In 2016, Chevron Faces Potential "Litigation Catastrophe" Over Ecuador Pollution Liability

Contact: Paul Paz y Miño: +1 510.281.9020 x302,

New York, NY – In 2016, Chevron faces a potential litigation catastrophe over its $10 billion "Amazon Chernobyl" pollution liability as rainforest villagers step up efforts to force company assets into receivership to pay for a court-ordered clean-up of what experts consider to be one of the worst oil-related environmental disasters in history.

Years of scorched-earth litigation against the villagers employed by Chevron CEO John Watson not only has failed to derail the case despite an estimated $2 billion in costs to the company, but has created even more severe tests for the oil giant in the coming year. Among them:

  • Chevron must grapple with evidence that the company's star witness in its retaliatory "RICO" case admitted lying under oath and might be busted for perjury;

  • The company must deal with continued fallout from an internal whistleblower video disclosed by Amazon Watch showing Chevron scientists defrauding the Ecuador court;

  • Chevron must try to overcome a stinging feat when the Canada Supreme Court ruled in a blockbuster 7-0 decision that the villagers could try to seize billions of dollars of company assets in the country to pay for their clean-up;

  • A unanimous 5-0 decision from Ecuador's Supreme Court in favor of the villagers makes the judgment enforceable against Chevron assets around the world, posing huge risk to company shareholders; and,

  • The release of a stunning new evidentiary report from prominent American scientists has again validated the overwhelming evidence that Chevron (operating as Texaco) systematically dumped billions of gallons of toxic waste into streams and rivers in the rainforest region, decimating indigenous groups and causing an outbreak of cancer. (For a summary of the overwhelming evidence against Chevron, see here.)

"All told, 2015 was a disastrous year for Chevron in the Ecuador pollution case and 2016 might be even more challenging for the company as it tries to dig out of its ever-deeper hole," said Paul Paz y Miño, a director with the environmental group Amazon Watch that for years has been battling the oil giant over its toxic dumping in Ecuador.

The adverse court decisions against Chevron, combined with the unraveling of Chevron's star witness, could lead to a "litigation catastrophe" for the company in Canada, said Paz y Miño. Chevron maintains an estimated $15 billion in assets in the country that the villagers are trying to seize.

"Make no mistake about it, Chevron is now moving backwards in its abusive campaign to evade the Ecuador judgment despite spending massive sums of shareholder money on an unethical, illegal, devious and ultimately futile jurisdictional shell game," said Paz y Miño. "Rather than clean up the toxic waste his company dumped, CEO John Watson instead continues to wage war on the very people he poisoned."

Luis Yanza, a Goldman Prize winner and a leader of the dozens of communities that won the judgment, said, "We have won the litigation and held Chevron accountable. We are now making huge progress toward collecting the judgment against a company that is on the run from the law. We hope that 2016 will be the year that courts finally force Chevron to comply with its legal obligations."

Going Backwards: Summary of Chevron's Setbacks in Ecuador Case

Here is a summary of some of the major challenges facing Chevron in 2016 from the Ecuador judgment as the company continues its attacks on rainforest villagers:

In Canada, Chevron faces a potential litigation catastrophe that could put billions of dollars of company assets into receivership. In 2015, the Canada Supreme Court ruled that the villagers could try to seize company assets to enforce their judgment. Chevron has an estimated $15 billion of oil fields, refineries, office buildings and other properties in the country. (For background on Chevron's difficulties in Canada, see here.) Increasingly desperate and with narrowing options, Chevron enlisted Canadian national and convicted U.S. felon Conrad Black to defend the company's arguments.

Chevron's fake narrative that it was the victim of a "ghostwritten" judgment in Ecuador has been proven false. A new independent forensic analysis by leading computer expert J. Christopher Racich definitively proves that Chevron's claim the judgment was "ghostwritten" by the plaintiffs is not only untrue, but was fabricated by company lawyers to block the villagers from enforcing their judgment.

In a new bombshell, the testimony of Chevron's star witness Alberto Guerra has fallen apart. The Chevron witness – Alberto Guerra – admitted to repeatedly lying in open court after being coached for 53 days by Chevron lawyers and paid at least $2 million by the company. Prosecutors in Ecuador want to pursue Guerra on perjury charges which explains why Chevron moved him and his family to an undisclosed location in the U.S. under company protection. It also was revealed that Chevron is paying the income taxes of Guerra as part of a package of benefits given in exchange for his testimony. (For the Courthouse News story on Guerra's lying, see here.

Watson faces a growing shareholder revolt and protests from environmental groups. Watson is dealing with increasing pushback over his mishandling of the Ecuador litigation. He faces yet another shareholder resolution in 2016 taking him to task over his bungling of the litigation, despite historically unprecedented expenditures to fund at least 60 law firms and 2,000 lawyers to fight the villagers. Protests against the company's sub-standard environmental practices also continue.

