Tuesday, September 30, 2014

Business Journalists Rush to Rescue Chevron from Its Ecuador Disaster

Reposted from Eye on the Amazon

Paul Barrett of Businessweek, Roger Parloff of Fortune Magazine and Michael Goldhaber of American Lawyer, all eager to tell Chevron's side in its Ecuador disaster.

On the run from a landmark $9.5 billion judgment in Ecuador, fighting enforcement actions in three countries that threaten strategic company assets, and gearing up for make-or-break appellate hearings does not bode well for the prospects of Chevron CEO John Watson and his management team.

No worries. Chevron got a little help from its friends in the corporate media last week. The resulting echo chamber is a startling reminder that, like the big banks, Chevron is considered by many to be too big to fail. It is clear that business journalists will come out of the woodwork to defend the company from attacks on their own kind, even if the truth about Chevron's human rights violations is sacrificed in the process.

The lawsuit brought by Ecuadorian rainforest communities against the oil giant is seen not only as a singular threat to Chevron's bottom line, but a historic symbol for corporate accountability. This is an unwelcome message to the oil-industrial complex which assumes that environmental damage and human rights abuses can be externalized and that justice can be so delayed that affected communities will never receive the redress or remediation they deserve. After all, Chevron has vowed to fight the Ecuadorians "until hell freezes over, and then we'll fight it out on the ice."

In a case like this with global implications for the environment, human rights, and corporate accountability, it's telling to see who Chevron's bedfellows are.

Over the 21 years of the Aguinda v. Chevron litigation, the list runs long. It includes people and institutions that have run to the company's defense, or outright done its dirty work – Ecuadorian government officials, military, judges, junk scientists, convicted felons, the U.S. Chamber of Commerce, and the U.S. Embassy in Ecuador, among others.

We can now add a trifecta of reporters to that list – two of whom have just published new books. These reporters have swallowed Chevron's narrative raw and whole. Sadly, this is not so surprising, coming as they do from Fortune Magazine, Businessweek, and American Lawyer (the latter considered the right wing litigation bible of corporate America) Roger Parloff, Paul Barrett, and Michael Goldhaber respectively, have been tripping over themselves to promote their books and articles, referencing, cross-referencing, citing, quoting, and linking to each other, to dizzying, albeit deceitful effect.

Let's focus on Paul Barrett of Businessweek, whose book "Law of the Jungle" (get it, there's no law in the jungle. Ha!), is a pro-Chevron tour de farce of the Aguinda v. Chevron litigation, as well as Chevron's countersuit using the RICO statute in New York Federal Court. He plays lip service to one of the indigenous leaders who lost two children due to oil contamination and builds up U.S. lawyer Steven Donziger, only to then take him and his clients down using Chevron's deceitful narrative. The majority of Barrett's book is written as if he spent extensive time on the ground in Ecuador, and was at many of the events described. However, he wasn't.

Barrett watched the documentary film, Crude, by Joe Berlinger. He then wrote as if he was standing right there in front of toxic waste pits, or in the judge's office, or at the hotel preparing Emergildo Criollo for the shareholders meeting. It's a deceitful tactic that purports to lend "jungle cred" to Barrett, as if his book is some kind of in-depth investigation from the sweaty Amazon court room or next to rusting Chevron pipelines that siphon off overflowing oil sludge into streams below, to be drunk later by unsuspecting villagers downriver.

Watching another journalist's film is no substitute for actual reporting. The reality is that Barrett spent precious little time in the Ecuadorian rainforest – two weeks at most. He did not speak to the lawyers for the communities, let alone Donziger, for the book. He never attended even a day of the trial. Barrett speaks no Spanish, so a thorough review of the 200,000 plus Ecuadorian trial record was out of the question. Ultimately, the book is mostly taken from Chevron's legal briefs.

A revealing example of Barrett's pro-Chevron bias occurs in Chapter Two. He begins by describing an entire scene from the film Crude as if he were there. As evidence of his simple acquiescence to Chevron's arguments, Barrett uses Chevron's deceptively edited outtakes from the film to paint a sinister scene of Donziger bullying and pressuring a judge. Barrett's citation is as follows:

We're going down to have a little chat with the judge. This is something that you would never do in the United States. But in Ecuador this is how the game is played, it's dirty. We have to – occasionally – use pressure tactics to neutralize their corruption. And today is one of those examples.

