Chevron wins US ruling calling Ecuador judgment fraud

By Christie Smythe
Bloomberg News

Chevron Corp. won a U.S. judge’s ruling that a multibillion-dollar pollution judgment issued in Ecuador was procured by fraud, making it less likely that plaintiffs will collect the $9.5 billion award.

U.S. District Judge Lewis Kaplan in Manhattan said today that the second-largest U.S. oil company provided enough evidence that plaintiffs secured the 2011 judgment on behalf of rain forest dwellers in the country’s Lago Agrio area by bribing a judge and ghostwriting court documents. Kaplan oversaw a seven-week nonjury trial over Chevron’s allegations.

“The decision in the Lago Agrio case was obtained by corrupt means,” Kaplan said in the opinion. “The defendants here may not be allowed to benefit from that in any way.”

Chevron, based in San Ramon, California, was ordered to pay $19 billion to a group of farmers and fishermen by the Ecuadorean court. The award was reduced to $9.5 billion on Nov. 12 by the Ecuadorean National Court of Justice, the nation’s highest tribunal.

The Ecuadorean villagers, and activists working on their behalf, argue the oil producer should be held financially responsible for pollution of the Amazon rainforest by Texaco Inc. from the 1960s through the early 1990s. Chevron, which bought Texaco in 2001, claims the company already paid $40 million to clean up its share of the drilling contamination.

Pending Cases

The Ecuadoreans have sued Chevron in Brazil, Argentina and Canada, where the company has assets that can be seized. The Court of Appeal for Ontario ruled in December that the 47 villagers have the right to pursue Chevron’s Canada assets. The other cases are pending.

In its racketeering case before Kaplan, Chevron alleged that a U.S. lawyer leading the Ecuadoreans, Steven Donziger, and members of his team engaged in “repeated acts of fraud, bribery, money laundering” and obstruction of justice in pursuit of a multibillion-dollar payout.

The company said that Donziger’s team bribed a judge who issued the decision with a promise of $500,000 from the proceeds, ghostwrote the ruling and arranged to have their own damages estimate submitted as independent findings to the court.

Aggressive Tactics

“This trial record proved what Chevron has been saying all along — that Donziger, who professes merely to be a lawyer representing clients, is, in reality, a liar, con man, and criminal who has headed a racketeering enterprise targeting Chevron as its deep-pocketed victim,” Chevron lawyers said in a memorandum filed Dec. 23.

Randy Mastro, a lead lawyer for Chevron, didn’t immediately respond to a request for comment today. Donziger said he didn’t have an immediate comment and plans to release a statement later today.

Donziger has argued that he did nothing wrong in Ecuador and that any aggressive tactics he may have used were no worse than Chevron’s actions. Han Shan, a spokesman for the plaintiffs, described them as being “out-gunned on a profound level” against the oil company.

“The court assumes there is pollution in the Oriente,” Kaplan wrote, referring to the area of Ecuador where drilling occurred. “The issue here is not what happened in the Oriente more than twenty years ago and who, if anyone, now is responsible for any wrongs then done. It instead is whether a court decision was procured by corrupt means, regardless of whether the cause was just.”

Trial Lawyers

During the trial, Chevron was represented in the courtroom by 10 lawyers, including seven partners, from Gibson Dunn & Crutcher LLP. Donziger’s team included a group of volunteers and trial lawyers Zoe Littlepage and Richard Friedman, who told Kaplan they were working for discounted fees.

Appellate lawyer Deepak Gupta joined Donziger’s team after the trial concluded. Donziger has said he intends to challenge any judgment issued against him by Kaplan.

Chevron sought to show that its adversaries weren’t lacking in resources, eliciting testimony that they received more than $30 million from sources such as a Pennsylvania trial lawyer, an Internet gambling entrepreneur who was friends with Donziger, and specialty financing firms.

One of the investment firms, Burford Capital (BUR) Ltd., backed out of a commitment to fund the litigation after learning about fraudulent activities by Donziger, Chevron alleged.

Some celebrities supported the campaign against Chevron, including Trudie Styler, who founded the Rainforest Foundation with her husband, musician Sting, and helped to start a project to make clean water available to forest inhabitants in Ecuador. Styler attended some of the New York court proceedings, bringing her husband to watch Donziger testify.

Voiced Support

Actress Mia Farrow and actor Danny Glover also voiced support for the campaign, and the case was featured in a documentary, “Crude,” by filmmaker Joe Berlinger. Chevron won access to hundreds of hours of outtakes from the film, which it contended showed Donziger acting inappropriately.

The company said in a Jan. 21 brief filed with the Manhattan court that it spent more than $10 million gathering evidence to build the racketeering case against Donziger.

Donziger, a Harvard Law School graduate, joined the case in a junior role in the late 1990s and gradually rose to a position as a strategist and fundraiser. He contends that Ecuador-based lawyers are now in charge of the case.