Donziger: Chevron Constructing "Fortress of Deceit" to Hide $12b Pollution Liability on Eve of Shareholder Meeting
SAN RAMON, CA - With pressure mounting from shareholders and the world’s leading on-line activist group over a $12b Ecuador pollution disaster, Chevron’s management team is trying to erect a “fortress of lies and deceit” in advance of the company’s annual meeting Wednesday to distract from a failed litigation strategy that poses major financial risk to company shareholders, according to an interview with Steven Donziger, a leading American human rights lawyer.
A Harvard Law graduate who has helped lead the legal battle against Chevron over its Ecuador pollution, Donziger said he was “deeply disappointed” at the refusal of Chevron’s management team to address its $12b liability given the undisputed evidence of massive environmental damage to the Amazon rainforest on the company’s watch from 1964 to 1992. “Chevron has caused an unprecedented humanitarian disaster for almost 50 years in the rainforest, and has yet to pay the first dollar to the Indigenous peoples and farmer communities it has decimated,” said Donziger.
Chevron was found by three layers of courts in Ecuador – including the country’s highest court – to have deliberately dumped billions of gallons of toxic waste onto Indigenous ancestral lands in the rainforest when it operated in Ecuador from 1964 to 1992. The company later vowed never to pay the judgment, despite having accepted jurisdiction in Ecuador. Chevron’s General Counsel, Hew Pate, also threatened the Indigenous groups with a “lifetime of litigation” if they persisted. (See this summary of the overwhelming evidence against Chevron; see this article by Greenpeace co-founder Rex Weyler on Chevron’s intimidation campaign around the case.)
“This type of behavior is simply unconscionable for any corporation in the world, but particularly one that donates massively to the Trump political machine while stiffing Indigenous peoples whose cultures have been devastated by oil pollution that enriched Chevron shareholders,” said Donziger. The lawyer called on governments to take into account the example of the Ecuador disaster before entering into any future business deals with Chevron. ”No government should do business with Chevron going forward until company management can demonstrate their respect for local citizens where they have extractive operations.”
In the meantime, Chevron’s 2018 annual meeting – scheduled for tomorrow at company headquarters outside San Francisco -- represents a major high-stakes test for new CEO Mike Wirth. Wirth already has gotten off to a rough start by refusing to meet with representatives of 36 institutional investors who are seeking to open up a dialogue in an attempt to settle the Ecuador matter. Further, Wirth now finds his company being targeted over the Ecuador issue by Avaaz, considered the world’s largest online activist organization with tens of millions of members in 195 countries.
Last week, Avaaz put out a call to action to pressure Vanguard Investments (one of Chevron’s largest shareholders) to vote in favor of two shareholder resolutions that criticize company management’s “material mishandling” of the Ecuador litigation. “Oil giant Chevron dumped billions of gallons of deadly chemicals in the Ecuadorian Amazon, leaving behind rivers full of toxic waste, decimating wildlife and spreading cancer and death in indigenous communities,” Avaaz wrote in an explanatory note.
As of Tuesday morning, more than 600,000 people had signed a petition urging Vanguard Investment Chair Bill McNabb to vote in favor of the resolutions. One resolution – which, in a major rebuke to Chevron management, received 39% of voting shares in last year’s annual meeting -- seeks to separate the positions of CEO and Board Chair, long considered a corporate governance anachronism but one that Chevron refuses to change.
Donziger also said Wirth and Hewitt Pate, Chevron’s General Counsel, were deliberately misleading shareholders and had erected a “fortress of deceit” to evade paying the liability to the people of Ecuador.
“It is our view that these individuals are engaged in a deceitful campaign to manufacture evidence and hide basic facts from the financial markets about the company’s exposure both in Ecuador and the U.S.,” Donziger said. “In Ecuador, where Chevron insisted the trial be held, three layers of courts found the company deliberately dumped billions of gallons of cancer-causing oil waste onto Indigenous ancestral lands, causing an outbreak of childhood leukemia and killing scores of people. In the U.S., Chevron and its lawyers lied and committed fraud in an effort to cover up this criminal behavior by bribing a witness with $2 million to falsely claim the judgment was written by the plaintiffs. The witness later admitted lying after being having been coached for several weeks by Chevron’s lawyers.
“Pate has spent about $2 billion in legal fees to try to make these facts go away, but no amount of Chevron money can erase the truth as acknowledged by scientific evidence, courts, and the naked eyes of thousands of witnesses,” added Donziger. Chevron retaliated by targeting Donziger with an avowed “demonization” campaign that involved at least 60 law firms and 2,000 lawyers in what is thought to be the most expensive corporate attack effort directed against a lawyer in history.
On the investor front, the 36 institutional investors – who represent $109 billion of assets under management – have been unsparing in their criticism of Chevron management.