Except the actual transcription is as follows:

We're going to confront the judge who we believe is paid by Texaco. We believe he is corrupt, and we're gonna confront him, ah, with – with our suspicions about his corruption and let him know what time it is. And, ah, you know, this is something that you would never do in the United States. I mean, this is something you would, I mean, this is just out of bounds, both in terms of judicial behavior, and what – what lawyers would do. But Ecuador, you know, there's almost no rules here. And this is how the game is played, it's dirty. And, you know, they're playing dirty, we're honest, they're dirty. They play dirty, we have to occasionally use, um, pressure tactics to neutralize their corruption. And today is one of those examples.

Barrett left out the bolded text above, changing the context and intent of what was said into its opposite. That's not reporting; that's hit job journalism.

That is not the only instance where Barrett obfuscates the facts, turning what are decidedly black and white issues into murky grey – another Chevron tactic. One of the company's trademark products, beside crude, is doubt. Doubt has long been the go-to tool of big business litigators to turn the tables on their adversaries by flipping logic and reason of disciplines like epidemiology on its head. The intentional manipulation of facts creates just enough second guessing of the dangers of chemicals and toxins to allow said guilty company off the hook.

This tactic was used by Chevron in the Ecuador case. What about the causation between sick communities and the waste pits they live on top of? Well, hydrocarbons aren't necessarily toxic, claims Chevron. According to Chevron's Manager of Global Issues and Policy, Silvia Garrigo in an interview with 60 Minutes:

"I have makeup on, and there's naturally occurring oil on my face. Doesn't mean that I'm going to get sick from it."

Interesting though, that when you enter a gasoline station in California there's a sign disclosing that your mere presence at the pump could expose you to carcinogens. But in Ecuador's Amazon, you can live on top of a Chevron waste pit and any causality link to carcinogens is questioned.

Barrett avoids the truly scandalous and criminal examples of Chevron's tactics to hide contamination during the Ecuador trial, like swapping toxic soil samples with clean ones, and avoiding sampling at depths at which Chevron knew contamination existed, at locations Chevron knew were still contaminated, and were downgradient from known contamination. You'd think that a book purportedly covering the largest environmental litigation in history would merit a real review of the evidence, much of which was provided by even the skewed soil and water samples taken by the company.

Other corrupt and illegal acts that were Chevron's standard practice during the Ecuador trial are glanced over or omitted by Barrett. This includes the company's successful cancellation of a judicial inspection of a major toxic site through collaboration with the Ecuadorian military to produce a phony security threat. Perhaps most audaciously, Barrett fails to adequately mention a sting operation where Chevron employees posed as remediation contractors in an attempt to entrap the presiding judge.

Barrett also overlooks all the arguments that render Chevron's fraud claims ridiculous. If the trial was marred by fraud, why hasn't Chevron filed an action to nullify the judgment under the fraud protection statute in Ecuadorian courts? Three layers of Ecuadorian courts – eight appellate judges – reviewed and upheld the $9 billion verdict, and threw out Chevron's claims of fraud. But for Barrett, apparently U.S. courts are the only legitimate court system in the world. Barrett lets Judge Kaplan off the hook for his colonial overreach in judging a country's legal system that he knows nothing about. Kaplan can't read the native language, nor did he read the trial record. On top of that, Barrett seems unconcerned that Chevron's star witness received some $300,000 in payments for his testimony, plus a new life for him and his family in the United States, thanks to a Chevron financed and supported asylum bid. Even Kaplan called it a corporate witness protection plan.

Not only does Barrett's bias show throughout the book, his extracurricular activities lay bare his leanings. On July 20, 2014, Barrett joined Chevron and its legal team from Gibson, Dunn, and Crutcher for a Congressional subcommittee hearing organized by Chevron lobbyists on Latin American democracy. Alongside a Chevron lawyer, and a representative from the American Enterprise Institute, Barrett played the role of expert on Latin America, lamenting Chevron's legal plight in the country jurisdiction of its choosing, without irony.

So what we're left with is a book that's a copy-paste job from Chevron's legal briefs and reads as if the case, and the plight of the affected communities, is over. Peter Maass, author of the book "Crude World: The Violent Twilight of Oil," reviewed Barrett's book for Outside Magazine, and concluded: "There are two sides to the story of the biggest environmental lawsuit ever, but a new book tells only one of them."

