging with the company about these issues and supporting shareholder proposals to improve governance.

Read the full report here.

By all accounts, Chevron believes it is above the law. Help us bring this fugitive of justice to account!


– Kevin Koenig

Monday, September 24, 2012

Chevron Faces U.S. Criminal Investigation For Lying About Toxic Gas Flaring

Reposted from The Chevron Pit

More evidence of the cultural rot deep within Chevron's management structure has surfaced with a devastating new report in the San Francisco Chronicle that the company is now under a criminal investigation for lying to authorities over toxic gas flaring at its Bay Area refinery. For Chevron CEO John Watson and General Counsel R. Hewitt Pate the news could not have come at a worse time.

We already have reported that under Watson and Pate's leadership Chevron faces a hair-raising $19 billion liability in Ecuador for the dumping of billions of gallons of toxic waste into Amazon waterways, and then undertaking a fraudulent remediation to cover it up. Chevron also recently paid a huge fine to the Justice Department for violating the Foreign Corrupt Practices Act in Iraq and has been sanctioned by various courts in Ecuador and the U.S. for engaging in unethical litigation practices.

The Chronicle reported in Sunday's editions that the U.S. Environmental Protection Agency is conducting a criminal investigation of Chevron after learning the company has installed pipes to re-route toxic pollutants around monitoring equipment at its Richmond refinery before burning them off into the atmosphere, where they pose a risk of cancer and respiratory ailments.

According to the Chronicle: "Air quality officials say Chevron fashioned a pipe inside its refinery that routed hydrocarbon gases around monitoring equipment and allowed them to be burned off without officials knowing about it."

A local county supervisor, John Gioia, had the guts to be quoted on the record about what Chevron did: "That's a criminal act, intentionally bypassing the monitoring," Gioia said.

The criminal investigation started when two inspectors noticed that Chevron's pollution-monitoring equipment wasn't recording anything and became suspicious.

A fire at the Richmond refinery on Aug. 6, which forced thousands to area hospitals for treatment, is also under investigation and has led to a class action lawsuit against the company. See this Huffington Post piece for more details.

"Chevron's pattern of legal and environmental management failure reveals an executive team out of its depth and out of control. The board's lack of effective oversight of top management risks driving the company and its shareholders into the ground," said Simon Billenness, an independent analyst who has followed the company's growing environmental liabilities.

Billenness also said a new analysis by the London-based group Fair Pension has revealed how Chevron's approach to the Ecuador disaster threatens shareholder value.

Our advice to the investigators: look at Chevron's corporate suites for the source of the problem, not just the line workers at the refinery who creatively figured out a way to save the company money at the expense of the health of local residents.

Workers cheat because of the existence of a corporate culture that encourages cheating, the effects of which the world has seen in Ecuador time and again. If you want to see what kind of corporate citizen really Chevron is, look at this video about its gross human rights violations in Ecuador.

Wednesday, August 22, 2012

Lawyer for Ecuadorians Turns the Tables On Chevron and Sues Oil Giant

Chevron: Can you handle the truth about your crimes in Ecuador?


Reposted from The Chevron Pit

New York lawyer Steven Donziger is going after Chevron, its CEO John Watson, and its General Counsel R. Hewitt Pate for orchestrating a campaign by the oil giant to evade paying a $19 billion judgment in Ecuador by targeting and defaming Donziger and other members of the legal team. Donziger, a litigator who has dedicated most of his professional work to the field of human rights advocacy, battled for almost two decades to help indigenous and farmer groups in Ecuador's rainforest hold Chevron accountable for the deliberate dumping of billions of gallons of toxic waste onto their ancestral lands, leading to the decimation of traditional cultures and an outbreak of cancer that has killed or threatens to kill thousands of people. See this article in Courthousenews.com.

(For background on Chevron's human rights violations in Ecuador and fraudulent cover-up, see this devastating video. For a written summary of the overwhelming evidence against Chevron relied on by the Ecuador court in finding the company guilty, see here.)

