Ecuador lawsuit backer tells Chevron judge he advised settling

A lawyer who helped fund pollution litigation in Ecuador against Chevron Corp. that resulted in a $19 billion judgment told a New York judge he became concerned about how the case was being handled and recommended plaintiffs settle.

Joseph Kohn of Philadelphia’s Kohn, Swift & Graf PC testified today in a non-jury trial in Manhattan federal court that he left the environmental case in November 2009 after the plaintiffs refused to allow his firm to take a more active role in its management. Kohn said his firm invested more than $6 million in the lawsuit, which was filed over a polluted oil drilling site in the Ecuadorean Amazon.

Chevron alleges in its case before U.S. District Judge Lewis Kaplan that the Ecuadorean plaintiffs, led by Manhattan lawyer Stephen Donziger, engaged in a racketeering scheme against the second-largest U.S. energy firm and won the judgment through fraud and bribery. Donziger denies doing anything illegal in Ecuador and claims he was merely matching Chevron’s own tactics.

“There was a frustration on our part,” Kohn said in court today under questioning by Donziger, who is representing himself alongside a team of other lawyers, in reference to discussions about financing in 2009. “Budgets were frequently not followed.”

In testimony filed with the court, Kohn said that his firm’s relationship with Donziger began to deteriorate in 2008 when the case began to take longer than expected and Chevron raised questions about possible unethical conduct. When Kohn tried to take a more active role in the case, Donziger obstructed his efforts, Kohn said in testimony filed with the court.

In November 2009, Kohn wrote to other lawyers on the Ecuadorean case recommending that they approach Chevron with a settlement. The other lawyers rejected that offer and said Donziger was handling strategy decisions, Kohn said in his written testimony.

Kohn said in court today that he responded with a letter stating that he could “no longer function as counsel.” In a follow-up meeting in 2010 in Philadelphia, Kohn told other members of the Ecuadorean plaintiffs team that they should consider transitioning to other lead legal counsel.

“I gave them my best advice that the case appeared to be running off of a cliff,” he said today in court under Donziger’s questioning.

In the underlying 20-year-old environmental dispute, Donziger and other lawyers for indigenous people in Ecuador’s Lago Agrio region sought damages for Texaco Inc.’s alleged dumping of toxic drilling wastes from 1964 until about 1992. The lawsuit continued against Chevron when it acquired Texaco in 2001.

Chevron contends that state-owned Petroecuador, a former Texaco joint-venture partner, is responsible for most of the pollution and that Texaco already paid to clean up its share.

In the racketeering case, Chevron alleges the Ecuadorean plaintiffs bribed and pressured judges who oversaw the case, including the judge who issued the $19 billion ruling, and ghostwrote a court-appointed expert’s damages report as well as the ruling itself.

The San Ramon, California-based energy company is seeking a ruling barring Donziger and his associates from trying to enforce the Ecuadorean judgment in courts around the world.

Kohn said he has waived any interest in the judgment. He agreed to put on hold plans to sue Donziger in an effort to recover the funds.