Ecuador's Chevron Shakedown

There is a case currently winding its way through the courts both in the U.S. and abroad which hasn’t garnered much media attention of late, though it certainly should. The story is not a new one, dating back two decades or more. To listen to some – particularly in the environmental lobbies – it has all the fixings of a made-for-TV movie fit to warm the cockles of any green warrior’s heart; a giant oil company goes into a pristine, South American rain forest to drill for black gold, ruins the environment and poisons the residents (probably wiping out the habitat of the salt marsh titmouse or something like that in the process). Injured residents rise up and go to court to obtain a massive settlement, intended to teach the greedy industrial giant a lesson once and for all.

Or is there perhaps just a bit more to the story?

The case in question involves the former energy giant Texaco, who entered into an agreement to drill for oil in Ecuador beginning in the 1970’s in partnership with the country’s state-run oil company Petroecuador. (Texaco was purchased by Chevron in 2001, inheriting the situation detailed here.) Having only a minority share in the resources, this arrangement continued until the early 90’s when the government of Ecuador “nationalized” the energy industry. Texaco was forced to pull out of the area, leaving the state-run company to continue drilling. At that time, Texaco further agreed to clean up any residual effects at their drill sites, which they did.

While that should have been the end of the story, an environmental activist group called the Amazon Defense Coalition (ADC) sprung up, seemingly created from whole cloth with the intent of reaching into Texaco’s deep pockets and seeing what they might find there. They even use a URL name of “texacotoxico” rather than anything to do with the Amazon or environmental concerns. Long story short, the group took Texaco to court in a small town in Ecuador and began proceedings to demand a $27B settlement for the alleged environmental harm. (Yes, that was “billion” with a “B.”)

The case has run into numerous delays and restarts. Since the American company had no holdings in country, ADC initially sought to extract the funds in the United States, but their first attempts met with defeat on a variety of legal issues. The challenges continued, with more damages being claimed by ADC until the current sum being demanded is in excess of $110B. These increased demands and claims of damage expanded through the last decade, even though Texaco / Chevron hadn’t been on site to collect a single barrel of oil for nearly twenty years and only the Ecuadorian government was extracting resources. The case will be coming up for a decision again early this year.

I couldn’t find a real estate agent to confirm this, but I believe $110B is roughly what you would need to buy Ecuador.

As each chapter of the story unfolded over the years a multitude of new wrinkles came to light.

In a related case, lawyer Cristobál Bonifaz – one original architect of the Texaco/Chevron lawsuit – brought claims of cancer and other maladies resulting from drilling contamination which were later dismissed in a San Francisco court as being “manufactured” and the court also observed that the lawyers’ lawsuit was “likely a smaller piece of some large scheme against [Chevron].”

The claim was allegedly supported by the results of a scientific study by expert biologist Charles Calmbacher, stating that the area was widely contaminated. Signed documents to that effect were submitted in court. However, when presented with the report as submitted, Mr. Calmbacher was perplexed, noting that the sheets with his signature on them seemed to have been attached to a totally different set of results.

The reports with his signature, [Calmbacher] said in the deposition, must have been written by someone else.

I concluded that I did not see significant contamination that posed immediate threat to the environment or to humans or wildlife around it,”

In addition, there has been proof captured on film of the Ecuadorian judge in the case being intimidated by operatives for the plaintiffs to ensure that a favorable judgment was obtained. But this was only one of many incidents of fraud brought to light when the case was challenged in various courts in the United States.

A Federal Magistrate Judge in North Carolina wrote, “While this court is unfamiliar with the practices of the Ecuadorian judicial system, the court must believe that the concept of fraud is universal, and that what has blatantly occurred in this matter would in fact be considered fraud by any court. If such conduct does not amount to fraud in a particular country, then that country has larger problems than an oil spill.”

Responding to a request by Hot Air for comment on the upcoming case, Chevron Media Adviser Justin Higgs said,

“The lawsuit in Ecuador, intended to defraud Chevron, is concocted by American contingency-fee lawyers who seek to enrich themselves through dishonest means. Over the last year, events in U.S. Courts have exposed a pattern of fraud and misconduct on the part of the plaintiffs’ lawyers. Chevron will fight this meritless case and we intend to hold accountable all of those who have knowingly participated in this unlawful scheme.”

At the bottom of it all, this suit smells to high heaven, plain and simple. We should know in the next few weeks or months what the latest decision holds, so stay tuned. We’ll be watching how this is handled and which groups in the United States are affiliating themselves with this Amazon Defense Coalition. We will continue to update you on the next set of results.

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