Donziger, represented by John Keker of San Francisco's Keker & Van Nest, quietly filed a 158-page compendium of claims against the oil giant last week in New York federal court. The lawsuit can be read here starting on p. 92. Donziger, who lives in a small apartment in New York City with his wife and son, had previously been sued (along with his clients) for $57 billion by Chevron as part of an outrageous and trumped-up civil racketeering claim. Chevron claimed that the entire Ecuador case – which includes 64,000 chemical sampling results proving toxic contamination at the company's hundreds of well sites in the Amazon – was an attempt by Donziger and his clients to extort money from the company.

Donziger said that the racketeering case was a thinly-veiled attempt by Chevron and its high-billing law firm, Gibson Dunn & Crutcher, to cover up evidence of Chevron's crimes and to intimidate the plaintiffs into abandoning the 19-year-old environmental case, which was filed in New York in 1993 but was shifted to Ecuador at Chevron's request after the oil giant filed numerous affidavits praising the country's court system. In February 2011, Donziger and his clients won the judgment after an eight-year trial in Ecuador marred by Chevron's attempts to intimidate judges, offer bribes to Ecuador's government, fabricate scientific evidence, and sabotage the proceedings by filing dozens of frivolous motions and drowning the court in paper. See here.

Chevron's legal team at Gibson Dunn openly markets a "template" to corporate defendants like Chevron facing large liabilities for environmental and human rights abuses. The template, which the firm calls a "rescue operation" for clients in trouble, assumes that the wholesale intimidation of lawyers will allow clients to win via subterfuge what they can't win on the merits. The Gibson Dunn "rescue" team – led by New York attorney Randy Mastro, Ted Boutrous, Andrea Neumann, Scott Edelman, and William Thomson – has used over 60 lawyers and billed Chevron hundreds of millions of dollars. All their hard work has brought a fair amount of disrepute to their law firm as Chevron has suffered multiple courtroom setbacks around the world, dramatically increasing its liability and creating a shareholder rebellion against CEO Watson. See here.

Mark our words – it is just a matter of time before Gibson Dunn itself gets sued for creating evidence and engaging in intimidation tactics to justify its high-priced fraud "template" that it sells to clients.

In 2009, the same Gibson Dunn "rescue" team leveled fabricated fraud charges in California against another American attorney who once worked with Donziger on the Ecuador case, and it blew up in their collective faces. That attorney, Cristobal Bonifaz, won a judgment against Chevron after a court found the company tried to use the fraud lawsuit to suppress his First Amendment rights and harass him, violating California's anti-SLAPP statute. Chevron was ordered to pay a large fine in that case and separately has been sanctioned by federal courts and accused of multiple ethical violations for doing Chevron's dirty work. See here and here.

Any lawyer who cares about fairness should read the chilling facts documented in Donziger's lawsuit. It is indisputable that he has been the target of an unrelenting campaign of defamation, harassment, and intimidation because he dared to stand up to the goons at Chevron who are trying to hide the company's outrageous misconduct in Ecuador. For this, he probably has suffered a level of harassment unprecedented in the annals of American jurisprudence.

The harassment included 15 days of sworn deposition testimony where he faced off against up to 20 Chevron lawyers and staffers, overseen by a federal judge (the normally well-regarded Lewis A. Kaplan) who bought into Chevron's hysteria and rushed to judgment and in the process sparked a worldwide reaction in the legal community to his excesses. See here and here. See petition asking for Kaplan's dismissal here.

Donziger also faced 24/7 surveillance in Manhattan and Ecuador and a campaign of defamation by Chevron's press flaks and lawyers that is outlined in the legal document he filed in court.

Donziger's lawsuit lays out the gory facts of Chevron's criminality and corruption in Ecuador, dating back to the mid-1990s when it engaged in a sham remediation to try to weasel out of the original lawsuit.

The Donziger suit explains that once Chevron realized it would lose the Ecuador trial based on the scientific evidence, the company turned to Gibson Dunn to try to render the Amazonian communities defenseless.

