Chevron Must Clarify Risk in Ecuador Suit, Cuomo Says

By Erik Larson, Bloomberg
6 May 2009

Chevron Corp. may have misled shareholders about the risk it faces in a potential $27 billion lawsuit alleging it caused “massive” oil pollution in Ecuador, New York’s attorney general said in a letter to the company.

The second-largest U.S. oil producer said in public filings that the Ecuadorian court handling the case lacks jurisdiction, even though the energy firm had consented to the South American country’s authority in the lawsuit, Attorney General Andrew Cuomo said in a May 4 letter to the company.

Cuomo asked Chevron Chief Executive Officer David O’Reilly to clarify by May 11 the amount of risk it faces in the case, to ensure that “public statements about the litigation are accurate and complete,” according to the letter. Cuomo asked O’Reilly to estimate possible damages and disclose its reserves.

Chevron Chief Financial Officer Patricia Yarrington told investors in a May 1 conference call that the case will likely drag on for years because the company plans to appeal any ruling ordering it to pay damages.

“From a shareholder perspective I think it’s interesting to pay attention to certainly and stay on top of it, but I don’t see that there’s a financial impact coming as a result of this,” Yarrington said during the call, according to a transcript.

Consultant’s Estimate

There’s “not much factual data” behind a consultant’s estimate that the case could lead to $27 billion in damages, she said.

Kent Robertson, a Chevron spokesman, said May 1 that the judge in the case has suggested he may rule in November.

Chevron shareholders, including New York state and New York City public pension funds “have a right to know what contingencies, if any, have been taken by Chevron in recognition of a possible adverse ruling in the litigation,” Cuomo said.

The company is being sued on behalf of 30,000 Amazon-basin residents on claims that Texaco Inc., which Chevron acquired, dumped toxic waste from oil drilling in the jungle from 1964 to at least 1990. The case began in 1993 in New York and now is being handled in a court in Lago Agrio, Ecuador.

Steven Donziger, an attorney for the Amazon residents, said May 1 that the damage estimate is based on thousands of pages of evidence of contamination and its health and social effects. If the Ecuador judge awards damages, Donziger said he will ask courts there and in the U.S. to enforce the judgment and require Chevron to post a bond during any appeal.

Don Campbell, a Chevron spokesman, didn’t immediately return a call seeking comment today.

The potential damages were calculated by geologist and environmental consultant Richard Cabrera, who was appointed by the Ecuadorian court, Chevron said last year. The company has questioned Cabrera’s impartiality, claiming his statements are similar to those of lawyers for plaintiffs in the case.


To contact the reporter on this story: Erik Larson in New York at; Karen Gullo in San Francisco at

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