ChevronToxico

$19B Ecuador Liability Puts Chevron CEO on Hot Seat at Annual Meeting Tomorrow

Amazon Watch

Amazon Watch
28 May 2013 - FOR IMMEDIATE RELEASE
Contact: Paul Paz y MiƱo: +1 510.281.9020 x302, paz@amazonwatch.org


Interviews available with Ecuadorian community member & Amazon Watch

Oakland, CA – Facing growing unrest from shareholders and environmental activists and forced to testify about his own role in the $19 billion Ecuador case, Chevron CEO John Watson will be under enormous pressure tomorrow at the company's annual meeting where rainforest indigenous villagers and their investor allies plan to confront him over his company's toxic dumping in the Amazon.

In a stunning rebuke to Watson, a New York federal judge earlier this month ordered that he sit for a sworn deposition to be taken by lawyers for the villagers and one of their representatives, New York-based attorney Steven Donziger. (See the judicial order here and a Reuters article here.)  And just last week, the environmental group Amazon Watch launched a pressure campaign to oust Watson as CEO due to his failure to deal with court orders that the company clean up the Ecuador disaster.

Watson likely will have to answer questions about his own role in the case, including suspicious payments from Chevron officials for witness testimony, among other hot-button topics that the villagers say prove Chevron committed crimes in Ecuador. Watson also orchestrated Chevron's purchase of Texaco, giving him intimate knowledge of the liability that has now hamstrung the company in Argentina, threatens access to new reserves, and ballooned into a $19 billion liability. The deposition of Watson had been furiously opposed by Chevron's lawyers at Gibson Dunn & Crutcher, who are facing their own ethical challenges in defending the oil giant's toxic dumping in Ecuador. (See this court ruling and this blog post.)

At the Chevron annual meeting, scheduled for May 29 at company headquarters near San Francisco, Watson will also be confronted by Servio Curipoma, a 39-year-old cacao farmer from Chevron's former concession area. Curipoma was witness to the company's egregious oil extraction methods that dumped oil waste on the roads and left behind hundreds of unremediated covered oil pits. Curipoma lost both his parents and a sister-in-law to cancer doctors have attributed to local drinking water contaminated by toxic crude waste.

Watson also will try to beat back two shareholder resolutions that directly challenge his mishandling of the Ecuador liability. Currently, Chevron faces enforcement actions targeting billions of company assets in Argentina, Canada and Brazil (see here for Canada, here for Brazil, and here for Argentina) and has suffered a series of devastating courtroom setbacks, including one in the U.S. Supreme Court, which prevented the oil giant from blocking international enforcement efforts.

The meeting also comes at a time when the highest-ranking official of the Catholic Church in the Amazon region of Ecuador provided firsthand testimony to the Argentina enforcement court that called out Chevron for trying to cover up its pollution in Ecuador. 

"For more than 30 years we have been witnesses to grave and profound environmental damage that continues to this day," said Monsignor Jesus Esteban Sabada, Auxiliary Bishop of Aguarico, Ecuador, an area where Chevron's predecessor company extracted oil from 1964 to 1992. Bishop Sabada sent a letter to the Argentina enforcement court, the text of which is available here.

The Financial Times also reported two weeks ago that Chevron was forced to "rethink" a planned $1.5 billion investment in a huge gas field in Argentina because of the enforcement action stemming from the Ecuador judgment. Earlier, a Chevron official has testified that the enforcement actions could cause "irreparable harm" to the company's global operations. The enforcement actions stem from an Ecuador court finding that Chevron dumped billions of gallons of toxic waste into the Amazon rainforest, decimating indigenous groups and causing an outbreak of cancer and other oil-related diseases. A summary of the judgment, based on a 220,000 page trial record and more than 64,000 chemical sampling results, can be found here. A video about Chevron's human rights abuses in Ecuador can be viewed here while a 60 Minutes report on the legal battle – which documents how Chevron installed pipes to deliberately run oil sludge into streams – can be viewed here.

Watson has fired up shareholders by ordering company attorneys to issue subpoenas to several shareholder critics, alleging they are in a "criminal conspiracy" with the Ecuadorian villagers who won the judgment against the company. New York Times columnist Gretchen Morgenson called the Chevron counterattack against its own investors "remarkable" in the annals of shareholder activism. (See Morgenson's article here.)