New York judge Kaplan – who from the bench has made insulting comments about the indigenous groups victimized by Chevron – will now have to decide whether to let Donziger's claims go forward as part of the existing Chevron racketeering case. Chevron steered its original case to Kaplan knowing full well his feelings toward Donziger, a fellow Harvard Law School graduate who he seems to treat as some sort of wayward son. At one early hearing, Kaplan – who has a corporate law background – sneered that "Mr. Donziger is trying to become the next big thing in fixing the balance of payments deficit" between the U.S. and the rest of the world by going after U.S. companies, which he lamented as "a sad pass" and "a giant game." See here. Kaplan on numerous occasions described the Ecuadorian indigenous groups as "the so-called" plaintiffs, as if he was trying to deny their very existence.

Kaplan, who once tried to impose an illegal worldwide injunction blocking enforcement of the Ecuador judgment, already has been reversed by the federal court of appeals on the case; whether he lets Donziger's counterclaims move forward so the full truth about Chevron's misconduct can come out in his courtroom will be interesting to watch given his obvious biases, to say the least.

Here is a quick summary of Donziger's counterclaims against Chevron:
  • Chevron has made numerous false statements by claiming Donziger committed misconduct by pressing forward with the pollution lawsuit after the company "remediated" the Ecuador oil fields, when it knows the remediation was a sham;
  • Chevron has lied about the overwhelming scientific evidence against it – evidence that includes thousands of chemical sampling results that show the presence of harmful toxins and carcinogens at the company's well sites – to try to make it appear Donziger had to fabricate evidence to secure a favorable verdict;
  • Chevron used deceptive and manipulative editing tactics to misrepresent video outtakes from the documentary film Crude to take Donziger's statements out of context, and to portray him in a negative light;
  • Chevron used its own longtime contractor, Diego Borja, to plan and execute an illegal video entrapment scheme against a sitting judge in Ecuador in an attempt to derail the trial, and then lied about hush money it paid to Borja so he would keep silent about it; and
  • In a final act of desperation, Chevron falsely claimed the "all-powerful" Donziger secretly wrote the 188-page trial judgment from his apartment in New York without providing a shred of such evidence.
Let's see if Chevron and its high-flying CEO Watson and General Counsel Pate – who recently received a 75% pay raise for his work on the Ecuador case after losing the largest environmental judgment in history – have the guts to let a jury hear all the evidence of the company's corrupt activities in Ecuador coordinated from company headquarters in San Ramon, California.

We predict that like most bullies, Watson and Pate will cower in fear and order their "rescue team" at Gibson Dunn to do all they can to convince Judge Kaplan to keep the truth contained in Donziger's counterclaims from coming to light.

Tuesday, August 14, 2012

From Ecuador to Richmond to Nigeria, Chevron Flouts Safety, Lacks Respect for Communities Where It Operates

Reposted from The Huffington Post

Want to understand the back story for Chevron's latest environmental disaster in Richmond, California?

Read this article about how Chevron essentially forced 154 of its Nigerian workers to jump from a smoking oil rig minutes before it exploded into the ocean after the company refused to evacuate them. Then, watch this video about Chevron's devastating human rights violations and fraudulent cover-up in Ecuador.

It has been clear for some time that a deep cultural rot has taken hold in Chevron's management team. The company is riddled by an outdated corporate governance structure designed to maintain a weak-kneed board of directors incapable of policing managers who don't care to address fundamental operational and safety problems. (See this press release and an article about Chevron's being named a company with some of the worst business practices in the U.S.)

For Chevron, it's about pure greed and lies. Its marketing mantra -- we respect the communities where we operate -- is an advertising industry joke.

Chevron CEO John Watson and General Counsel R. Hewitt Pate -- a disciple of Karl Rove -- both of whom are hopelessly conflicted on these issues are being paid huge amounts of money to make sure Chevron continues to pad its pockets at the expense of the communities where it operates.

