It is clear that two recent court decisions in Chevron's $12 billion "Amazon Chernobyl" pollution case -- in Canada and Gibraltar -- have led new CEO Michael Wirth to issue yet more misleading statements to distract attention from the company's environmental liability. Wirth's approach suggests increasing frustration inside Chevron's executive suites as the case enters its 25th year and the Indigenous peoples of Ecuador show no sign of letting up in their historic accountability campaign.

Chevron has spent an estimated $2 billion on its "corporate intimidation" campaign (see this article from Greenpeace's Rex Weyler) targeting the Ecuadorian Indigenous peoples and the lawyers who won the landmark court judgment ordering a clean-up of what is widely considered the worst oil-related disaster on earth. Instead of complying with the law, Chevron threatened the Indigenous peoples with a "lifetime of litigation" if they persisted.

How poorly this strategy is working can be seen by the fact close to 1 million people signed an on-line petition from Avaaz calling on Chevron's largest shareholder (Vanguard) to challenge company management on the issue. Chevron shareholders slammed Wirth at the company's annual meeting on May 30 over his "material mishandling" of the Ecuador liability and his ham-fisted approach to climate change and environmental issues generally. Chevron is increasingly out of step with the world at large and even many of its industry peers on these critical issues.

Despite Wirth's massive spending, a lawsuit filed by the Indigenous peoples of Ecuador against Chevron to enforce the $12b judgment is heading again to Canada's Supreme Court. That's after an astounding win by the Ecuadorians before the same court in 2015. The stakes could not be much higher for human rights victims the world over and for corporate polluters like Chevron who continue to use legal maneuvering and tricked-up corporate structuring to evade liabilities for environmental harm. More on that below.

At Chevron's recent annual meeting, 36 institutional investors who manage $109 billion in assets urged Wirth to seek settlement of the Ecuador matter as a way to minimize future shareholder risk. Several shareholders directly confronted Wirth at the meeting about the company's failure to address its legal obligations to the people of Ecuador given that cancer rates have skyrocketed and legendary nurse Rosa Moreno and thousands of others have died. Two resolutions challenging management over the case received overwhelming support at levels significantly higher than last year. Zevin Asset Management and Newground Social Investment sponsored the resolutions.

Wirth's response to shareholder concerns was to hold up the equivalent of the middle finger. He refused to meet with representatives and then blamed "trial lawyers" like Steven Donziger (the human rights lawyer who has advised the Ecuadorians) for what has to be one of the oldest clichés in the book for corporations caught in major wrongdoing. He also claimed Chevron "cleaned up" its toxic mess in Ecuador -- including its 1,000 open-air waste pits -- when it created an obvious sham remediation that has been rejected by three layers of courts in Ecuador.

In all, the Chevron shareholder meeting was a stunning rebuke for a CEO who has staked a good portion of his company's reputation on one enormous litigation. Chevron has spent at least $2 billion to hire 60 law firms and 2,000 lawyers to attack lawyers for the Indigenous groups whose lands and waterways it poisoned. Yet the company already has lost multiple court decisions in Ecuador (three layers of courts) and in Canada (before the country's Supreme Court and twice before the Ontario Court of Appeal) while Wirth and his management team have dehumanized the very people they continue to harm, as Paul Paz of Amazon Watch pointed out in this captivating post.

Chevron did win once in 2014 before a sole U.S. trial judge (Lewis A. Kaplan) who relied on false testimony from a witness paid $2 million by the company, who refused to hear evidence of Chevron's pollution, who held undisclosed investments in Chevron during a farcical trial called a "Dickensian farce" by prominent U.S. trial attorney John Keker, and who later issued a "fraud" finding against Donziger and his clients that has been wholly discredited by admissions from Chevron's key witness that he lied under oath. For background, see here and here.

Thus far, that's not a very good litigation record for an army of high-priced Chevron lawyers fighting some of the most vulnerable people in the world. We are surprised Chevron General Counsel Hew Pate, one of the architects of this scorched-earth strategy, was not fired years ago for his incompetence. Yet Wirth -- installed in February after the disastrous reign of CEO John Watson -- shows no signs of changing course, at least for now.

Now, let's examine the recent court decisions in Gibraltar and Canada and assess whether Wirth and the Chevron Board are telling the truth to shareholders.

