March 4, 2014 8:23 pm

Chevron wins case over Ecuador pollution

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Employee Brandon Scully works on a Chevron Corp. sign at a gasoline station in San Francisco, California©Bloomberg

Employee Brandon Scully works on a Chevron Corp. sign at a gasoline station in San Francisco

Chevron has won an important victory in its battle to avoid a $9.5bn damages award for pollution in Ecuador, as a US judge said the ruling against it in an Ecuadorean court “was obtained by corrupt means”.

The US oil group hopes the ruling in a court in New York will help it defend itself against attempts to pursue it for compensation around the world.

Finding in Chevron’s favour in a civil racketeering case the company had brought against Steven Donziger, a lawyer representing Ecuadorean plaintiffs seeking compensation, and other lawyers working with him, Judge Lewis Kaplan said that the defendants “may not be allowed to benefit from that in any way”.

He added that the plaintiffs “received the zealous representation they wanted, but it is sad that it was not always characterised by honour and honesty as well”.

The result has no direct financial implications for Chevron. Judge Kaplan’s ruling bars the plaintiffs from enforcing the Ecuadorean judgment of damages against the company in the US, which they have already tried and failed to do.

The plaintiffs have been pursuing the case in other countries including Canada, Brazil and Argentina, and Judge Kaplan’s ruling does not seek to bind courts in those countries.

However, John Watson, Chevron’s chief executive, told reporters at the IHS Cera Week conference in Houston that “having a clear verdict of fraud and racketeering in the United States will be very helpful” in defending the company in those countries.

Judge Kaplan’s ruling also bars Mr Donziger and two Ecuadorean lawyers from receiving any benefit should those cases in other countries be successful.

Mr Donziger said in a statement he would pursue an “immediate and expedited appeal”, adding: “We believe Judge Kaplan is wrong on the law and wrong on the facts and that he repeatedly let his implacable hostility toward me, my Ecuadorean clients, and their country infect his view of the case.”

In his 497-page ruling, Judge Kaplan said Mr Donziger and his clients had engaged in “years of pressuring Chevron to settle by a variety of both legitimate and illegitimate means” over pollution in the Lago Agrio region of Ecuador left by Texaco, which had operated in the area until 1992 and was bought by Chevron in 2001.

He said that in support of that claim in the Ecuadorean courts, Mr Donziger and the other defendants had submitted fraudulent evidence, coerced a judge, falsely presented a consultancy’s report as the work of a court-appointed and “supposedly impartial” expert, and “told half-truths or worse to US courts in attempts to prevent exposure of that and other wrongdoing”. Ultimately, the judge said, the defendants wrote a court judgment themselves and promised $500,000 to an Ecuadorean judge to sign it.

The judge also said Mr Donziger personally stood to gain a fee of more than $600m if he was successful, and had “deceived when deception served his interests”.

The judgment includes several extracts from Mr Donziger’s personal notebooks, which included the observation that: “the only way the court [in Ecuador] will respect us is if they fear us – and that the only way they will fear us is if they think we have . . . control over their careers, their jobs, their reputations – that is to say, their ability to earn a livelihood.”

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