The Chevron Ecuador Lawsuit Trial | Chevron's Views & Opinions

“It will be very expensive to clean up, but far less than the profits they took out of Ecuador.” – Steve Donziger, lead trial attorney.  Commondreams.org: 10/29/09.

Mr. Donziger’s math is finally adding up and, perhaps unintentionally, Mr. Donziger has exposed one of the most fraudulent aspects of the Ecuador trial – the $27 billion damage recommendation known as the “Cabrera Report.”

The assessment developed by the plaintiffs’ representatives and delivered to the court by mining engineer Richard Cabrera looks to hold Chevron liable for more than $27 billion in damages. In part of the dubious $27 billion claim, Cabrera recommends Chevron pay damages of $2.743 billion for pit remediation.  In comparison, Petroecuador, the government-owned oil company responsible for the current condition of Ecuador’s oil fields, remediates pits to current laws and standards at a cost of $85,000 per pit. Cabrera’s estimates imply a per-pit remediation cost of up to $3 million per pit. This recommendation is more than 30 times higher than the cost the state pays for pit remediation.

Meanwhile, Texaco Petroleum made less than $500 million during the days of the consortium.  The vast majority of the proceeds, approximately $25 billion, went to the government of Ecuador.  And, at the conclusion of the consortium, Texaco Petroleum performed remediation work at 108 of 321 well sites – work that corresponded with the company’s 37.5% stake in the consortium. The remaining remediation is the admitted responsibility of Petroecuador.

So, no matter how you slice it, Mr. Donziger has finally conceded the truth about remediation costs.  Any realistic assessment of the conditions in Ecuador clearly shows that the remediation work for which Petroecuador is responsible would cost a fraction of what Mr. Donziger and his colleagues have contended.  Now, if they would only focus their efforts on the responsible party rather than the deep pockets, some solutions might actually occur.

“This lawsuit started in the United States and is financed by a law firm.” – Julio Prieto, plaintiff’s attorney

In a December 7th interview with Ecuadorian radio station Majestad, plaintiff’s attorney Julio Prieto makes mention of a law firm bankrolling the environmental lawsuit currently pending against Chevron in Ecuador.

The referenced firm is Kohn, Swift & Graf PC of Philadelphia, the primary entity providing a majority of, if not all of the funding for the lawsuit against Chevron.

When U.S.-based trial lawyer, Cristóbal Bonifaz, first concocted the original lawsuit against Texaco in 1993, he contacted Harold Kohn, a Philadelphia class-action lawyer. Shortly thereafter, Kohn’s son, Joe, who later became a partner at Kohn Swift & Graf, signed on. Subsequently, Kohn enlisted Steven Donziger, a New York-based trial lawyer who went to law school with Bonifaz’s son.

When asked about his motivation for taking on the case against Chevron in the movie Crude, Joe Kohn candidly stated, “it was not taken as a pro bono case, you know, a lot of my motivation is, at the end of the day… it will be a lucrative case for the firm.”

As part of the Kohn, Swift and Graf financed PR campaign to take Chevron’s reputation hostage and ransom it back to the company in the form of a large settlement, Kohn has hired DC lobbyist Ben Barnes to lobby the US Congress on “environmental matters resulting from oil exploration in Ecuador.” Barnes then hired DC based PR representative Karen Hinton to spread misinformation and distort the facts of the case.

Years of misinformation and distortion spread by U.S. trial lawyers and their PR cohorts lead the public and media to believe that 30,000 indigenous Amazonians are behind this lawsuit, and that any financial award from a settlement or verdict would go to the indigenous peoples of the Oriente.

However, the truth tells a different story.  Kohn’s firm has coordinated a series of economic and political relationships between the Ecuadorian government, U.S. trial lawyers and activist groups in an effort to put pressure on a small rural courtroom in Lago Agrio, Ecuador, to find Chevron guilty in an environmental lawsuit. Any financial awards as a result of a settlement or judgment against Chevron would invariably go only to the Ecuadorian government and the U.S. contingency fee lawyers driving this frivolous lawsuit. In fact, Washington Pesántez Prosecutor General of Ecuador confirmed that “90% [of any judgment against Chevron] would be delivered to the State…”

One thing is certain, Chevron will continue to fight this misguided and disingenuous lawsuit until justice prevails.

