By Adam Klasfeld, Courthouse News Service
31 March 2014
Lago Agrio, Ecuador – An economist who studies and writes about what he considers corporate con jobs said he thinks Texaco got away with one during its time drilling the Ecuadorean Amazon, speaking on a plane flying over the fog-shrouded rivers and forest canopy of Ecuador's vast, oil-rich Oriente region.
A professor at the University of Missouri, Kansas City, William Black cut his teeth in white-collar crime while working as a regulator in 1989 when the Savings and Loan scandal rocked Washington.
The economist caught the ire of Lincoln Savings and Loan Association chairman Charles Keating Jr. when he exposed notes of a meeting between the banker and five U.S. senators accused of accepting campaign contributions in exchange for preferential treatment.
Keating infamously wrote, "get Black – kill him dead," in a memo reproduced in the book "Unsung Heroes."
"The speaker of the House referred to me as 'that red-headed S.O.B.' and personally tried to get me fired," Black said, referring to the Texas Democrat Jim Wright.
My hair "got much greyer during this whole period," Black quipped.
In his book "The Best Way to Rob a Bank Is to Own One," Black focused on frauds committed by those who "control" state or corporate entities, like CEOs and CFOs.
After studying the sprawling litigation over Texaco's role in oil contamination in Ecuador, Black shared his view that Texaco engaged in "classic and indeed clever control fraud" by enacting a policy of making roads out of degraded crude oil.
"The reality is that you're illegally disposing of waste in a way that's going to be incredibly toxic to the environment and hurt humans and animals as well, but you sell it to them as, 'I am doing you a favor,'" he said.
When asked about this practice, the Latin American spokesman for Texaco's parent said there was nothing improper about making roads this way.
"Heavily degraded crude from reserve pits was in some cases laid on roadways in the Oriente at the request of local authorities to keep down dust," Chevron spokesman James Craig said. "This was a common practice at the time, including in many rural areas of the United States, and is still done in some places today."
Black noted, however, that the practice "doesn't work anywhere near as well in a place that has enormous amounts of rain."
The oil business is not new to Black either, having worked as a lawyer for Standard Oil of Ohio. Around the time of Exxon's infamous Valdez oil spill on March 24, 1989, Sohio faced unrelated litigation involving problems with the Trans Alaska Pipeline, Black said.
Black's visit to Ecuador this month marked his fifth since the heat-up of litigation between residents of the Amazon rainforest and Texaco's successor Chevron. It was his first visit, however, to Lago Agrio, a rainforest oil town named after Texaco's former headquarters in Sour Lake, Texas.
During his first visit, Chevron already had alleged that their Ecuadorean opponents were extorting them, and they prevailed on such claims in a New York federal court this month.
Chevron insists that responsibility for remaining cleanup of the region belongs to the state-run Petroecuador under a 1995 agreement with a prior Ecuadorean administration.
On a tour of the Aguarico 4 oil pit near Lago Agrio, a biologist at Ecuador's Ministry of the Environment countered that on Texaco alone drilled here before the well dried up. He claimed that the Ecuadorean government could not remediate the site under the 1995 agreement because it had to preserve evidence for the Lago Agrio case.
Chiming in on this dispute, Black said that visiting the site helped him appreciate what he described as "cover-up" by Texaco. He said that he heard for the first time from Ecuadorean officials that representatives of Texaco allegedly told the local population about the medicinal effects petroleum had on the human body.
Multiple residents from the region shared the same story on a recent "Toxic Tour" of the Amazon.
Though Chevron spokesman Jim Craig said he had also heard of such reports before, he chalked up to "mythmaking" in a phone interview.
"We have never seen any evidence to support this allegation, yet through endless repetition this unsubstantiated claim has been used by the LAPs' lawyers and representatives to generate sympathy and public support for their fraud," Craig wrote in an email, using the abbreviation for Lago Agrio plaintiffs.
Craig added that the racketeering determinations in the New York decision represented the "only fraud in the Oriente."
Black said that proof of a policy to misinform Amazon residents of crude oil's supposed health benefits would bring a "level of malignancy and pathology" to Texaco's conduct.
"If those things are true, then you get rid of any innocent explanation that 'It's an earlier time' and 'People weren't as sensitive to the technology," because you only do those things if you know they're a problem," he said.