“Investors lack confidence that Chevron’s executive team and board are sensitive to human rights and environmental risks,” said Pat Tomaino of Zevin Asset Management, which has organized the shareholder effort, in a recent press release. The shareholder letter to Wirth said: “One item of particular concern on our agenda is the risk posed by long-standing litigation of the acquired liability of Texaco pollution in the Ecuadorian Amazon. We have questions regarding the adequacy of management’s disclosure of the risk to shareholders from the Ecuador litigation and whether our company could benefit from exploring alternative approaches that might better protect future investor value.”
Providing an example of how Chevron misleads shareholders, Donziger cited a Chevron press release issued last week touting a virtually useless $38 million default “judgment” the company won in the tiny British territory of Gibraltar (total population 34,000) against a bank account with no funds held by some Ecuadorian villagers. (The account had been set up years ago as a trust to collect any proceeds from the judgment to be used for environmental clean-up.) The case is so irrelevant it was not even defended, although Donziger estimated Pate spent at least $50 million to hire several lawyers in London and the territory of Gibraltar just so it could get a public relations boost on the eve of the shareholder meeting.
At the same time, in the recent press release Pate ignored the most important news about Ecuador, which is that a collection action in Canada to seize $12 billion of company assets to force compliance with the court judgment is heading to that country’s Supreme Court for the second time, posing major risks for company shareholders. The Canada Supreme Court already has ruled unanimously in favor of the Ecuadorians on a jurisdictional question.
Donziger also gave other examples of how Wirth and Pate have failed to properly disclose material information to shareholders or otherwise have disrespected shareholder interests:
- Pate’s most “fundamental lie” is that he continues to claim the Ecuadorian Indigenous groups and farmer communities obtained their judgment in Ecuador by “fraud” after a Chevron witness was paid $2 million by the company and then falsely claimed the Ecuadorians bribed the trial judge, said Donziger. The witness, Alberto Guerra, later admitted he lied under oath after being coached for 53 days by company lawyers led by Randy Mastro. While the fraud narrative collapsed, Pate still tries to use it despite a criminal referral letter against the company filed with the U.S. Department of Justice.
(Here is background on Chevron’s use of fraudulent evidence, including false witness testimony; here is the criminal referral letter.)
- Chevron management’s refusal to address longstanding investor concerns regarding the costs and risks of the Ecuador litigation “show a complete disregard” for shareholders, said Simon Billenness of CSR Strategy Group, who works with company investors. “Forty percent of Chevron shareholders have voted for resolutions citing management’s mishandling of the Ecuador pollution problem,” Billenness said. “It’s time for Chevron to consider alternatives to litigation including reaching a fair and equitable settlement with the affected communities in Ecuador.”
- Pate refuses to disclose that Chevron has an estimated $15b to $25b of assets in Canada, or more than enough to pay the entirety of the Ecuador judgment. He also has failed to disclose that the company’s wholly-owned subsidiary in Canada, Chevron Canada, has been funneling billions of dollars annually to foreign governments as part of an apparent tax-avoidance or corruption scheme, which could lead to additional liability for Chevron.
- While Pate puts out a misleading press release, Canada’s powerful national indigenous federation (the Assembly of First Nations) quietly signed a joint protocol with Ecuador’s national indigenous federation (CONAIE) and the Amazon Defense Coalition of Ecuador (the grass roots community-based group from Ecuador enforcing the judgment in Canada, known by its initials FDA) to hold Chevron accountable for its environmental harm in Ecuador. Former Canada National Chief Phil Fontaine, an iconic figure in the country, has been harshly critical of Chevron while Greenpeace co-founder Rex Weyler slammed the company for engaging in a “corporate intimidation” campaign and for committing “ecological crimes” in Ecuador.
- In the same press release about Gibraltar, Pate also put out materially misleading information about other lawsuits related to the pollution judgment in Brazil and Argentina and that were dismissed on technical grounds, largely after Chevron applied political pressure and in one case engaged in corruption, Donziger added. For example, a judgment enforcement action brought by Ecuadorian villagers in Argentina was “dismissed” by the country’s Supreme Court on technical grounds after then Chevron CEO John Watson met with then President Cristina de Kirchner and subsequently invested $1.5 billion in an oil and gas field, according to local press reports.
- Pate has spent at least $2 billion of Chevron funds to defend against the Ecuadorian Indigenous groups, yet the company has lost based on voluminous scientific evidence – including 105 technical evidentiary reports – that demonstrate the company (operating as Texaco) deliberately left more than 1,000 open-air oil waste pits in the rainforest, decimating Indigenous peoples and causing an outbreak of childhood leukemia and other cancers that has killed or sickened thousands of people and could create additional liability for the company.
Donziger said that given the extent of Chevron management’s failure to address its Ecuador pollution liability, he felt compelled to correct the record with shareholders. “Neither I nor my clients in Ecuador’s rainforest are going to stand by while Chevron management puts out misleading or incomplete statements that appear designed to deceive the markets about a massive pollution problem in Ecuador that is forcing a slow and inexorable death on Indigenous peoples and farmer communities,” said Donziger.
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