Chevron Claims Ecuadorians’ Lawyer Won Case Through Fraud
By Christie Smythe & Patricia Hurtado – Oct 15, 2013 12:00 AM ET
For more than a decade, lawyers for Ecuadorian villagers have argued Chevron Corp. (CVX) is responsible for polluting a swath of Amazon rainforest bigger than Rhode Island that it refuses to clean up.
Today, facing a $19 billion judgment won on behalf of those villagers, the second-largest U.S. oil company will try to prove in a federal courtroom in Manhattan that it’s a victim rather than the villain in a legal drama over the environmental devastation.
A police officer looks on as protestors participate in a demonstration outside of the Chevron headquarters in Feb., 2011 in San Ramon, California. Photographer: Justin Sullivan/Getty Images
In a non-jury trial, Chevron seeks to persuade U.S. District Judge Lewis Kaplan to bar enforcement of a 2011 verdict against the company in Ecuador that it says was a product of coercion and manufactured evidence. The company contends the judgment was obtained by fraud, including through bribery of an Ecuadorian judge, as part of a racketeering scheme by the villagers’ attorneys, consultants, activists and others to extort money from the oil producer.
“The enterprise’s ultimate aim is to create enough pressure on Chevron in the United States to extort it into paying to stop the campaign against it,” the company’s lawyers wrote.
Kaplan said last week there’s “considerable evidence” the litigation was “tainted by fraud.”
The San Ramon, California-based company is seeking a ruling barring the Ecuadorians’ lead lawyer, Manhattan attorney Steven Donziger, and his associates from trying to enforce the verdict in courts around the world where Chevron has assets. Plaintiffs have sued Chevron for payment in Canada, Argentina and Brazil so far without success.
In the underlying 20-year-old environmental case, Donziger and other lawyers for indigenous people in Ecuador’s Lago Agrio region sought damages for Texaco Inc.’s alleged dumping of toxic drilling wastes from 1964 until about 1992 that polluted about 1,500 square miles (3,885 square kilometers). The lawsuit continued against Chevron when it acquired Texaco in 2001.
Chevron contends that state-owned Petroecuador, a former Texaco partner, is responsible for most of the pollution. Texaco paid $40 million to clean up its share and was released from liability under agreements with Ecuador in 1995 and 1998, Chevron said. An international arbitration tribunal affirmed their validity in September.
For the Manhattan trial, Donziger and his co-defendants have told Kaplan that Nicolas Zambrano, the judge who signed the Ecuadorian judgment in favor of the Lago Agrio plaintiffs, will testify on their behalf. Zambrano, who is no longer a judge, submitted a declaration denying allegations he’d been bribed.
The trial also will feature another Ecuadorian judge who was involved in the case, Alberto Guerra, who presided over the Chevron pollution case before Zambrano. Guerra has submitted a declaration stating that Donziger and another lawyer bribed Zambrano to decide the case in favor of the Ecuadorians and permitted them to ghost write the opinion which Zambrano signed.
Chevron contends that advocates for the Ecuadorians, guided by Donziger, “sought to inflict maximum damage to Chevron’s reputation.” The effort received more than $10 million in financing from Philadelphia lawyer Joseph Kohn and U.K.-based investment firm Burford Capital Ltd. (BUR), according to the company.
Burford sold its interest in the litigation in 2010, it said in July. Kohn was dropped from the litigation and criticized Donziger in an August 2010 letter uncovered by Chevron. He didn’t respond to a phone call seeking comment on the trial.
The team ran a media campaign that helped to secure an article in Vanity Fair’s May 2007 “Green Issue” and the 2009 documentary “Crude” by filmmaker Joe Berlinger, featuring villagers stricken with cancer, birth defects and other diseases alleged to be related to exposure to toxins from Texaco’s drilling, according to Chevron.
While the film highlighted the pollution battle, it also gave Chevron evidence for its fraud case. In May 2010, Kaplan ruled that the company could have hundreds of hours of outtakes from “Crude,” which Chevron claims show Donziger and his team improperly influencing the Ecuador court’s verdict.
Using the footage, excerpts from Donziger’s diary and other materials obtained through U.S. court orders, the company asserted that Donziger’s team pressured environmental consultants and helped draft a report that inflated damages to $27 billion. The team also ghost-wrote portions of the ruling and bribed the judge who issued the verdict, Chevron alleged.
Donziger’s team used an “army of protesters” to intimidate the judge and met with him frequently outside of court proceedings, Chevron alleged in its lawsuit. The plaintiffs’ lawyers also hatched “trumped up” criminal charges to bring against Chevron lawyers in Ecuador, the company alleged.
In a Nov. 17, 2005, diary entry, Donziger wrote that two of his associates “were scouring the penal code to find any provision that could be used against” one of the Chevron lawyers, according to a court filing.
Chevron contends Donziger’s diary shows that he was trying to wage a crusade to shake billions of dollars out of the company. In an April 4, 2007, entry, Donziger called his fellow litigants “fellow soldiers” and mused about the possibility of obtaining a settlement from Chevron.
“I sit back and dream,” he wrote. “I cannot believe what we have accomplished. Important people interested in us. A new paradigm of not only a case, but how to do a case. Chevron wanting to settle. Billions of dollars on the table. A movie, a possible book. I cannot keep up with it all. Just four years ago, I felt broke and hopeless, unable to gain traction. I cannot wait to get off the plane and see my fellow soldiers.”
A Harvard Law School graduate, Donziger has argued that Chevron took comments from the “Crude” footage out of context and that his team was following customary procedures in Ecuador. The damages report was legitimate research and both Chevron and the plaintiffs met with the judge outside of court, he alleged.
“Chevron has taken a page out of the Washington D.C. political playbook when they accuse Mr. Donziger of illegal activity in Ecuador,” Christopher Gowen, a spokesman for Donziger, said in an e-mail. “They simply accuse Mr. Donziger of doing what they themselves were doing.”
Gowen said Donziger didn’t “trump up” charges against the Chevron lawyers and that they “earned these inquiries by the way they treated the people of Ecuador.”
Donziger alleged in counterclaims that Chevron manipulated testing at the pollution site, tried to influence the Ecuadorian government and unfairly attacked his reputation. Kaplan dismissed Donziger’s countersuit in July saying he didn’t present strong enough evidence.
Last month, Donziger and his associates failed in a bid to replace Kaplan as the judge overseeing the trial claiming he’s biased in favor of the company. A three-judge panel of the U.S. Court of Appeals in Manhattan rejected the request on Sept. 26.
Kaplan refused to delay the trial while the appeals court considered the request, saying it lacked merit.
“Notwithstanding their attempts to portray themselves as Davids, each alone facing Goliath, the reality is quite different,” Kaplan said of Donziger and his associates in a Sept. 9 ruling.
The judge said in an Oct. 10 ruling that Chevron has presented “considerable evidence that suggests that several aspects of the Lago Agrio litigation were tainted by fraud.”
“It has shown also that there is probably cause to believe that the Ecuadorian judge was bribed and that the judgment itself was written not by the judge who signed it but by the Lago Agrio plaintiff representative lawyers and agents,” Kaplan wrote.
Kaplan sanctioned Donziger and his co-defendants in that ruling for withholding documents from Chevron during pretrial information sharing.
“We are certain that if Judge Kaplan reviews the evidence in full and follows the law we will prevail on the merits,” Gowen said.
The racketeering case is Chevron Corp. (CVS) v. Donziger, 11-cv-00691, U.S. District Court, Southern District of New York (Manhattan). The appeals court case is In Re Naranjo, 13-00772, U.S. Court of Appeals for the Second Circuit (Manhattan).
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