Parloff, Barrett, and Goldhaber are quick to claim that from the outset they had high hopes for the Ecuadorian villagers. They had hope that U.S. courts could be used to hold corporations accountable for human rights violations abroad. But given the overwhelming evidence against Chevron, we have to seriously question these claims. Two of the pillars of American business reporting, and a conservative legal magazine hoped that the Ecuadorian rainforest communities who procured the largest environmental judgment in history from the second largest U.S. oil company would prevail? That's doubtful. The reporters have held on to that story merely to give the appearance of objectivity and to reinforce their framework claiming Chevron as the true victim. Immediately after publishing a number of articles, their "journalist" buddies began chiming in. Thus, the pro-Chevron feedback loop was set in motion.

For example, after Barrett's book launched on Sept. 23, Joe Nocera, a columnist for The New York Times, wrote a piece about Barrett's account. Nocera unquestioningly sides with Barrett and Chevron, while failing to mention that his wife's law firm represented Chevron in a discovery matter directly related to the Ecuador litigation. Shouldn't a journalist cite such an obvious conflict of interest?

Then cue Debra Saunders, the "token conservative" columnist for the San Francisco Chronicle. Saunders writes an article the next day about Nocera's article about Barrett's book. Feeling dizzy?

Saunders ends her piece quoting Nocera, with an alleged quote from Donziger, excerpted from the movie Crude, and edited and used by Chevron during the RICO trial. The quote is this: "Facts do not exist. Facts are created." Sounds incriminating, right? Except Donziger goes on to say, "...and you talk to Texaco, because they create facts. Texaco creates facts. They create standards. … That's what I am saying. They create fiction."

This is how the Chevron media echo chamber continues to feed itself. A book repeats Chevron's flawed arguments during the RICO trial almost verbatim, which produces articles and reviews of the book, which then produces yet more articles about articles about the book – all recycling and reinforcing Chevron's false and misleading narrative. The great irony is that Nocera, Saunders, and Barrett and the others accuse Donziger of trying the case in the media, when in fact it's Chevron and its minions who continue to prop up the company's crumbling house of cards in the court of public opinion, because its legal case is meritless.

We all know that a good "David vs. Goliath" story sells. But what sells better is the 'Hero's fall from grace' frame that Chevron's defenders are pushing about Donziger. Except, the demonize Donziger narrative is not new. In fact, it's been part of Chevron's playbook long before the New York RICO trial began

Enter Sam Singer, from Chevron's PR firm Singer and Associates. Singer is not merely Chevron Apologist-in-Chief; he's a long time Bay Area PR hit man who prides himself on cleaning up the image of his corporate clients. He's like the "Wolf" in Pulp Fiction – the guy you call to clean up your mess, hide the bodies, or whatever other unmentionables are needed. A recent piece in SF Weekly, "Trust Me: Who Are you Gonna Believe, San Singer or Your Own Eyes?" exposes Singer and his tactics:

When your workspace is engulfed in flames; when your mistress threatens to reveal your illegitimate family; when your restaurant serves up E. coli burgers; when your employees inadvertently kill a young child; when a wild beast rampages through your place of business – you better call Sam Singer. "When things go bump in the night," assures Singer, "we are there."

"The truth, after all, isn't exactly Singer's milieu. His mission is to push ‘the facts as our clients see them,'" writes Joe Eskenazi for the Weekly. That's what Singer does for Chevron.

According to internal Chevron emails with Singer, the plan was to target Donziger from the get go. Singer's strategy was to paint Ecuador "as the next major threat to America" like Iran or a "Cuban missile crisis in the making" and Donziger as "the most powerful man in Ecuador, pulling the strings of an emerging banana republic." Indeed, another Chevron strategist in an internal memo to colleagues was more blunt, noting that the company's [long-term] strategy is to demonize Donziger."

But even Singer and Chevron's strategy was wearing thin after Donziger and the Ecuadorians proved more resilient that Chevron thought possible. A recent article in Rolling Stone was a turning point, finally putting the spotlight on Chevron's phony narrative and the vacuousness of its arguments for anyone willing to look past Chevron's talking points. Despite this, Parloff, Barrett, and Goldhaber have been quick to take up the slack.

