California Pension Fund Voting for Resolution Stemming from Chevron’s $27 Billion Ecuador Liability in Rainforest
Amazon Defense Coalition
21 May 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
Pressure Grows as Funds from Connecticut, Philadelphia, Detroit Defy Recommendation of Chevron Management
San Francisco, CA (May 21, 2009) – Chevron is facing a shareholder rebuke at its annual meeting next week over the company's $27 billion Ecuador liability with the announcement that the nation's largest public pension fund in California is defying the recommendation of company management and voting for a resolution on the issue.
CalPERS, which owns an estimated $600 million of Chevron stock and controls $170 billion in assets, announced on its website today that it will vote for a resolution calling on Chevron to examine whether it complies with host country laws and environmental regulations. Chevron has been heavily criticized for violating such laws in Ecuador, leading to a humanitarian crisis among indigenous and farmer communities in an area of rainforest where Texaco admitted to dumping billions of gallons of toxic waste from the mid-1960s to the early 1990s.
New York State Attorney General Andrew Cuomo has also opened an investigation of Chevron to determine if it is misleading shareholders about the financial risks the company faces in Ecuador.
"The CalPERS vote is a significant announcement that puts enormous pressure on Chevron's management in the investor community," said Dan Orlow, a private American investor who is advising the Amazonian communities. "It demonstrates that important pension funds are now lining up against Chevron on Ecuador."
CalPERS and the two New York funds – the state's Common Retirement Fund and the Employees Retirement System of New York City – are three of the largest public pension funds in the U.S. and together control more than $1 billion of Chevron stock. Other public pension funds that have announced their support of the resolution include those of Connecticut, Pennsylvania, Maryland, and the pension funds of firefighters and police in Detroit and other large cities.
Funds from three large unions – the AFL-CIO, Teamsters, and AFSCME – have announced their support of the resolution along with several smaller private funds, such as Trillium Asset Management in Boston.
The Ecuador liability was featured earlier this month on 60 Minutes in an unflattering report for Chevron. Thousands of rainforest residents have been fighting a legal battle against the company for clean-up of their lands since 1993.
The case is in Ecuador at Chevron's request after it was initially filed by the communities in U.S. federal court. The company agreed to be subject to jurisdiction and be bound by any ruling in Ecuador as a condition of the case being transferred out of U.S. court, which makes the enforceability of a judgment out of Ecuador likely despite what the company is saying to shareholders, said Steven R. Donziger, an American legal advisor to the Amazonian communities.
The liability appears to be the largest ever faced by an oil company for environmental damage, and almost surpasses the $31 billion price tag paid by Chevron to purchase Texaco in 2001. Chevron's management has announced it expects an adverse judgment in the case but has said it would appeal, while the plaintiffs have announced they plan to ask the court to hold the amount of any judgment in escrow pending appeals – a move that could severely hinder the company's cash position in a time of relatively low oil prices, according to analysts.
Previously, the Securities and Exchange Commission denied an attempt by Chevron management to prevent the Ecuador resolution from coming to a vote.
The announcement by CalPERS comes the same week that Chevron's management filed with the SEC an open letter to shareholders urging them to vote against the Ecuador resolution. That letter – signed by Chevron Corporate Secretary Lydia I. Beebe – contains incorrect and misleading information and appeared to backfire, said Donziger.
"Each assertion in the Beebe letter is either false, materially misleading, or incomplete except for the part where the company admits it might lose the legal case," said Donziger.
"Our team is being contacted repeatedly by shareholders and analysts who are concerned that Chevron management is not fully and honestly disclosing the company's exposure in Ecuador," said Orlow. "There is a real concern that Chevron is not playing it straight and that it might have overpaid for Texaco."
The Cuomo investigation is being brought under New York's Martin Act, which allows for both civil and criminal liability for fraud. Several New York-based shareholders, including Amnesty International, had requested the probe to determine if the company's public disclosures complied with securities regulations.
The annual meeting is scheduled for May 27 at Chevron headquarters in San Ramon, CA. Indigenous leaders from Ecuador's Amazon are expected to attend and confront Chevron's management about Ecuador.
"In past annual meetings, Chevron CEO David O'Reilly occasionally has treated the Ecuadorian visitors with a discourteous tone and shut down the microphone when they attempted to speak," said Donziger.