Financial Times Newsletter Describes Chevron Board As "Nearly Invisible"
Amazon Defense Coalition
22 February 2012 - FOR IMMEDIATE RELEASE
Contact: Paul Paz y Miño: +1 510.281.9020 x302, firstname.lastname@example.org
New York, NY – A highly-respected newsletter distributed to corporate directors has described Chevron's Board as "nearly invisible" when dealing with the risks stemming from company's $18 billion environmental judgment in Ecuador.
Tony Chapelle of Agenda Week – which is published by the London-based Financial Times – wrote: "The consequences for Chevron [of the Ecuador judgment] could be grave.... Pressure from investors is intensifying for the board to get a better handle on risk oversight, and some are suggesting that the company has not been forthcoming with disclosure about potential losses from the Ecuador case."
Chapelle reported that a number of large Chevron shareholders believe the board "just doesn’t get" the devastating impact the contamination has had upon the indigenous peoples of Ecuador, who first filed their claims more than 18 years ago in U.S. federal court. Chevron had the case shifted to Ecuador in 2002, promising the U.S. court to pay any adverse judgment subject only to narrow enforcement defenses.
In February 2011, an Ecuador trial court found Chevron liable for deliberately dumping billions of gallons of toxic waste into Amazon waterways in Ecuador that local inhabitants rely on for drinking water. Evidence demonstrated that the dumping decimated indigenous groups, caused an outbreak of cancer, and poisoned an area the size of Rhode Island. A summary of the case can be seen in this 15-minute video available here.
Chevron operated in Ecuador from 1964 to 1992 under the Texaco brand.
In the newsletter, Chapelle pointed out that Chevron comptroller Rex Mitchell last year submitted a sworn affidavit to a U.S. federal court predicting that the company would suffer "irreparable damage" if the Ecuador judgment were to be enforced against Chevron assets.
But Chapelle concluded that the company has continued to downplay the risk to shareholders, writing that ten days after the Mitchell affidavit was submitted "the risk factors section in the company’s annual report said there was no way of estimating losses from the case, and its 10-K did not mention potential irreparable harm." This contradiction also was pointed out last year in a report by the analysts Sanford Lewis and Simon Billenness.
Chevron has refused to pay the $18 billion judgment and has stripped its holdings from Ecuador, forcing the rainforest communities to explore lawful collection assets in the many countries around the world where the oil giant operates.
Quoting Arthur Miller, one of the nation's leading jurists and a former professor at Harvard Law School, Chapelle asked whether the Chevron Board should take a "higher profile" in the case.
Miller said: "...the Ecuador situation may well be an example of a case that obliges the board to be proactive. It has enormous scale, and the public policy issues concerning human life and environmental damage are very, very serious."
At least 25 pension funds with a combined $300 billion in assets under management have asked Chevron to explore a resolution of the legal case although there is no indication that the rainforest communities are open to a settlement now that they have won their judgment. In a recent letter, several funds – including one from the International Brotherhood of Teamsters – accused Chevron of exercising "poor judgment" in its management of the Ecuador litigation. See here and here.
Some of the funds have called on Chevron's Board to appoint a new director with experience in environmental risk liability. Chapelle reported: "They say such an expert might have steered the company away from the Texaco deal."
The article also draws parallels between the way Chevron has handled the environmental disaster in Ecuador, and BP’s handling of the 2010 oil spill in the Gulf of Mexico.
Chapelle wrote: "...in the wake of that incident, which had an even larger price tag, (the) BP chairman ... met with President Barack Obama and promised to make the affected residents whole. Also, within months, the BP board removed CEO Tony Hayward, whose successor promptly made safety oversight a factor in executive bonuses. By contrast, the Chevron board has been nearly invisible."
Chevron's CEO John Watson was heavily involved in what was clearly an inadequate vetting of the Ecuador liability when the oil giant purchased Texaco in 2001, said Karen Hinton, a spokesperson for the rainforest communities. As a result, Watson is trying to "sweep the Ecuador problem under the rug" by not fully disclosing the risks to shareholders in public filings as required by law, Hinton said.
"Watson appears to have a serious and growing conflict with his own shareholders over the Ecuador liability," she said.