On Eve of Showdown At Annual Meeting, Letter Explains How Management Puts Out False and Misleading Information
Former Sen. Sam Nunn Cited for Failing to Listen to Concerns
25 May 2009 - FOR IMMEDIATE RELEASE
Contact: Paul Paz y Miño: +1 510.281.9020 x302, email@example.com
San Francisco (May 25, 2009) – Chevron's management and Board of Directors are failing to adequately discharge their fiduciary duties relating to a potential $27 billion liability in Ecuador for environmental damage caused by Texaco when it operated an oil concession in the Amazon from 1964 to 1990, the environmental group Amazon Watch charged today in an open letter to the company's shareholders.
The six-page letter asserts that Chevron's management is providing "false, misleading, and incomplete" information about the Ecuador liability in its public filings and that Chevron's Board of Directors is "passive" and had shown no inclination to independently vet management's handling of the enormous Ecuador liability.
"Shareholders should realize that Chevron's massive liability in Ecuador can be placed squarely on the failings of its management and Board of Directors to discharge their fiduciary duties," said Atossa Soltani, the executive director of Amazon Watch, based in San Francisco.
The letter also charges that Chevron never adequately vetted Texaco before it purchased the company in 2001 for $31 billion, or just $4 billion more than its current financial exposure in Ecuador. "If this liability holds up, it will be clear Chevron's management overpaid for Texaco by billions of dollars and thereby diminished shareholder value through its own negligence," Soltani said.
Chevron's management is expected to be confronted Wednesday by leaders from Ecuador's Amazon over the Ecuador issue, said Mitch Anderson, who has monitored the trial for the organization. Attending the shareholder's meeting will be an indigenous leader whose people are severely impacted by oil pollution left by Texaco, which used a variety of sub-standard practices in Ecuador that had been prohibited at the time in the U.S.
Chevron is charged in the 15-year lawsuit with dumping more than 18 billion gallons of toxic waste into Amazon waterways and abandoning more than 900 unlined waste pits covering an area the size of Rhode Island. The pollution has caused a spike in cancer rates and decimated the cultures of various indigenous groups in the area, according to the lawsuit.
The letter asks Chevron's shareholders to consider various examples of what Amazon Watch calls Chevron management's failings in reference to the company's potential Ecuador liability:
- Chevron has failed to disclose to the SEC that it is under a fraud investigation by the New York State Attorney General to determine if it is misleading shareholders about the Ecuador liability. In it own letter to shareholders filed last week with the SEC, Chevron omitted this critical fact. The New York statute used to investigation Chevron for fraud can potentially be used to bring both civil and criminal charges.
- There is increasing evidence that Chevron's Board of Directors never adequately vetted its purchase in 2001 of Texaco for the environmental liability in Ecuador, even though it had been warned at its 2001 annual meeting – before the merger was approved – that it would face a large liability for Texaco's dumping of toxic waste.
- Chevron's Board is shirking its fiduciary duties by failing to independently assess management's handling of the Ecuador matter, which could amount to the largest civil judgment in history. Not a single member of Chevron's Board has visited Ecuador to conduct a firsthand inspection of the damage and the court process and there is no evidence the Board has sought information independent of management – the same flawed information that prompted the Cuomo investigation.
- Chevron's open letter to shareholders, dated May 20 and signed by corporate secretary Lydia Beebe, contains numerous assertions that are false, misleading, or incomplete.
"It is becoming increasingly evident that Chevron's Board is asleep at the switch," said Kevin Koenig, who is on the Amazon Watch staff in Ecuador. "There is no evidence at all they have done anything meaningful to challenge company management over what is clearly a gathering storm called Ecuador."
Koenig cited as an example the fact that former Senator Sam Nunn, who heads the Chevron Board's policy committee, refused to meet with several shareholders who had toured the Ecuador disaster.
The Amazon Watch letter urged shareholders to vote for a resolution that would require management to assess Chevron's compliance with the environmental laws in countries where it operates. The resolution, sponsored by several large public pension funds, stems from Texaco's clear failure to comply with Ecuador's environmental laws when it operated in that country, said Koenig.
An independent, court-appointed team of experts assessed damages at up to $27 billion. The total includes approximately $9 billion to cover an estimated 1,401 deaths from cancer related to oil contamination, according to the experts.
Chevron has vowed to appeal any adverse judgment, while representatives of the Amazon communities have said they intend to seek enforcement of any court decision on damages immediately given Chevron's abuse of various laws and court proceedings in an effort to delay the trial. The letter emphasizes that any court judgment in Ecuador against Chevron will be enforceable in countries where the company has assets.
The legal case was filed in 1993 in U.S. federal court and transferred to Ecuador at Chevron's request. The company at the time filed 14 expert affidavits praising Ecuador's courts as fair and adequate, although in recent months – as the evidence turned against it – Chevron began to attack the court process as biased.
Evidence at trial demonstrates that 100% of Texaco's former oil production sites in Ecuador are highly contaminated with cancer-causing toxins, according to a team of independent experts appointed by the court to assess damages.