In 2015, a shareholder resolution challenging the company's scorched-earth strategy on the Ecuador case received whopping support – 33% of all shares, representing $62 billion of market value – at the company's annual meeting. Normally, any shareholder resolution that garners more than 5% support is considered successful. The 2015 Ecuador-related resolution was the fourth in recent years put forward by shareholders that received at least 30% support.

Ecuadorian indigenous leaders continue to challenge the company while receiving global support from legal scholars. Humberto Piaguaje, a leader of Ecuador's Secoya nationality and a representative of the 80 communities affected by the pollution, confronted Watson directly at the Chevron annual meeting over the legacy of death and suffering caused by the company's deliberate dumping of toxic waste. In the meantime, dozens of international law scholars and human rights groups from around the world have filed "friend of the court" briefs in the U.S. and Canada backing the affected communities.

Chevron faces renewed attacks from the environmental group Amazon Watch and its extensive network of allies. AW already organized 43 human rights and environmental organizations – including Amnesty International, Friends of the Earth, and the Sierra Club – to sign a letter criticizing Watson for the company's retaliatory litigation strategy. The group is planning to back a formal complaint to the Department of Justice and other legal authorities over evidence that Chevron tried to bribe witnesses, including the trial judge who ruled against the company.

Amazon Watch also reports it has received significant renewed financial support from a number of donors, despite Chevron's unethical efforts to pressure the organization's funders to back away from the Ecuador campaign.

Watson must also deal with disclosure of the company's own stunning videos showing an effort to defraud Ecuador's courts. Amazon Watch recently released a series of Chevron whistleblower videos showing company scientists engaged in an elaborate ruse to hide the company's contamination from the court during the trial there. (See here to watch the tapes andhere to read a news story about it.) More than two million people have viewed the tapes.

Chevron also faces evidence its own lawyers tried to bribe the Ecuador trial judge. The company will be under pressure to refute evidence that it tried to use its paid witness Guerra to offer a starter bribe payment of $1 million to the trial judge in Ecuador who ruled against the company. Chevron used Miami-based lawyer Andres Rivero (who received at least $8 million in fees from the company) to try to set up the bribe, which appears to violate the Foreign Corrupt Practices Act.

Chevron must deal with a surprise setback in a private arbitration proceeding. Watson continues to deal with fallout from a devastating decision by three private arbitrators who threw out the company's claim that it had "remediated" the pollution problem in the 1990s. The decision came in collateral attack filed by Chevron against Ecuador's government where the company is seeking a taxpayer-funded bailout of its pollution liability.

Chevron's General Counsel accused of market manipulation. Chevron's General Counsel - former Bush Administration official R. Hewitt Pate – has been accused of market manipulation after exaggerating the significance of an illusory default judgment obtained in the tiny protectorate of Gibraltar against a company set up by the villagers to protect the proceeds of their judgment. (For background on Pate's misleading statements, see here. For an earlier example of Pate trying to bamboozle the markets, see here.)

Chevron's main outside law firm, Gibson Dunn, faces ethical problems related to its hyper-aggressive practices. The same trial practice group that represents Chevron in trying to undermine the Ecuador judgment – led by the controversial lawyer Randy Mastro – recently was blasted by a federal judge for ethical lapses in an internal investigation of New Jersey Governor Chris Christie over the closing of access lanes to the George Washington Bridge. That decision came after another GDC lawyer was caught fabricating evidence on behalf of a client – the same allegation the villagers have leveled at the firm for allowing Guerra to present false witness testimony. (For background on more GDC ethical lapses in the Chevron case, see here and here.)

Chevron's retaliatory "racketeering" case – in reality a farcical show trial conducted by a deeply arrogant U.S. judge who deemed Ecuador's entire judiciary unworthy of international respect – continues to lack relevance. Aside from Guerra's admissions that he lied on the stand, a New York appellate court harshly criticized Chevron's lead lawyer during oral argument in a pending appeal. Although it will not affect enforcement actions targeting Chevron assets, a second adverse appellate decision against Chevron in that case could deal a further blow to the company's public relations narrative.

Finally, Chevron's ongoing demonization campaign targeting lawyers for the villagers with defamation and espionage failed to accomplish its goal of blocking the case. The main target of that campaign – New York attorney Steven Donziger – blasted the company in a detailed article on a legal website while he and his clients continued to receive support from scholars and civil society groups around the world.

Donziger said he was concerned that Watson has invested so much in Chevron's strategy that he has left the company with no coherent exit strategy.

"Mr. Watson has marched the company so far out onto a limb it appears there is no longer a viable path to turn back without Watson himself losing face and possibly his job," said Donziger. "Watson appears to be waging a sort of personal crusade against the villagers and their lawyers.

"That's not an appropriate role for a CEO and in our view reflects a severe corporate governance flaw in Chevron that runs counter to shareholder interests. Chevron should comply with the law and pay the Ecuador judgment forthwith."

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