Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Chevron Misleads SEC Over Ecuador Lawsuit, Assert Rainforest Residents

Information in 10-Q Called "Dishonest" and "Misleading"

Amazon Defense Coalition

By Business News, Amazon Defense Coalition
17 February 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109

QUITO, Ecuador, (BUSINESS WIRE) -- Chevron is deceiving shareholders and the financial markets by filing misleading information with the Securities and Exchange Commission (SEC) to downplay its $27 billion potential liability in a environmental lawsuit in Ecuador, representatives for the plaintiffs in that case asserted today.

"We believe Chevron is distorting information in its public filings and thumbing its nose at SEC regulators," said Pablo Fajardo, the lead lawyer for 30,000 rainforest residents, a CNN "Hero Award" winner. "The company's information is dishonest and misleading."

Texaco has admitted it dumped more than 18 billion gallons of toxic waste water into Ecuador's Amazon waterways when it was the exclusive operator of an oil consortium from 1964 to 1990. The waste included carcinogens such as benzene, and five indigenous groups assert their traditional lifestyles have been decimated by the contamination.
Chevron bought Texaco in 2001 and will bear any liability in the case. A final decision is expected later this year.

A court-appointed expert, Professor Richard Cabrera, determined that 1,041 cancer deaths in an area the size of Rhode Island could be attributed to Texaco's sub-standard operational practices. The Cabrera report - based on the work of 14 independent scientists - concluded that damages could rise to $27 billion to cover environmental clean-up and compensation for cancers and other health problems.

In its November 10-Q filing with the SEC, Chevron included four assertions that are easily proved false simply by examining the court record, said Fajardo.
He said the four primary distortions in the 10-Q are:

-- Chevron falsely claims that the Ecuador court lacks jurisdiction over the company. In reality, Texaco stipulated before U.S. federal judge Jed Rakoff in 2002 that it would submit to jurisdiction in Ecuador as a condition of the court granting its motion to have the case transferred.

-- Chevron misleadingly asserts that the lawsuit is barred by the statute of limitations. Yet before Judge Rakoff, Texaco waived all defenses based on the statute of limitations as a condition of having its motion granted to move the case to Ecuador.

-- Chevron claims it was "released" from liability by Ecuador's government after a partial remediation in the mid-1990s. In reality, the language of Chevron's purported release expressly excludes the claims of the private individuals bringing the lawsuit. Chevron also fails to disclose that two of its lawyers are under indictment in Ecuador for lying to secure the release.

-- Chevron claims that the use of Ecuador's 1999 environmental law to bring the case is wrong because the law cannot be applied to environmental damage that occurred years earlier. In reality, as confirmed by the lawsuit, the plaintiffs are bringing their claims based on a statute that dates to 1861.

Fajardo said other obvious distortions in Chevron's SEC filing include:

-- Chevron tries to diminish the court expert, Richard Cabrera, by calling him a "mining engineer". Chevron fails to disclose that Cabrera is also a respected environmental scientist and university professor and that he worked on the expert report with 14 independent scientists. In fact, Chevron was so impressed with Cabrera's expertise that it paid him to work in an earlier part of the case.

-- Chevron says in the 10-Q that it cannot estimate a possible loss in the case, despite the fact the expert report identifies specific damage amounts in 4,000 pages of data that includes 64,000 chemical sampling results from dozens of oil production sites.

"Chevron's strategy in Ecuador has been to deceive the authorities and then try to cover it up when caught," said Fajardo. "Courts in both countries are being defrauded and thousands of innocent people are the victims."

Fajardo said lawyers for the plaintiffs were providing the SEC with more detailed information from the court record documenting Chevron's deception. Even though Chevron has faced a multi-billion dollar liability for several years in Ecuador, the company did not disclose it to the SEC until the middle of 2008 and even then refused to estimate the amount of potential loss despite the $27 billion liability cited in the Cabrera report.

For the last two years Chevron has suffered a series of setbacks in the case, which was originally filed in 1993 in U.S. federal court. Ecuador's trial court denied a Chevron motion to dismiss the case, Ecuador's national prosecutor indicted two Chevron lawyers and seven former government officials for lying about the purported clean-up, and the U.S. Congress extended trade benefits to Ecuador despite protests by Chevron.

A U.S. federal judge recently denied Chevron's attempt to force Ecuador's government into a binding arbitration over who should pay for further clean-up.