In the meantime, Chevron was unhappy with the unfavorable coverage it continued to receive in Richmond, California, home to the company's largest and oft exploding refinery. Richmond's mayor traveled to Ecuador to tour Chevron's toxic legacy and saw firsthand the company's impact on the rainforest and human health. Since then, she has been a vocal critic of Chevron's disaster in Ecuador. Combined with coverage of a controversial $1 billion refinery expansion plan and Chevron dumping $1.6m into local elections, there was little positive traction for the company in the local press. What was Chevron to do? If you can't influence the media, become the media!

Thus, the Richmond Standard was born. A Chevron-funded daily, the Richmond Standard is an Orwellian extension of the corporate media. An LA Times piece by Michael Hiltzik titled, "A Chevron PR website pretends to be an objective news source," explains:

This is what the news business has come to in communities where economics have wiped out traditional local newspapers. Self-interested corporations have stepped into the vacuum. You'd be hard-pressed to find a case as flagrant as Richmond's.

As the Financial Times describes it:

The Richmond Standard is one of the more polished sites to emerge in the age of hyper-local digital news brands such as Patch and DNAinfo.com. That may be because it is run and funded by Chevron, the $240bn oil group which owns the Richmond refinery that in August 2012 caught fire, spewing plumes of black smoke over the city and sending more than 15,000 residents to hospital for medical help.

The only writer for the "paper" is an account executive for Singer and Associates, Mike Aldax. According to Aldax, "my function is to report the news you're not seeing in Richmond." Translation: pro-Chevron stories. Hiltzik reports:

Aldax says Chevron doesn't review or edit his stories, but it doesn't have to. It provides his paycheck, and even subconscious self-censorship can undermine news gathering – especially if one defines news as information its subject doesn't want the public to know.

According to Singer, the Standard has at least found some support. "The rappers...They love us!"

For Chevron and the Ecuador case, there's no need to bypass corporate media when you have Parloff, Goldhaber, and Barrett. As the company's prime cheerleaders, they give voice and credibility to Chevron's recycled claims that were rejected by Ecuadorian courts. Meanwhile, the voices of indigenous and farming communities, who continue to suffer on the ground in Ecuador, are largely drowned out in the U.S.. These three pro-business American reporters give cover to Chevron's board of directors whose oversight of the liability has been called out by its own shareholders. Parloff, Goldhaber, and Barrett help immunize CEO John Watson who, as Chief Architect for the Texaco acquisition, has let the Ecuador issue come to define the company, while the liability has ballooned into the billions. And they've wrongly lifted the spirits of Chevron's stockholders who are led to believe that the issue is over.

But here's the rub. Chevron never intended to file a RICO suit, nor did Watson ever think it would get this far. The company's strategy has always been to outlast and out-resource the Ecuadorian communities and their legal team. It was Judge Kaplan who, presented with edited outtakes from the movie Crude that Chevron now admits were not properly translated or did not include the full transcript, asked, "does RICO play here at all?" A U.S. federal judge suggested that Chevron ought to file RICO charges, and the company quickly obliged. Kaplan navigated Chevron and its legal team through the trial, and issued a ridiculous verdict ripe to be overruled.

Which is why, during the four years in the run up to and during the trial, Chevron has sought to eviscerate the plaintiffs, their legal counsel, their funders, NGOs, or anyone who has ever dared to support the communities. The company hoped to outlast Donziger and the plaintiffs in a resource and PR battle, because they know exactly how hard it is to win the case on the merits. Ironically, given the tremendous amount of resources and time Chevron has invested in its scorched earth strategy, the communities and their counsel are not only still alive, they are in a remarkably good position.

The seven-week bench trial that Kaplan presided over – and that Parloff, Goldhaber, and Barrett sat through – may have generated back slaps and high-fives from San Ramon to Midland, Texas. But it was never built to last. Which is why, at least according to the rumor mill, Chevron is looking for an exit strategy. The company likely hopes the Ecuadorian government will play a role in its hoped-for rescue.

With a panel from the Second Circuit Court of Appeals looming over the company, Watson has reason to be worried.. The last time the Second Circuit had a crack at Judge Kaplan, it vacated his preliminary injunction in the case almost immediately. It was also an embarrassing public depantsing of Gibson Dunn lawyer Randy Mastro, who was literally laughed out of court. Don't expect to see Randy making the oral arguments this time.