A recent Los Angeles Times editorial on Ecuador’s trade preferences with the United States curiously ignores evidence of Ecuador’s hostility to the United States and erroneously asserted that Chevron is calling for an end to beneficiary status for Ecuador under the Andean Trade Preferences Act.  While more than one organization is calling for “halting the trade agreement” with Ecuador, Chevron is not.  Chevron argues that countries should not be unconditionally rewarded with unilateral trade benefits even as they flout commercial obligations with the United States.  Because Ecuador has taken a series of actions to undermine trade and investment rules, Chevron is calling for treating Ecuador differently under the Andean trade act than the other two countries included in the act, Peru and Colombia.  Chevron is proposing several ways for Congress and the administration to treat Ecuador differently, including statutory periodic reviews or limiting preferences to private entities and firms in Ecuador, not to government-owned entities such as Ecuador’s state-owned oil company, Petroecuador.

The claim made by the Los Angeles Times, that Ecuador has “demonstrated a willingness to work with the U.S.” does not reflect what is actually happening with the bilateral relationship.  In the last year alone, Ecuador has taken a variety of actions that demonstrate its hostility to U.S. interests.  For example, it evicted the United States from an air base where it ran drug interdiction efforts for at least a decade.  It also became only the second country in history (after Bolivia) to withdraw from a 156-member international dispute settlement body after calling the body “an atrocity” that “signifies colonialism” and “slavery . . . to Washington.”  It also announced intent to withdraw from investment treaties with the United States and a dozen other countries, and it provided Ecuadorian interests a roadmap for using U.S. intellectual property rights without permission.  The situation in Ecuador has gotten so bad that in November, Transparency International called Ecuador one of the most corrupt governments in the Americas, with a score worse than 27 of the 31 countries tallied in the Hemisphere and 146th out of 180 countries total worldwide.

Ecuador once was a U.S. ally that respected the rule of law, but that has not been the case in recent years, and its treatment of U.S. investors and its obligations on investment and contractual matters reflects that change.  The U.S. government, Transparency International, and the World Bank have all noted serious concerns with Ecuador’s judicial system and adherence to the rule of law.  Contrary to the editorial’s assertion, Chevron is not asking the U.S. to force a favorable outcome in the case.  It asks for a fair hearing, a hope that Ecuador will honor its contractual obligations, and consideration of Ecuador’s actions on well-established trade and investment treaties and guidelines.

Chevron has been a longstanding supporter of trade preferences program.  However, we believe that extending unilateral trade preferences should carry with it some type of recognition that the recipient countries must adhere to the rule of law and trade and investment obligations.  We would hope that U.S. policymakers, and Los Angeles Times editorial writers, believe in this same standard.

“The government of Ecuador asked a U.S. court on Friday to intervene in its long-running environmental battle with oil giant Chevron Corp.

The federal court filing is tied to a multi-billion-dollar lawsuit taking place in Ecuador that seeks to hold Chevron responsible for environmental damage allegedly caused by Texaco Inc., which operated there from 1964 to 1990.”
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“Ecuador President Rafael Correa said private oil companies they should leave the country if they don’t invest in their oil fields.”
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“Oil companies operating in Ecuador have until March to sign new contracts or the government will “change the rules of the game” to give the state more control over the sector, President Rafael Correa said on Saturday.”
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“Negotiating with China is “worse than the IMF,” Ecuadorean President Rafael Correa said on Saturday after rejecting China’s conditions for a US$1.7 billion loan to build a hydroelectric plant.”
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“By commencing the arbitration, it is Chevron that is trying to escape its commitments,” – Eric Bloom, attorney representing the Government of Ecuador

On the contrary, the Republic of Ecuador’s complaint against Chevron in the Southern District of New York is frivolous in much the same way as the lawsuit against Chevron in Ecuador.  Both are based on the made-up idea that Chevron agreed in 2001 to submit itself to the jurisdiction of Ecuador’s courts.   But Chevron, which was in no way involved in the proceedings in 2001, never consented to anything, and Texaco certainly never agreed to submit to jurisdiction in Ecuador to face fabricated claims, biased courts, and corrupt proceedings being dictated against it by Ecuador’s government.  That is precisely why Chevron initiated its BIT arbitration.  The arguments made by the Republic in its New York lawsuit ignore these basic truths and are not grounds for enjoining arbitration anyway.   Given the extensive docket of international arbitration claims challenging Ecuador’s repeated disregard for its legal obligations and the rights of investors in its country, it is not surprising that Ecuador would seek to evade another reckoning by an honest, international panel.