On recent conference calls with analysts who provide information to shareholders, Watson repeatedly misrepresented and distorted the facts about the $19 billion damage award in Ecuador. He has called the case a fraud and the Ecuadorians "criminals" -- basically blaming the victims, the usual tactic of Chevron's top brass.

The disaster at Chevron's refinery in Richmond -- where over 1,000 people were sent to the hospital because of toxic fumes -- is another case in point. As Richmond community leader Andres Soto said on Democracy Now!, Chevron is engaging is more "mendacity" and "misrepresentation of the truth":

"Realistically, what we have seen is nothing but spin out of the refinery. On the one hand they apologized to the community (that's) how they always lead their statements off. But, realistically, they came out and they were blaming the same community and the environmentalists for them not being able to modernize and upgrade their operations there at the Richmond refinery when in fact, we know that this unit, the crude unit that actually caught on fire and blew up, it was never part of that upgrade program.

They could have ensured the safety of this thing in general. But it is that mendacity, the misrepresentation of the truth that Chevron is engaging in that makes it very difficult to deal with them. They refuse to negotiate in good faith with the committee over a wide range of issues, whether it is fair taxation or whether it's environmental safety and environmental justice." (emphasis mine)

Children in Richmond living in poverty and in the shadow of Chevron's antiquated refinery already are hospitalized for asthma at almost twice the rate of children in the rest of Contra Costa County.

In Ecuador, the eight-year trial produced overwhelming scientific evidence that Chevron deliberately dumped more than 16 billions of gallons of toxic waste into Amazon waterways and abandoned more than 900 toxic waste pits that have pipes to funnel oil sludge into streams and rivers used by indigenous groups for their drinking water. Thousands of died of cancer, or are at risk of dying.

In most countries, those responsible would be prosecuted for homicide. But in Ecuador, Chevron stripped its assets from the country and simply refuses to pay the judgment - essentially challenging the Ecuadorians to chase it around the world to seize various assets. (The Ecuadorians have launched legal actions to seize Chevron assets in Canada and Brazil already.)

But that's not all. The rot in Chevron is so extreme that the same pattern of polluting local communities and then lying about it has appeared in numerous other places: See this report for details.

  • In Brazil, Chevron faces a $22 billion liability and possible criminal penalties for an offshore spill and related cover-up last November in the Frade field, a $3.6 billion deep water oil project that is one of Chevron's biggest capital investments in the world.
  • In Angola, the impacts of oil activity in the Sea of Cabinda are so disastrous that most of the sand on the shores is polluted and black in color, and most of the beaches cannot be used.
  • In Salt Lake City, a rupture of a Chevron pipeline dumped over 33,000 gallons of oil into Red Butte Creek, exposing residents to oil fumes with horrific health impacts. A second rupture occurred just five months later, dumping an additional 21,000 gallons of oil.
  • In Canada, Chevron is undertaking a major expansion of its tar sands projects. Increasing evidence demonstrates that Chevron's development is contaminating the environment with toxins and severely impacting the health, livelihood and cultural preservation of indigenous communities living downstream.
  • In Kazakhstan, Chevron's development of the giant Tengiz Field emitted such high levels of toxins that the country's government fined the operation nearly $64 million.
  • In Indonesia, a Chevron pipeline explosion covered part of a village in hot crude oil, leaving two children suffering burn wounds and a community devastated.

These debacles happened on the watch of CEO Watson and General Counsel Pate. How rotten is Chevron? Pate just received a 75% raise (to $7.8 million per year) for getting the company to act like a fugitive from justice on the Ecuador case. Watson's compensation last year was on the order of $25 million. See here.

Countries around the world should simply cease doing further business with Chevron until it respects the communities where it operates and begins to obey local laws and court judgments. By any measure, the Richmond disaster is only the latest illustration of why this company has lost its social license to operate.

