$27 Billion Liability in Ecuador “Poorly Handled” By Chevron’s Top Management, Analyst Tells Leading Trade Publication
Amazon Defense Coalition
27 May 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
New York, NY (May 27, 2009) – Platt's Oilgram News, the leading trade publication for the oil industry, is reporting that "momentum seems to be growing against Chevron" in the long-running environmental case brought by Amazon communities in Ecuador that could lead to a $27 billion judgment later this year.
The article, published on Tuesday under the headline "Concerns Grow in Chevron-Ecuador Suit", quotes a leading oil industry analyst, Fadel Gheit, as saying the Ecuador case "is a mess in the ground and in public opinion" and has been "very poorly handled" by Chevron. The $27 billion liability is expected to be a major topic today at Chevron's annual meeting, with attention focused on how Chevron's Board of Directors had not independently vetted management's handling of the matter.
The lawsuit, being held in Ecuador at Chevron's request, will determine if Chevron will be forced to pay for a clean-up of the more than 18 billion gallons of toxic waste dumped by Texaco (now Chevron) when it operated an oil concession in the Amazon from 1964 to 1990. A team of court-appointed experts has assessed damages at up to $27.3 billion and a decision is expected later this year.
Several scientific experts consider the disaster to be the worst oil-related contamination on the planet. A team of U.S.-based reviewers found that the damages number is consistent with the cost of other large environmental clean-ups around the world.
Gheit, who works for Oppenheimer, was quoted in reference to Chevron's Ecuador liability as saying: "I think the longer it lingers the more it will cost. I would settle and cut my losses. Time is not on their side. The sooner they resolve it the better off shareholders are. I don't think it will cost $27 billion, but [it] will certainly cost a hell of a lot more than $1.8 billion" that Chevron has set aside for liabilities.
The article also quoted Barclay's Capital analyst Paul Cheng as saying, in reference to the Chevron liability, that "we would expect that any negative ruling [in Ecuador] would be damaging to the stock's near-term performance, and we would be an aggressive buyer to take advantage of any weakness."
Platts Oilgram News is widely recognized as the standard publication chronicling the oil and gas energy sector and its published rates are used as a benchmark within the industry. The article reported on concerns about Chevron being raised by the New York attorney general and public and private funds.
The article quotes a letter sent to Chevron by New York Attorney General Andrew Cuomo saying "this office has broad authority to investigate and pursue allegations of financial fraud and material misstatements in connection with publicly traded companies." Cuomo said he was looking into "Chevron's characterization of available legal defenses" and asked Chevron to estimate "possible damages if found liable ... [and] what if any reserves have been established in contemplation of such damages being assessed against Chevron."
The Cuomo investigation is being brought under New York's Martin Act, which allows for both civil and criminal liability for fraud. Several New York shareholders had requested the probe to determine if Chevron is complying with securities laws.
Leaders from Ecuador's Amazon region are expected to attend the shareholder's meeting today and confront Chevron CEO David O'Reilly over the company's allegedly misleading assertions about Ecuador.