Ethical Performance
inside intelligence for responsible business


Chevron fights on over $19bn pollution judgement

November 2013

A former Ecuadorian judge has testified that he and a colleague were bribed to award $19bn (£11.7bn, €13.7bn) to villagers who claimed Texaco oil operations polluted the Amazon rainforest for nearly 30 years.

 Judge Alberto Guerra declared to a New York court that he was paid thousands of dollars by the villagers’ lawyers to rule in their favour and that his fellow judge in the jungle courthouse, Nicolas Zambrano, was promised $500,000 from the award.

Guerra claimed he was paid yet more for routinely ghost-writing Zambrano’s judgments. Zambrano denies all allegations.

The bribes, Guerra said, were paid as deposits into his bank account or in $20 and $50 bills in envelopes.
The Ecuadorians won the award after claiming that Texaco discharged 18 billion gallons of formation water into the forest and its rivers, causing health problem including cancer and birth defects.

Chevron, which now owns Texaco, has brought the case in New York accusing the Ecuadorians’ Harvard-educated lawyer Steven Donziger of fraud under the Racketeer Influenced and Corrupt Organisations Act, which was introduced in 1970 to combat mob conspiracies.

The case, featuring accusations and counter-accusations, is expected to last several weeks. Anti-Chevron demonstrators have lined up outside the court.

Chevron says Donziger and his associates lobbied the Ecuadorian judges and intimidated them by inciting protests. Randy Mastro, one of Chevron’s lawyers, has said Donziger could receive $1.2bn of the £19bn award.
Donziger claims his tactics were lawful, and his lawyer Richard Friedman compared him to celebrated civil rights leaders. Friedman told the court: “Like Thurgood Marshall, like Ralph Nader, like a host of human rights lawyers before him, Mr Donziger understood you need legal and social change.”

Donziger has responded by accusing Chevron of bribing Guerra with at least $326,000 for a favourable decision. Guerra maintains Chevron paid him for computer equipment and for gathering evidence, and Chevron said it relocated Guerra’s family and paid him $38,000 for his evidence, $10,000 a month for living expenses and $2,000 for housing.

Chevron’s answer to the original pollution charge is that Texaco cleared its waste at a cost of $40m before handing over the oilfield to the state-owned Petroecuador and quitting the country. It blames Petroecuador for most of the pollution.

It maintains Texaco was released from any liability anyway by agreements with Ecuador in the 1990s. An arbitration panel in The Hague ruled the agreements protected Chevron from collective action claims.

The hearing, before US District Judge Lewis Kaplan, is the latest in a string of cases between the villagers and Chevron.

In 2011 the Ecuadorian court awarded $18bn to the village of Lago Agrio, plus $1bn to cover fees. However, the villagers cannot collect the award in Ecuador because Chevron now has few assets and no operations there.
Chevron then obtained an injunction from Judge Kaplan stopping payment through the US courts but the Second US Circuit Court of Appeals reversed that ruling.

Chevron is now asking Kaplan to rule that Donziger’s case is fraudulent so that it can challenge the Ecuadorians’ right to pursue the $19bn award in the US. If it wins, it will sue Donziger separately for tens of millions of dollars to cover some of its legal expenses.

Darren McKinney, a spokesman for the American Tort Reform Association, observed: “Companies are watching the Chevron suit because they’re sick and tired of unfair mass tort verdicts. Chevron is providing a model for how to fight back.”

Chevron | Global | Corporate governance


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