– Karen Hinton

Thursday, August 9, 2012

Chevron's Disaster at Home

Fire at Chevron's Richmond refinery

Reposted from Eye on the Amazon

In case anyone didn't get the message that Chevron has a reckless attitude with regard to environmental safety and responsibility, the explosion and fire Monday night at its refinery in Richmond, California – and Chevron's rhetorical stonewalling since then – have provided a smoky, toxic answer.

The disaster caused government officials to issue a "shelter in place" order for hundreds of thousands of nearby residents. It also worsened local residents' already abysmal view of the company.

At a community meeting Tuesday night, Chevron officials' bluster was met by outrage:

In a rowdy expression of frustration and anger, more than 500 residents crowded into Richmond Memorial Auditorium, where people shouted down Chevron and Contra Costa County public health officials on hand to answer questions about the accident.

The question asked most often was, "What are we breathing?" Residents were repeatedly unsatisfied each time a public health official said inspectors didn't know because they were still analyzing the data.

(...) Often when Chevron refinery General Manager Nigel Hearne spoke, he was met with extended boos and catcalls of "liar!" Residents held signs that read, "How many more 'accidents'?" and "Chevron out of Richmond."

The city of Richmond lies only 15 miles as the crow flies from Chevron's leafy corporate campus in affluent suburb of San Ramon. But it might be worlds away. Local community organizations that have participated in the True Cost of Chevron network said that Tuesday's disaster is symptomatic of a long record of pollution and lies in the largely industrial, low-income city.

Check out the Ella Baker Center's call to action, and join them and us in insisting that Chevron come clean in Richmond.

– Paul Paz y Miño

Friday, July 13, 2012

Canadians: Don't Say You Weren't Warned

Like the tobacco companies before it, the oil giant Chevron–which in 2011 reported $28 billion in profit–has engaged for years in a campaign of subterfuge to evade its legal obligations related to a massive environmental contamination in Ecuador. In Canada, where the Ecuadorians have come to force Chevron to comply with the rule of law, people should be aware of this company's long track record of abusing indigenous communities in Ecuador by poisoning their streams and rivers with toxic waste. Internationally respected Canadian courts have a chance to put an end to Chevron's rope-a-dope strategy to delay, deny, and distract attention from this gross and even criminal misconduct.

Chevron predictably refuses to pay an $18 billion judgment against it in Ecuador, where it was found by a court after an eight-year trial to have recklessly operated six large oil fields in the rainforest from 1964 to 1992. To understand how easily it would be Chevron to pay this judgment, the company's gross annual profit since the trial started in 2003 is over $150 billion. That's over eight times the damages imposed by the court.

The judgment number is modest compared to the magnitude of the damage. By way of comparison, the smaller BP spill in the Gulf of Mexico produced a total liability of $40 billion, or more than twice as much as Chevron's liability in Ecuador.

The Ecuador court found that Chevron–out of pure greed–dumped more than 16 billion gallons of toxic "water of formation" into Amazon waterways, and the trial record is replete with evidence of how the company engaged in a fraudulent "remediation" to try to cover up the contamination; doctored soil and water samples to hide the extent of the contamination from the court; never spent a penny on environmental monitoring or safety; used sub-standard practices that produced an outbreak of cancer that has killed numerous people; and then tried to bribe both the judge and high-level officials in Ecuador's government to quash the legal case. This is the same company that has already paid a $30 million fine in the U.S. for violating the Foreign Corrupt Practices Act in Iraq.

Independent journalists have long confirmed the company's hand in creating this unprecedented catastrophe. See these recent news reports from the Australia program Sunday Night; the American show 60 Minutes and this extraordinary video from the plaintiffs summarizing the evidence and Chevron's corrupt attempts to derail the trial. A story in Vanity Fair on the courageous Ecuadorian lawyer Pablo Fajardo, who was raised in abject poverty and who has been targeted with death threats for trying to hold Chevron accountable, can be downloaded here.

The Ecuadorian communities originally filed the case in the U.S. in 1993; Chevron delayed the matter for nine years before convincing a U.S. judge to shift the venue to Ecuador. At the time, Chevron lawyers filed 14 sworn affidavits praising Ecuador's courts as fair and transparent. These affidavits can be read here.

