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January 06, 2012
Ecuadorian Court Upholds $18 Billion Judgment Against Chevron
    by Robert Kropp

In addition to upholding the judgment for environmental damages in Ecuador's Amazon rainforest, the court also criticized Chevron's efforts to undermine the trial.

An Ecuadorian appeals court on Tuesday upheld an $18 billion judgment against Chevron for environmental damages to the Ecuadoran Amazon rainforest. The judgment, which was doubled after Chevron refused to issue a public apology, is believed to be one of the largest environmental verdicts in history.

The case was originally filed against Texaco in US Federal Court in 1993, charging the company with dumping billions of gallons of waste byproduct from oil drilling in the rainforest, and burning hundreds of millions of cubic feet of gas and waste oil into the atmosphere. Wastewater laden with toxins was dumped into rivers and streams that local inhabitants relied on for their drinking water, bathing, and fishing, according to the plaintiffs.

Chevron bought Texaco is 2001 and the case was transferred to Ecuadorian courts in 2002, over the objections of the plaintiffs. A ccording to Pablo Fajardo, a human rights activist and lead counsel for the 30,000 indigenous people and farmers who were plaintiffs in the case, Chevron promised as a condition of the transfer "to submit to jurisdiction in Ecuador and abide by any final judgment in the trial."

In support of its request that the case be transferred to Ecuador, "Chevron's predecessor company Texaco filed numerous sworn affidavits in U.S. federal court from its own lawyers and experts praising Ecuador's courts as independent, impartial and competent," according to the Amazon Defense Coalition.

In February, 2011, an Ecuadorian trial court found in favor of the plaintiffs, and awarded damages totaling $18 billion. According to a repor t authored by Simon Billenness and Sanford Lewis, "This judgment is comparable in size only to BP's promised $20 billion fund to compensate victims of the 2010 Gulf of Mexico oil spill."

Despite its agreement to abide by the decision of the Ecuadorian court, Chevron continued to challenge the court's jurisdiction. In Tuesday's decision, the three appellate court judges found that Chevron had "staged incidents that encumbered the process of the trial." The appellate panel also upheld a decision that Chevron should pay the costs of the plaintiffs due to the "flagrant bad faith it exhibited in the case."

"The court recognized all the political influence and lobbying that Chevron did to keep the case from going forward," Fajardo said in a conference call following the ruling. "But despite all the efforts of Chevron, we won."

In a statement issued in response to the ruling, Chevron said, "Today's decision is another glaring example of the politicization and corruption of Ecuador's judiciary that has plagued this fraudulent case from the start."

"Chevron does not believe that the Ecuador ruling is enforceable in any court that observes the rule of law," the statement continued.

In fact, in a letter to the US House Judiciary Committee in December, Fajardo and a second attorney for the plaintiffs argued that Chevron, along with the US Chamber of Commerce, attempted to mislead Congress about the company's environmental liabilities in Ecuador.

Instead of waiting for the judgment of the appellate court, the letter stated, Chevron engaged in "a rank combination of forum-shopping and bait-and-switch, and a textbook example of abusive litigation that undermines the credibility of all US claimants before the world community."

A report by the Chamber warning of abusive foreign court judgments was authored by William Thomson, a lawyer who represents Chevron in its attempts to undermine the Ecuador court case. Karen Hinton, the US spokesperson for the Ecuadorian plaintiffs, said, "The Chamber's so-called 'report' on foreign judgments not only presents skewed data designed to shield American companies from liability for their misconduct, but also is being used as a marketing tool by William Thomson to attract clients to his law firm."

Chevron's continuing refusal to acknowledge its environmental liabilities in Ecuador has also raised concerns among shareowners that the company is deliberately withholding material information from them. As the report by Billenness and Lewis observed, Chevron's Deputy Comptroller Rex Mitchell said that a seizure of the company's assets as payment of its liabilities in the lawsuit "would disrupt Chevron's supply chain and operations," and "damage Chevron's business reputation as a reliable supplier."

As a result of the discrepancies in Chevron's disclosures, Trillium Asset Management asked the Securities and Exchange Commission (SEC) in May, 2010, to review "whether Chevron has appropriately disclosed to shareholders the scope and magnitude of financial and operational risk from a recent adverse legal judgment in Ecuador."

"Chevron is entitled to disagreements with the plaintiffs about points of contention in the lawsuit; indeed, that is why a lawsuit exists," the letter continued. "However, some of the preceding statements, taken in aggregate, could create the misleading perception that the Ecuadorian lawsuit is fraudulent and without legal merit. The reality is that these are disputed issues on which Chevron holds a position, which is not the same as the position held by the plaintiffs or the Ecuadorian court."

Shareowners have already filed several resolutions for the 2012 proxy season, addressing what Billenness described as "the bitter fruits of poor corporate governance" demonstrated by Chevron in its handling of the case.

According to a Chevron spokesperson, the company is analyzing the appellate court ruling and has not decided if it will appeal the case to Ecuador's Supreme Court.

"Chevron is guilty of extraordinary greed and criminal misconduct that has created a humanitarian crisis in Ecuador that puts thousands of people at risk," Fajardo said. "Whether people live or die depends largely on whether Chevron meets its responsibility to remediate a problem it created."

A 2004 study reported "a significantly higher overall incidence of cancer in both men and women…where oil exploitation had been going on." The study also found increases in hematopoietic cancers in children.

"Chevron broke the rainforest," Fajardo added. "It now must fix it."


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