With Enron As Backdrop, Chevron Faces Mounting Corporate Governance Problems Of Its Own
SEC Complaint, Fraud Probe Over Ecuador Oil Disaster Raise Stakes as Concerned Shareholders Converge in Houston
Rainforest Indigenous Leader To Confront CEO David O’Reilly
25 April 2006 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
Houston - Chevron CEO David O'Reilly and the company's top management have come to Enron's hometown for the annual shareholder's meeting only to face a rising tide of corporate governance problems over their handling of a potential multi-billion liability for oil contamination in Ecuador's rainforest. [See schedule of related events at end of press bulletin.]
In Chevron's annual meeting on Wednesday, to take place in the building that housed Enron's corporate offices, O'Reilly faces a growing shareholder challenge over the handling of a controversial class-action lawsuit concerning toxic dumping at least 30 times larger than the Exxon Valdez. The lawsuit alleges that Texaco dumped more than 18 billion gallons of toxic "water of formation" into the rainforest from 1964 to 1992, forcing two indigenous groups to the brink of extinction and causing a surge in cancer rates, miscarriages, and other oil-related health problems.
Texaco was the sole operating manager of the Ecuador consortium that caused the pollution, although the Ecuadorian government was a partner. The lawsuit alleges Texaco alone made the fateful decision to dump the toxic water of formation in violation of industry standards, Ecuadorian law, and Texaco's operating agreement. Experts say it will cost billions to remediate.
"Like the Enron way, Chevron's management is hiding from its shareholders and employees the significant financial liabilities it faces from the growing public health crisis it caused in Ecuador," said Atossa Soltani, the executive director of Amazon Watch, an environmental group monitoring the trial. "Chevron's mishandling of the Ecuador controversy has become a serious threat to the company's image and reputation worldwide."
O'Reilly will face several hot-button issues over Chevron's growing Ecuador problem:
- Several influential shareholders -- including the New York State Common Retirement Fund, Trillium Asset Management, and Amnesty International - are sponsoring resolutions urging Chevron to address human rights and environmental issues in Ecuador. A resolution introduced by Trillium asks the company to reveal its spending to defend the litigation, which has dragged on for three years and been plagued by a series of blunders by Chevron lawyers.
- Representatives of Amazon Watch have filed a complaint with the SEC over Chevron's failure to disclose the Ecuador liability to shareholders. The complaint alleges that Chevron has engaged in a smear campaign designed to paint an overly rosy picture of an earlier remediation, which has the effect of misleading shareholders over the size of the potential liability.
- Questions continue to mount over the poor handling of the litigation by Chevron's Ecuador counsel. The use by Chevron of an unaccredited laboratory has prompted the court to consider nullifying all of the company's soil and water samples.
- Chevron has refused to disclose to shareholders that Ecuador's national prosecutor is investigating the company on possible fraud charges for an inadequate environmental clean-up in the mid 1990s. A recent report by Ecuador's government suggests Texaco misled Ecuadorian government officials to get its substandard remediation certified.
- The battle between O'Reilly and the Ecuadorians promises to have a personal tone. Emergildo Criollo, a leader of the Cofan indigenous people in Ecuador, plans to confront O'Reilly at the meeting and explain how his tribe is dying due to toxic contamination. During Texaco's operation of the concession, the Cofan's population decreased from thousands to roughly 400.
Chevron also has refused calls by the affected communities to cancel a private contract it has with an elite Ecuadorian military unit ("Rayo 24") that has been implicated in human rights abuses. Leaders of the trial have endured numerous threats and incidents of harassment, some known to be perpetrated by members of Rayo 24. Rainforest leaders are preparing a complaint asserting Chevron's entanglement with the Ecuadorian military may violate the Foreign Corrupt Practices Act.
The lawsuit was filed in 2003 on behalf of 30,000 people who live in the area of the former Texaco concession, about the size of Rhode Island. Dr. Ann Maest, a chemist for the affected communities, has said that the area is so contaminated that it would not be fit for habitation under U.S. law.
In the trial, technical reports from 29 sites confirm significant levels of toxic contamination in violation of Ecuadorian law, said Steven R. Donziger, one of the lawyers for the affected communities.
"A surprising aspect of this trial is that the proof by Chevron of extensive toxic contamination corroborates the proof presented by the affected communities at every site inspected," said Donziger. "The dispute at trial is over what level of harm the toxic contamination is causing."
"Chevron's claim that carcinogens from oil contamination cause no harm remind many in Ecuador of the preposterous claims by the tobacco industry that smoking caused no harm," said Donziger.
Texaco extracted an estimated $30 billion in profits from Ecuador. It would have cost an estimated $1.5 billion to install technology to re-inject the formation waters into the ground, said Donziger.
Chevron Annual Meeting - Amazon Watch Timetable of Events
(Note:Indigenous leader will be in traditional dress)
Monday, April 24, 7-9pm: Public Event at The Artery (5401 Jackson @ Prospect). Amazonian leaders will speak about Texaco's destruction of their lands. Event will feature "CVX on Trial" video and images from "Crude Reflections" photo exhibit.
Tuesday, April 25, 11am: Press Conference at Crowne Plaza Hotel, 1700 Smith St. Attended by shareholders, Cofan Indian leader, Amazon Watch, Amnesty International and attorneys.
Wednesday, April 26: CVX AGM Meeting and Mobilization (Emporis Bldg. @ 1500 Louisiana Street). Shareholders and Cofan leader to present their case inside. Protest outside CVX's AGM in Houston, co-sponsored by Amnesty International, from 7.30am.
Wednesday, April 26, 12 noon (immediately after shareholder's meeting): Press and Shareholder Briefing with E-Tech International Representatives, Steven Donziger, lawyer for the Ecuadorian plaintiffs, Amnesty International and Amazon Watch at the Crowne Plaza Hotel.