Looking back, it is clear that Chevron thought it likely the plaintiffs would melt back into the jungle if the case was thrown out of U.S. courts. Instead, the affected communities re-filed their claims under Ecuadorian law in the local court where Chevron had begged for the trial to be held. When the evidence began to point to its guilt, Chevron started to attack as unfit the courts it had previously praised. It also engaged in political engineering, mounting a six-year lobbying effort that is still ongoing to convince the United States to cut trade preferences for Ecuador just for allowing the lawsuit to be brought in the place where Chevron wanted the trial to be held.

When asked by 60 Minutes to explain the hypocrisy of wanting the case in Ecuador and then trying to get out of the case once it got to Ecuador, Chevron lawyer Sylvia Garrigo said, "We don't want to be sued anywhere, period." Garrigo also compared the awful waste pits in Ecuador to the oil in the makeup on her face.

There is no better snapshot than Garrigo of Chevron's deeply held belief that it is entitled to impunity for its human rights abuses in Ecuador–abuses that have killed or threaten to kill thousands of people with cancer and other diseases, according to independent peer-reviewed health evaluations in the region. See here and here.

Chevron might think it can get away with ignoring court orders in Ecuador, but it will not easily obtain impunity in Canada's courts. Chevron's interest in various oil field and refining operations in Canada are reportedly worth billions of dollars. They could easily be sold with the proceeds redirected for clean-up in Ecuador. That would be poetic justice indeed for a company that admitted contaminating drinking water with benzene-laden "water of formation", and then denied it was legally responsible.

As terrible as the BP spill was, it was still an accident. Chevron's contamination of Ecuador's rainforest was the product of a planned design to inflate profits by externalizing production costs. The company even built pipes that continue to drain the toxic waste from its pits into nearby streams, as documented in the trial and in the 60 Minutes segment.

According to American law professor Judith Kimerling, who chronicled these facts in her 1991 book Amazon Crude, Chevron engineers told the indigenous people of the region that oil had vitamins and other positive medicinal effects. Robert F. Kennedy Jr., the noted environmental lawyer, penned a powerful firsthand essay after visiting the region in 1991. See here. Kennedy said he witnessed "antiquated equipment, rusting pipelines, and uncounted toxic waste sites"; the jungle, he said, "was broken by landscapes reminiscent of war."

Chevron is notorious in communities around the world for trying to win through intimidation, political lobbying, and corruption what it can't win legitimately in court. In Ecuador, the trial judge found that Chevron tried to grind the case to a halt as part of its defense strategy. The company once filed 18 motions in 30 minutes and then tried to recuse the judge when he did not rule on them fast enough. Chevron employee Diego Borja, under the direction of company lawyers, tried to bribe a sitting judge in a sting operation; Chevron threatened other Ecuadorian judges as well as lawyers for the plaintiffs with sham criminal prosecutions; and finally, offered $1 billion to Ecuador's government (half of which was to go to an environmental project) to induce it to illegally quash the case. Chevron lawyer Doak Bishop famously announced that the Ecuadorian plaintiffs "are irrelevant". This sworn affidavit from Ecuadorian lawyer Juan Pablo Saenz provides some of the gruesome details about Chevron's ongoing efforts to corrupt Ecuador's judicial system.

Chevron's new public relations narrative claims that the evidence in Ecuador is in its favor. What the evidence actually shows is that Chevron, via its own audits and technical reports, proved the claims of the plaintiffs and then lied about it to shareholders and the financial markets to artificially boost its stock price. That helps explain why a U.S. Congresswoman and three institutional investors recently asked U.S. regulatory authorities to investigate the company for violating securities laws. See here and here.

Another prominent U.S. elected official who visited the region in 2008, Rep. Jim McGovern of Massachusetts, described seeing a "terrible environmental and humanitarian crisis" that made him "ashamed" as an American. See here for a letter he wrote to President Obama about Chevron's activities in Ecuador.

