CEO O'Reilly Violates SEC Regulations and Corporate Governance Duties By Hiding Liability, Lawyers Say
Amazon Defense Coalition
3 April 2008 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
Quito, Ecuador - Chevron Corp.'s (CVX) management is lying to shareholders about the finding by a court expert that it faces up to $16 billion in liability for a major human rights catastrophe in the Amazon rainforest by dumping billions of gallons of toxic waste, said representatives of the Amazon Defense Coalition, a group representing 80 communities and five indigenous groups in the class-action lawsuit.
Early this week, an independent court-appointed expert, Professor Richard Cabrera, a prominent Ecuadorean geologist and leading environmental consultant for various oil companies, concluded that Chevron owed a minimum of $7 billion and up to $16 billion to compensate for damages to Ecuador's Amazon rainforest during the operation of a large oil concession from 1964 to 1990.
Chevron was found by the expert to have abandoned 916 open-air toxic waste pits and dumped more than 18 billion gallons of toxic waste into Amazon waterways. A summary report of the findings indicated that the company's practices have caused 428 excess deaths from cancer, for which it proposed $2.9 billion in compensation.
"What the expert found is that Chevron has hoisted itself by its own petard, and with its own evidence, proven the claims in the lawsuit alleged by the indigenous groups," said Steven Donziger, an American legal advisor on the case. "It's rather extraordinary to see a defendant like Chevron helping to make the case against itself."
After details of the report became public on Wednesday, Chevron released a press statement that "lies on its face in fundamental ways" and hides the fact that the company's primary spokesman on the issue has been under criminal investigation in Ecuador for his actions relating to the very legal problem at issue, said Pablo Fajardo, the lead Ecuadorean lawyer on the case.
Fajardo directed criticism at Chevron's CEO, David O'Reilly, who has distanced himself from the case.
"Chevron's CEO and his management team face a defining moment in the Ecuador case - whether to follow the law and adhere to environmental regulations, or to continue operating as if their company is above the law," said Fajardo, who represents 80 communities and five indigenous groups who have been pursuing the class-action case since 1993.
"Mr. O'Reilly can either continue to lead Chevron down a lawless path where he deploys his public relations team to mislead shareholders, or he can come clean about the human rights violations Chevron has committed in the Amazon as required by disclosure obligations. We are advising shareholders to watch Mr. O'Reilly closely in the coming weeks to see if he makes the correct choice."
Fajardo said Chevron's press statement about the damages claim contained several misrepresentations and its allegations were unsupported by evidence, as follows:
- Chevron's claim that Professor Cabrera is being paid by the plaintiffs is misleading. Cabrera is paid directly by the court for the current phase of his work, as is customary and required in Ecuador.
- Chevron did not divulge in its press statement that it previously supported and paid the fees of Professor Cabrera when he was appointed to supervise an earlier judicial inspection. Only when Cabrera was appointed to assess damages did Chevron object because it feared the trial would soon end, said Fajardo.
- Chevron's claim that Cabrera is unqualified is deceptive. Cabrera is a prominent professor and highly respected geologist who has worked as an environmental expert for several oil companies. His report also reflects the work of no fewer than 14 prominent Ecuadorean scientists and technical experts, covering every discipline relevant to the study of oil-related contamination.
- The Chevron spokesman quoted in the press statement, Ricardo Reis Veiga, has been under criminal investigation in Ecuador for lying to the government about an earlier botched remediation. Reis Veiga also has a conflict of interest in that he supervises the litigation for Chevron, yet he is also accused of fraud in the case itself.
- Chevron also did not divulge in its press statement that the Ecuadorean court had ordered police protection for Cabrera after he was harassed by Chevron lawyers and security guards while conducting his own field inspections.
- Chevron's assertion that Cabrera didn't take enough water and soil samples is likewise misleading and evidences a shallow understanding of the Ecuadorean civil justice system. Cabrera did extensive sampling at 47 different sites and also separately reviewed all 64,000 analytical results produced by Chevron and the plaintiffs before arriving at his conclusions. In all, Cabrera examined data from 94 of 378 sites - a statistically significant number from which he is allowed by science and law to draw general judgments about Chevron's operations.
- Chevron's claims of bias in the court also have no basis. The Ecuador court has bent over backwards to accommodate Chevron, and extended it due process protections not available to a typical defendant, said Fajardo.
"Chevron's claim that Professor Cabrera is cooperating with the plaintiffs is completely false and demonstrates a level of desperation because the company's legal prospects are rapidly dimming," said Fajardo, recently the recipient of the CNN "Hero" award for his work on the case. "Chevron is frightened by Cabrera precisely because he is an independent and credible expert," Fajardo said.
Fajardo further added that Chevron still has not revealed the potential Ecuador liability in its public filings, in apparent violation of SEC regulations. (A formal complaint sent to the SEC by Amazon Watch can be accessed at www.chevrontoxico.com.) Chevron has also refused to divulge that Ecuador's Attorney General filed a formal complaint to the U.S. Department of Justice alleging the company had committed various frauds in an earlier remediation.
"This is part of conscious strategy to try to discredit a trial process that Chevron knows it is losing because of the evidence," Fajardo said.
Ultimately, the court will decide the amount of damages after the parties respond to the expert's report; however such independent assessments are normally given great deference by judges in Ecuador.