But before the Second Circuit hearing, another critical hearing is slated for December. In Canada, the country's Supreme Court will hear arguments on whether the Ecuadorian communities can indeed go after Chevron's massive assets as a way of enforcing their judgment. These are major, make-or-break hearings for Chevron. But you wouldn't know that by reading the work of Parloff, Barrett, or Goldhaber. These three gringos who have been guzzling Chevron's Kool-Aid for the last four years may very soon wake with a hangover of a lifetime.

Sunday, September 28, 2014

How Reporter Paul Barrett Got It Wrong on Chevron's Calamity in Ecuador

Reposted from The Chevron Pit

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

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

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

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

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

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

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

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

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

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

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

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

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

Consider a few more of the shortcomings in Barrett's account:

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

Boiled to its essence, Barrett's book is a corporate perspective on a successful American plaintiff's lawyer who with his Ecuadorian colleagues pioneered a new model of funding for a mass-scale human rights litigation. The fact the lawyers had the trial judgment affirmed unanimously by two separate appellate courts in Ecuador – including by the country's highest court – only seems to infuriate Barrett all the more.

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

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

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

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

Wednesday, September 24, 2014

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

Reposted from The Chevron Pit

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

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

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

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

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

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

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

We have since learned that there is a disturbing pattern to Nocera's conflicts. Consider:

  • Nocera’s wife, Dawn Schneider, is the communications director for the Boies Schiller law firm headed by well-known litigator David Boies. Chevron hired the firm to work on critical discovery issues related to the Ecuador case. Here are legal briefs [HERE and HERE] that demonstrate the firm's deep involvement in defending Chevron against corruption allegations. Nocera did not disclose his wife's connection to this law firm in his column.
  • In 2006, Nocera was roundly criticized for writing a cover story for the New York Times Magazine on the tobacco company Altria (formerly Phillip Morris) that was surprisingly soft. The public relations person for Altria who worked directly with Nocera on the article? None other than the erstwhile Dawn Schneider.
  • On another occasion, Nocera wrote in his column about a litigation dispute between Oracle and SAP in which he passed judgment in favor of Oracle. But Oracle also was a client of David Boies, the immediate boss of Dawn Schneider. Nocera failed to disclose this fact as well. Details of that embarrassing episode – which caused the NYT to publish a clarification – are here.

Nocera's latest column attacking Donziger relies heavily on the findings of activist U.S. judge Lewis A. Kaplan that purports to overturn a unanimous decision by Ecuador's Supreme Court on questions of Ecuadorian law. Kaplan himself disparaged the Ecuadorians from the bench and made a mockery of justice as this document explains in some detail.

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

Barrett's book is largely an apologia for Chevron's atrocious behavior in the Amazon rainforest. He spent only a handful of days in Ecuador. Barrett also failed to interview anybody of import on either side of the litigation. And he topped it all off by repeating many of Chevron's talking points in testimony this summer before the U.S. Congress where he sat next to a partner from Chevron's lead outside law firm. See here for the details.

Nocera is also friends with Fortune writer Roger Parloff, another full-throated advocate for Chevron trying to masquerade as an independent journalist. For more about Parloff's own lack of ethics, read this recent blog post.

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

We're not holding our breath.

Friday, September 19, 2014

Fortune's Roger Parloff Now Helping Chevron Smear Those Who Held It Accountable

Reposted from The Chevron Pit

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, September 11, 2014

How Chevron's Scientists Misled Courts and Public About Death and Disease in Ecuador

Reposted from the Huffington Post

"Scientists ... involved in developing public health and environmental protections recognize we do not need (and we almost never obtain) proof beyond a reasonable doubt. Waiting for absolute certainty is a recipe for failure: People will die, and the environment will be damaged if we wait for absolute proof ... Out of all scientific uncertainties, few are more complex than understanding the causes of human disease. Scientists cannot feed toxic chemicals to humans to see what dose causes cancer."

Doubt Is Their Product, Dr. David Michaels, 2008

This is how Dr. David Michaels, a leading epidemiologist and former U.S. government scientist, begins a chapter in his seminal and groundbreaking book, Doubt Is Their Product.

The book describes in depressing detail how industries, their scientists, corporate lawyers and large PR firms have "shaped and skewed" science to create doubt about the dangers of chemicals and other toxins industries produce.

