May 20, 2013
Chevron Continues to Misrepresent Ecuador Judgment, Updated Report Says
by Robert Kropp
Attorney Graham Erion updates his 2012 report on misrepresentations made by Chevron to investors
regarding the $19 billion judgment against it for environmental destruction in Ecuador.
In January, when I wrote a series of articles entitled Top Sustainable Investment Stories of 2012,
I reserved the fifth and final piece for the disastrous year experienced by Chevron for its poor
corporate governance in addressing the material implications of the $19 billion judgment against it
for environmental destruction in Ecuador.
2012 began with a court in Ecuador
upholding the judgment that Chevron persists in framing as fraudulent. Then, in October, after the
US Supreme Court effectively upheld the largest environmental judgment in history by refusing to
hear Chevron's bid to overturn it, plaintiffs in the caseórainforest villagers living in the
Ecuadorian Amazonówon a ruling in Ecuador affirming their right to seize the $200 million of assets
that Chevron has not yet removed from the country.
In the face of multiple legal
decisions against it in courts in Ecuador and the US, Chevron's management continued to publish
"false or materially misleading information regarding its $18.1 billion judgment in Ecuador for
causing environmental damage," according to a report issued last May by Graham Erion, an attorney
for the plaintiffs in the case. Erion's report helped to further galvanize sustainable investors,
who wrote to the Securities and Exchange Commission (SEC), requesting that it launch an
investigation into "evidence that the company is violating securities laws by repeatedly making
misrepresentations and material omissions regarding its adverse judgment in Ecuador of $18.1
billion for despoiling the environment."
"Chevron's continued failure to disclose these
risks is potentially harmful to investors and the integrity of the financial markets that your
agency is charged with protecting," the investors continued.
One year after the initial
publication of Erion's report, what has Chevron learned from its disastrous year? Not much,
according to an updated
version of the report. Instead of acknowledging the materiality of the judgments in financial
filings, in December the company issued subpoenas against Trillium Asset Management, Simon Billenness of the Unitarian Universalist Association (UUA), and others, requesting all documents pertaining
to shareowner action, "including but not limited to CHEVRON shareholder resolutions."
Meanwhile, "CEO John Watson and his senior management have chosen to keep their shareholders
and the financial markets in the dark by misrepresenting basic facts in its public disclosures,"
Erion's updated report charges, "perhaps to artificially prop up its share price, or, in the case
of John Watson, to keep his job."
Among the most persistent of Chevron's
misrepresentations, according to Erion, include misleading investors regarding the risks of
enforcement actions to company operations and business relationships; refusing to disclose
quantifiable assets at risk of seizure; misrepresenting court records in the case; and continuing
to claim the lawsuit is fraudulent, "despite overwhelming evidence submitted by the company at
trial that pointed to its own guilt."
"The cumulative list represents a stunning portrait
of a company that ignores its obligation to provide full, true and plain disclosure of material
facts as required by law," the report argues. "Given the need to protect the investing public from
securities fraud, any of the above examples should be worthy of investigation by the Securities and
On May 29th, Chevron's shareowners will gather at the company's
annual general meeting to vote on a number of resolutions addressing corporate governance. The New
York State Common Retirement Fund, along with co-filers Amnesty International USA, Trillium, and Zevin Asset Management, are calling for a board
member with environmental expertise. The investors cite the Ecuador case as one reason for
supporting their resolution.
Citing the "unprecedented attacks" on shareowners by
Chevron's request for subpoenas, Newground
Social Investment has filed a resolution requesting that "the required ownership threshold for
calling a special meeting is lowered to holder or holders of not less than 10% of all the shares
entitled to vote."