Last year, a resolution critical of Chevron management for the Ecuador liability received a whopping 38% of the vote from shareholders representing a combined $73 billion worth of Chevron stock. In addition, 40 institutional investors representing $580 billion in assets sent Watson a letter asking him to settle the case.

This year, the two shareholder resolutions that cite the Ecuador liability as a driving factor call for Chevron to appoint a director with environmental expertise and to lower the threshold needed to hold a special meeting.  Just last week, 14 different shareholder groups asked the Securities and Exchange Commission to investigate the company for misleading investors. Their letter can be viewed here

Watson also faces these additional problems related to the Ecuador liability:

  • Conflict of interest. Shareholders and activists say Watson should step down as Chevron CEO because of his failure to properly vet the Ecuador liability when the company purchased Texaco for $31 billion in 2001. Watson was a key driver behind the controversial transaction even though Amazon Watch specifically warned the company about the size of the liability.
  • Deceit of shareholders. Watson also has been accused of lying to shareholders and the markets about key facts in the case, according to a recent report prepared by a Canadian securities lawyer. Last year, several shareholders and a U.S. Congresswoman have asked the SEC to investigate Chevron for violating its disclosure obligations under U.S. law.
  • Use of Kroll to spy on Chevron adversaries. The order from Judge Francis also requires that an official from the U.S. investigative services company Kroll, which essentially functions as a private surveillance agency for Chevron on the Ecuador case, sit for a deposition. Kroll operative San Anson was caught trying to bribe journalists to spy on the plaintiffs, while evidence surfaced the company has been involved in payments to judges in Ecuador and espionage against Donziger and his family, who live in Manhattan.
  • Cash for witness testimony. Under Watson's leadership, Chevron used Miami lawyer Andres Rivero to offer a suitcase full of cash to a former Ecuador judge in exchange for favorable testimony. Chevron later admitted it paid the judge more than ten times his annual salary and moved him to the U.S., where it is helping him obtain political asylum even though he is an admitted criminal.
  • The Diego Borja bribery scandal. Under Watson's tenure, Chevron admitted that it paid former employee Diego Borja more than $2 million to try to sabotage the Ecuador trial by entrapping a sitting judge in a fake bribery scandal. The move backfired, but the company still moved Borja to the U.S., where it pays him a substantial salary – the plaintiffs call it "hush money" – with no indication he is working.

As for enforcement actions, Watson faces a series of growing headaches. In early November, a court in Argentina ordered that the company's assets be frozen while independent analysts are beginning to take notice that Chevron faces significant litigation problems around the world related to the Ecuador judgment. Chevron has $2 billion worth of assets in Argentina, and approximately $80 million of in cash is already in a court escrow account pending resolution of the enforcement action.

While Chevron recently won a temporary stay of the enforcement action in Canada on narrow technical grounds, the court found that the Ecuadorians established jurisdiction over Chevron subsidiaries that control roughly $15 billion worth of assets. The stay is now on appeal, with a decision expected in a few months.

In Brazil, where Chevron has an estimated $4 billion in assets, the Ecuador enforcement action is going through a streamlined process in the country's highest court, with a ruling expected sometime in 2014. Chevron also faces a lawsuit from Brazilian authorities over its spill off the coast of Rio de Janeiro in 2011.

On a more personal level, the indigenous communities in Ecuador plan to confront Watson directly at the annual meeting. In past years, Watson has turned off the microphones of the Ecuadorians to silence them.

"Chevron needs to put its pants on, start acting like a grown up and accept responsibility for its mess in Ecuador," Watson was told last year by Luz Trinidad Andrea Cusangua, an Ecuadorian who traveled from the rainforest to speak at the 2012 annual meeting.

Two years ago, Chevron's annual meeting in Houston erupted in chaos when Watson ordered five shareholder critics arrested as they confronted the company about its human rights abuses in Ecuador. At the time, Watson was accused of "losing his head" by Rainforest Action Network's Maria Ramos. Last year, Watson prevented two villagers from showing a video of the company's damage to their ancestral lands and then had security officials block them from passing out copies of the video to shareholders.

"Since becoming CEO Watson has led Chevron further down a dismal path – one where its international reputation is that of a corporate criminal on the run from justice," said Paul Paz y Miño, a director at Amazon Watch, which has been monitoring the Ecuador liability for a decade.

"At any other company with an independent Board of Directors that adhered to proper ethical standards, Watson probably would have been fired by now," added Paz y Miño.

For more background on the case, see this update prepared by Fenton Communications.

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