The chapter is aptly named: "Tricks of the Trade: How Mercenary Scientists Mislead You."

Michaels published his book in 2008 three years before an Ecuador court awarded a group of Ecuadorian villagers $9.5 billion in damages, resulting from Chevron's intentional contamination of the Amazon rainforest. The oil giant admitted to substandard drilling practices by dumping 16 billion gallons of untreated, toxic "formation water" into waterways relied on by the local population for drinking water as well as building over 900 huge unlined pits to serve as permanent storage for pure crude and water laced with known carcinogens, such as benzene and cadmium.

Comparing the amount of contamination and the amount of time it has remained in the environment with other similar disasters, Ecuador's is one of, if not the, worst environmental disasters in the world.

Since losing the Ecuador trial, Chevron has been trying to discredit the judgment through a series of retaliatory lawsuits in the U.S. Along the way, Chevron has been plying its own special "tricks of the trade" with America's judiciary and the news media – tricks that noted U.S. experts have called "fundamentally flawed" and "grossly exaggerated."

Chevron's goal has been to create doubt about the contamination's impact, arguing no proof exists that its oil and its operations harmed the environment or an Ecuadorian villager ever, even though Chevron's predecessor Texaco explored for oil exclusively in the concession area and was the only operator of all of the well sites from 1964 to 1990.

Let me repeat. During that 26-year-period – according to Chevron and its scientists – the company's admittedly substandard drilling practices did nothing to harm the environment or one single person.

This is part of their "proof": Chevron argued that Mother Nature had "weathered" the oil so much it was harmless and, as a result, no cleanup was needed. Problem is Chevron cheated on its weathering test. The oil giant's scientists found weathering – or degradation of oil – even in fresh oil. Chevron's inaccurate use of the test, USEPA Method 8014, "grossly exaggerated the magnitude of weathering." (See more of Chevron's "tricks of the trade" below.)

With its high-priced attorneys, scientists and academics, Chevron has bamboozled one activist U.S. judge and some legal reporters into believing that to prove causation of death and disease the villagers must all but exhume dead bodies and examine them until finding drops of oil inside with the Texaco brand.

Nothing less is good enough, they argue. But such nonsense has never been the standard of proof in a court of law for damages.

American Lawyer's Michael Goldhaber and Businessweek's Paul Barrett have twisted the legal standard of causation in their individual books about the lawsuit, holding the Ecuadorians to a much higher standard than they would face even in U.S. courts, which have a long history of rejecting industry demands of absolute certainty.

As Michaels points out in his book, it is scientifically impossible to prove direct causation of a health problem with absolute certainty. Making that the standard would allow Chevron and indeed the entire oil industry off the hook for every health problem they cause.

Michaels wrote: "Epidemiologists cannot state that a specific chemical exposure has definitely caused the cancer of a specific patient. The lung cancer from asbestos is indistinguishable from the lung cancer from smoking."

But, that hasn't stopped cancer victims and the U.S. government from winning damages for health impacts from tobacco and chemical companies. And, it didn't stop the Ecuadorians in their historic case. Academic studies (here and here) have been conducted that show the closer the villagers live to the oil sites, the higher the rates of cancer among them. Uterine cancer victim Rosana Sisalima with her granddaughter are shown here at their San Carlos home in 2004 near Chevron's well sites. Rosana succumbed to cancer in 2006. (Photo by Lou Dematteis/Redux)


Despite Chevron's efforts to discredit the studies, [scientists from across the world criticized those efforts; see here], the Ecuador courts accepted the evidence and ruled accordingly. In fact, three layers of courts in Ecuador – a total of nine judges, including a five-judge panel from the country's highest court - found against Chevron on precisely this legal theory.

Yet Chevron's manipulation of the evidence continues in collateral legal proceedings where Chevron hopes to discredit the Ecuador judgment and evade paying for a clean up. The oil giant's scientists, led by Dr. Sarah McMillan, are helping the company in this regard. (See here and here.)

But Chevron's antics are being more and more exposed.

Dr. Jeffrey Short, recently retired from a 31-year career as a research chemist at the U.S. National Oceanic and Atmospheric Administration, reviewed the reports of Chevron's scientists from the Ecuador case and shot holes all through them. So did Dr. Edwin Theriot, the former director of environmental programs for the U.S Corps of Engineers, no bastion of liberal-leaning environmentalism.