In the lead-up to Chevron's annual meeting, Wirth issued a press release touting a $38 million "default" judgment Chevron recently won in Gibraltar against an empty bank account held by some rainforest villagers. Gibraltar is a British territory that has only 34,000 people and three judges; it might be the smallest court system in the world.

The Ecuadorian villagers had intended to use the Gibraltar account to hold clean-up funds outside of their own country (should they ever be collected) as a sort of safety valve given Ecuador's disastrous banking crisis in the late 1990s. The account has been dormant for years and never held funds. Chevron's legal attack on the account, given its absolute irrelevance, was never defended and "default" judgments under these circumstances have almost no legal effect.

The upshot is that the Gibraltar judgment -- about one-300th the size of Chevron's environmental liability -- is unenforceable against people in the rainforest with no money, although it does show the lengths Chevron will go to try to intimidate its adversaries. It also shows how desperate Wirth is to chalk up some sort of tiny public relations "victory" to try to distract shareholders from the company's $12 billion loss in Ecuador. Nice try, but shareholders are not that stupid.

In Canada, the case will be heading to the Supreme Court on the issue of whether corporations can evade paying their environmental liabilities simply by placing assets in a wholly-owned subsidiary. Chevron has an estimated $15 billion to $25 billion worth of assets in Canada, or more than enough to pay the Ecuador judgment. All are held by a 7th-tier subsidiary whose shares are owned in their entirety by Chevron.

The huge risk of these assets being seized to pay for a real clean-up of Chevron's damage in Ecuador is why the company flooded a Toronto courtroom in April with about 40 lawyers for argument before the Ontario Court of Appeal (OCA).

Chevron already had tried to block the litigation by imposing an outrageous $1 million costs order on the impoverished indigenous groups. That effort was overturned unanimously by the OCA last October, clearing the way for argument on the company's last remaining technical defense: that its assets in Canada should be immunized from collection because they are held in that wholly-owned subsidiary. Chevron admits it profits billions of dollars annually from the subsidiary, but claims those same profits cannot be used to pay the Indigenous groups in Ecuador.

In what can only be described as a narrow-minded decision with dismal implications for Indigenous rights, two members of the three-judge panel on the OCA recently handed a victory of sorts to Chevron (and all corporate polluters) by ruling that environmental liabilities can be evaded by a polluter simply by placing assets in a wholly-owned subsidiary whose shares are owned 100% by the parent company. Think about that: Chevron owes a $12 billion debt to the people of Ecuador, yet under the logic of the two judges, the company will never have to pay the Ecuador judgment even though it profits billions of dollars annually from the same subsidiary.

Why is that various legal fictions emanating from "corporate law" always seems to take precedence over the rights of Indigenous peoples and other communities when their press their fundamental human rights to live in an environment free of toxic waste? This legal regime has to evolve, and it will be up to Canada's Supreme Court to ensure that it happens.

It can't be that we live in a world where corporate polluters that lose legal cases to communities they harm can simply stiff their victims through an asset structuring maneuver. This approach clearly over-incentivizes corporations to pollute and will end up not only harming and killing numerous rainforest residents in Ecuador, but likely will spell disaster for our planet over the long run by encouraging yet more reckless extractive activity without the use of proper safety measures.

The problematic ruling, written by Justice C. William Hourigan (a former commercial litigator), rewards Chevron's bad faith and allows oil and mining companies a license to engage in inherently dangerous resource extraction with little fear of the environmental consequences. The good news is that the decision is so rigid in its approach that it is likely to be overturned; a third judge on the panel essentially took apart Hourigan's logic and exposed his dishonesty in a concurring opinion. We believe it likely that Canada's Supreme Court will course-correct.

Canada's Supreme Court in 2015 delivered a fabulous victory for the Ecuadorians against Chevron on a jurisdictional question.  It is clear that Chevron is running out of technical defenses; the company's entire fraud "defense" likely will collapse once Canadian courts force the company to present its false evidence before a neutral judge. What a tragedy it would be if Canada's courts buy into Chevron's desperate attempt to avoid that moment by making it impossible to collect the company's substantial assets in the country to force it to comply with the rule of law.

As CEO Wirth prevaricates and disrespects his own shareholders, the Indigenous peoples and farmer communities of Ecuador march on. Their motion seeking Supreme Court review in Canada will be filed in the coming weeks. We will report on that event when it happens.

June 11, 2018

http://thechevronpit.blogspot.com/2018/06/chevrons-12b-ecuador-pollution.html