By Graham Erion, Lawyer for the Rainforest Communities
This memo presents evidence and analysis that Chevron's management is publishing false or materially misleading information regarding its $18.1 billion adverse judgment in Ecuador for causing environmental damage. Chevron has an obligation to immediately acknowledge the reality of this loss contingency to the company's investors so informed decisions can be made about the material financial risks Chevron faces. This memo relies heavily on legal and factual information available to Chevron and to the lawyers who represent the rainforest communities who won the judgment. However, this material has not been readily available to the investing public, which relies on Chevron for honest and complete disclosure of all the material information related to the company. Investors likely have not reviewed the 188-page trial court decision in Ecuador, the 220,000-page trial record, or the various appellate decisions affirming the judgment or the decisions from the Second Circuit Court of Appeals in the United States rebuking Chevron for the manner in which it sought to block enforcement of the judgment.
It must also be noted that Chevron's management team and Board of Directors appear to suffer from conflicts of interest regarding the Ecuador litigation. All are compensated to some degree or another by the company's short-term financial performance and thus have an interest putting off the Ecuador liability to another day. Further, Chevron CEO John Watson played a vital role in the Chevron-Texaco merger in 2001. It now appears that at the time of the merger Chevron did not adequately vet Texaco for its enormous Ecuador environmental liability and thus overpaid significantly for the company.