Which brings us back the falsehoods Chevron will try to market in Canada. First, the few minutes of outtakes from the movie Crude that Chevron posted on its website are spliced and diced in its editing room to present a completely distorted view of the case. Joe Berlinger, the film's director, told Fortune that he is "dismayed at the level of mischaracterizations" in Chevron's presentation of his outtakes.

American lawyer Steven Donziger, who Chevron has spied on and harassed for years as he too tried to hold company officials accountable, emphasizes throughout the full 600 hours of outtakes the strength of the evidence against Chevron and his own frustration that Chevron that was corrupting the court and improperly delaying the trial. Chevron won't show you these outtakes, which faithfully reflect the conclusion among the legal team that the scientific evidence against Chevron is overwhelming.

Chevron's take on the science is equally unavailing. To the extent you can judge somebody by the company they keep, consider this: one of Chevron's scientific consultants in the Ecuador case is Dr. Douglas Southgate, who works with an institute funded by the oil and gas industry to cast doubt on global warming. See here. Another, Ralph Marquez, is the former lead lobbyist for the chemical industry in Texas. See here. Michael Kelsh–the author of a grossly flawed cancer study funded by Chevron–was hired by a company owned by a former Chevron Board member. See here. (One can better understand how Chevron uses junk science by reading the classic book Merchants of Doubt: How a Handful of Scientists Obscure the Truth On Issues from Tobacco Smoke to Global Warming.)

The evidence relied on by the Ecuador court clearly shows that all of the toxic substances Chevron and the plaintiffs found at hundreds of contaminated well sites in Ecuador are dangerous to human health and can kill people at high exposures, according to the Agency for Toxic Disease Registry, the leading authority on toxicity in the U.S. government. Yet Chevron continues to deny any harm has occurred.

Chevron's paid "expert reports" claiming there is no risk to human health are pre-cooked by company lawyers. For example, the Chevron-funded Kelsh study severely undercounts the incidence of cancer in Ecuador's Amazon by relying on official mortality data when most rainforest residents die quietly in the forest and therefore never enter the national cancer database. In its first iteration, Kelsh never disclosed in the study that he received funding from Chevron. Chevron can also cite the existence of some "clean" water and soil samples from the trial, but it lifted these samples up-gradient from the waste pits as part of its fraudulent sampling and analysis plan, exposed here in a report by Dr. Ann Maest.

Incidentally, Dr. Maest–one of the most respected experts in the world on how contaminants travel in groundwater–testified under oath recently that there is massive contamination of water in Chevron's concession area. See here and here. In a blatant act of deceit, in a recent blog Chevron leaves the false impression that Dr. Maest agrees with the company that there is no water contamination. See here.

Chevron's assertion that the plaintiffs wrote the judgment is a both a fabrication and a final act of desperation. It plays into the company's fundamentally racist notion that an Ecuadorian judge is simply not capable of writing a considered, intelligent 188-page decision that picks apart and destroys its arguments, as was done in this case.

Of course, these arguments already were litigated and resolved in the trial that Chevron wanted. But to Chevron, any court or judge who disagrees with it is just part of an ever-widening conspiracy. As of now, the members of this "conspiracy" include numerous judges in Ecuador, dozens of respected media outlets that Chevron claims have been "hoodwinked" by the plaintiffs, prominent U.S. law firms such as Patton Boggs, and the highly respected Canadian lawyer Alan Lenczner, who represents the Ecuadorians in their legal action. You might as well throw in Sergio Bermudes, probably the most respected litigator in Brazil, who just joined the case to help the plaintiffs.

Chevron's goal in Canada will be to reopen the litigation so it can kick the can down the road several more years, calculating it is cheaper to pay the hourly rates for an army lawyers than it would be to clean one of the largest oil disasters on the planet.

Canada's courts will have a great opportunity to finally block Chevron's rope-a-dope, cynical, and manipulative legal strategy.