Long time readers will recall our coverage over the last two years of the efforts of so-called environmentalists in Ecuador – in league with their brethren in the US – to pick the pockets of Chevron in a rather poorly rigged lawsuit. Their hopes of snagging billions of dollars from the American energy giant have met one setback after another in every court outside of the one they purchased in their home country, but what little credibility they had has taken another blow. An investment fund which funneled millions of dollars into their legal costs with the understanding that they would get a cut of the plunder on the back end has now determined that they’ve been bamboozled.
Burford Capital, a $300 million publicly-traded fund that invests in lawsuits, has accused representatives of the Ecuadorians who are suing Chevron in Lago Agrio, Ecuador, of having defrauded the firm into investing in their case two years ago…
“We believe that you and particularly your U.S. representatives engaged in a multi-month scheme to deceive and defraud in order to secure desperately needed funding,” the letter states, “all the while concealing material information and misrepresenting critical facts in the fear that we would have walked away had we known the true state of affairs.”…
On October 31, 2010, Burford gave the plaintiffs $4 million in financing as the first tranche in what was planned to become a $15 million investment. In exchange it received a 1.5% stake of any recovery, which was to rise to a 5.5% stake upon full funding.
First off – and maybe I’m just a babe in the wood here – I had no idea that investment groups were in the practice of funding the legal costs of lawsuits which didn’t involve them in any fashion purely as speculation and a chance at taking a slice of the profits. Is that really “a thing” today? I mean, I don’t want to dredge up the whole specter of “vulture capitalism” here, but this has to be about as good of a fit for the description as one could imagine.
With that said, I have to note that I’m not exactly feeling a lot of sympathy for Burford and their investors at this point. We can ignore for the moment the fact that they were betting on a group of envirowhackjobs who were engaged in what appears to be, in my opinion, a highly dubious attempt to rip off an American company. Just from a straight business perspective, before you dump millions of dollars of your investors’ funds into any endeavor, you’d check it out pretty carefully, no? You wouldn’t throw all of your cash at some great business investment opportunity before investigating and finding out that it was actually a chop shop.
So even if your business does involve funding lawsuits, the information has been out there for ages showing that this particular claim was being described as a blatant scam by many observers. Should we now feel sorry for you if the Ecuadorians take your money as well and head for the hills?
Not likely. Lie down with dogs, get up with an empty wallet, guys.