SEC Complaint Lodged Against Chevron for Hiding $10 Billion Liability in Ecuador
Chevron Misleads Investors, Says Amazon Watch
Amazon Watch
26 March 2008 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
San Francisco, CA - The Securities and Exchange Commission (SEC) was today urged to impose a "substantial" sanction on Chevron for misrepresenting facts to shareholders over a potential $10 billion liability resulting from a class-action environmental lawsuit in Ecuador's Amazon region.
In a letter sent to SEC Chairman Christopher Cox, environmental group Amazon Watch said the oil giant has "spoon-fed" Chevron shareholders a "series of falsifications, exaggerations, omissions, and misleading public statements" to downplay its liability in a long-running lawsuit brought by thousands of rainforest residents in the Amazon over what experts believe is the worst oil-related disaster on the planet.
The case, which has produced roughly 250,000 pages of evidence and more than 60,000 chemical sampling results, is expected to end later this year. A court-appointed expert is preparing a damages assessment, which the plaintiffs expect to be more than $10 billion.
"Chevron created an environmental catastrophe in Ecuador and as a result thousands of vulnerable rainforest residents are suffering from dangerous toxic pollution," said Luis Yanza, a representative of the 80 communities and five indigenous groups that brought the lawsuit.
Last month, Chevron conceded in a submission to the office of the U.S. Trade Representative that it expects "a near-term unfavorable finding from the Ecuadorian court and potentially enormous ... financial liability", according to Amazon Watch, which has a copy of the Chevron document. Chevron also said it was the victim of an "unfair" trial, an assertion that the plaintiffs dispute.
Yet Chevron for years has refused to mention this "enormous" potential liability in its public filings as required by securities law, the group said in the letter. Chevron also placed information on its corporate website that suggests it faces no risk in Ecuador, according to the organization.
"Chevron misleads its shareholders by claiming in public that it has no liability in Ecuador, while in private it claims to face an enormous liability," said Atossa Soltani, Amazon Watch executive director. "Which is it? The SEC must ensure that Chevron tells the truth about its liabilities in public as well as in private discussions."
Amazon Watch filed a similar complaint against Chevron in early 2006, which prompted the SEC to contact the company seeking information. It is unclear if the SEC is still investigating Chevron, but given recent developments in the Ecuador trial "it is imperative that the agency take a fresh look at Chevron's irresponsible corporate governance practices as regards this matter," said Soltani.
The lawsuit accuses Chevron of carving close to 1,000 open-air waste pits out of the jungle floor and filling them with toxic-laden oil sludge that has leeched into the soil and groundwater. The company is also accused of dumping 18 billion gallons of toxic waste water into rainforest waterways from 1964 to 1990, the years it operated a lucrative oil concession in Ecuador.
Chevron has not denied the core allegations of the lawsuit, but claims a release it obtained from Ecuador's government in the mid-1990s after a purported remediation of a small number of waste pits immunizes it from liability. The Ecuador court has not accepted Chevron's argument about the release, which does not cover private claims of the sort currently being pressed.
In any event Ecuador's Attorney General has accused Chevron of committing fraud in order to induce the release, another fact that Chevron has not disclosed to shareholders, according to Amazon Watch.
Chevron's sub-standard operational practices in Ecuador "threaten the survival of rainforest indigenous groups and can be linked to hundreds of deaths from cancer and other oil-related diseases," said the letter.
"Despite privately admitting to a U.S. government agency that it faces an extraordinary liability... Chevron is continuing to flout its disclosure obligations by adopting a policy of total silence on this issue in its public filings," Amazon Watch writes.
"If SEC enforcement action in the area of public disclosure is to be meaningful, this situation cannot be tolerated further without the imposition of a penalty on Chevron for failing to comply with its obligations," the letter continued.
The letter said that recent material changes in Chevron's litigation posture trigger its obligation to disclose the liability in its public filings. These include the fact the trial is nearing an end, that thousands of new sampling results show extensive levels of toxic contamination at Chevron's former production sites, and the fraud complaint.
The letter also asserted that Chevron is using misrepresentations not only to mislead shareholders, but to delay or deflect appropriate enforcement action.