Dr. Short, whose report was commissioned by Ecuador's government, concluded that findings by Chevron's scientists – one of whom I know has been paid millions for his work over the years – are based on "fundamentally flawed," "grossly exaggerated," and "fundamentally inappropriate" testing methods. (See page 3.)

He wrote of Chevron's scientists: "(Their) bias toward underestimating the amount of residual crude oil in a field sample ... is well understood by Chevron's own experts."

In other words, Chevron's experts know their evidence is bullshit.

It's manufactured science – the kind Michaels warned us about – designed to produce doubt and create uncertainty, even when it's right before your very eyes.


Chevron's Tricks of the Trade:

For a scientific explanation of these testing methods, see Dr. Jeffrey Short's study.

  • Chevron used the wrong test to measure toxins in soil – kind of like putting a stethoscope in someone's mouth to see if they have a fever. Chevron's test, though, sounded so, well, scientific: Toxicity Characteristic Leachate Procedure or TCLP. Only problem is it doesn't measure toxins in soil. (I guess Chevron thought no one would notice.)
  • Chevron undercounted the most hazardous hydrocarbons – kind of like a kid showing his or her parents only those tests with high scores and shredding the rest. Eventually, though, it catches up with the student and it did with Chevron, too. See here.
  • Chevron argued that Mother Nature had "weathered" the oil so much it was harmless and, as a result, no cleanup was needed – kind of like justifying a decision to leave date-expired bottles of poison around for kids to play with. But Chevron cheated on its weathering test. They found weathering – or degradation of oil – even in fresh oil. Chevron's inaccurate use of the test, USEPA Method 8014, "grossly exaggerated the magnitude of weathering."


Wednesday, September 10, 2014

Chevron Racism Toward Ecuador Highlighted by Court Decision in BP Case

Reposted from The Chevron Pit

A legal decision handed down last week by U.S. federal Judge Carl Barbier found that BP's "gross negligence" caused the Deepwater Horizon blowout in the Gulf of Mexico.

The decision increased the company's liability to roughly $50 billion. For our purposes, Judge Barbier's decision – which sets an important benchmark for corporate accountability – has a deeper meaning.

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

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

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

So what gives?

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

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

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

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

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

Chevron also proposed that the Ecuador court adopt a clean-up standard for oil field hydrocarbons 100 times greater than that used in its home state of California. Put another way: in Chevron's universe, an Ecuadorian life is worth 100 times less than an American life in California.

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

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

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

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

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

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

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

When Watson and Chevron General Counsel R. Hewitt Pate claim the Ecuadorian verdict is too high, what they mean is it is too high for the particular people who won it. Consider these facts:

  • Chevron lawyer Rodrigo Perez Pallares admitted during the Ecuador trial that the company deliberately discharged 15 billion gallons of toxic water into fresh water sources in the Amazon rainforest. The amount is an estimated 85 times more oil waste than BP discharged into the Gulf.
  • Chevron's dumping in Ecuador was done by design to increase profits. BP's spill – even though the result of gross negligence – was still an accident.

Another case involving Anadarko's recent settlement over 2,700 contaminated sites in the U.S. also underscores Chevron's inexcusable double standard. In that case, Anadarko inherited the polluted sites from Kerr McGee when it bought the company, just like Chevron inherited Texaco's pollution liabilities when the companies merged in 2001.

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

But in Ecuador, according to Chevron, that amounts to a violation of "due process" and is an example of "fraud" against the company.

Watson and his army of lawyers have ruthlessly attacked Ecuador's government for not cleaning up their own contamination in Ecuador. Now we see that the U.S. government did not lift a finger for decades to address Kerr McGee's contamination – largely because the issue of liability was still being contested. In the end, Kerr McGee settled the matter for $5.6 billion, further underscoring how major polluters routinely pay out billions of dollars for their liabilities.

Unless you are Chevron.

Let's sum up.

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

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

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

Friday, September 5, 2014

Rolling Stone Nails Chevron for Corrupt Acts in Ecuador Litigation

Reposted from The Chevron Pit

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

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

Even though it wanted the case tried in Ecuador, Chevron now has sour grapes and is refusing to pay up. Thousands of lives are at risk due to the refusal of Chevron management to address the company's legal obligations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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