Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Chevron’s Misrepresentations to Shareholders over Ecuador Liability Have Been Obvious for Months

Company “Clearly Hiding” Risk Factors from Investors and Financial Markets, Representatives Say

Amazon Defense Coalition

Amazon Defense Coalition
Contact: Karen Hinton at +1.703.798.3109

LAGO AGRIO, Ecuador (BUSINESS WIRE)--Behind the letter sent by New York Attorney General Andrew Cuomo to Chevron over its potential $27 billion environmental liability in Ecuador is a growing concern in the investor community that the company is providing misleading information about its financial risk to regulatory authorities and investors, said an Amazon Defense Coalition official.

For several months, representatives of the indigenous communities in Ecuador's Amazon have been warning shareholders that Chevron has been using false information to minimize its financial exposure in the litigation, which is expected to end this year with a possible record-breaking judgment against the company. Cuomo has asked Chevron to provide information about its public filings on the litigation and set a response deadline for May 11, according to news reports Wednesday.

"We believe Chevron is distorting information in its public filings and thumbing its nose at SEC regulators," Pablo Fajardo, the lawyer for the Ecuadorians, was quoted as saying on February 17 of this year. Fajardo at the time described Chevron's SEC disclosures as "dishonest and misleading."

Today, Fajardo said he stands by his comments. "The letter from the New York Attorney General is not surprising and is probably overdue," he said when told of the news reports. "It has been clear to us for some time that Chevron has engaged in a cover-up to hide the liability from shareholders."

The Cuomo letter to Chevron follows an article in April in the Wall Street Journal that outlined concerns from several large public pension funds about the way Chevron's management is handling the Ecuador matter. On Sunday night, 60 Minutes broadcast a segment where a Chevron lawyer, Sylvia Garrigo, stumbled through an interview unable to explain how the company could find itself facing such a huge liability in a court where Chevron asked for the trial to take place.

The lawsuit charges Texaco (now Chevron) with dumping more than 18 billion gallons of toxic waste into Ecuador's Amazon waterways, decimating indigenous groups and causing increases in cancers and oil-related health problems. A team of court experts have calculated damages at $27 billion, and a decision is expected later this year.

While the case was initially filed in the U.S. in 1993 and the trial started in 2003 in Ecuador at Chevron's request, Chevron never disclosed any potential liability in the matter in its public filings until 2008.

Fajardo said Chevron has provided misleading or incomplete information, or blatantly lied, in its 10-q and 10-k filings as follows:

    * Chevron claims in its disclosures that it is not subject to jurisdiction in Ecuador’s courts. This directly contradicts a court order the company signed in 2001 voluntarily subjecting itself to jurisdiction in Ecuador, as a condition of the case being transferred out of U.S. courts.
    * Chevron also claims that is has statute of limitations defense in Ecuador. But in the same order cited above, Chevron waived those defenses as a condition of transferring the case to Ecuador.
    * Chevron asserts in its filings that it was released from Ecuador's government from further environmental liability, but the release itself by its express language does not cover the claims of private litigants.
    * Chevron also asserts that the law used in Ecuador is being applied retroactively, when in fact it has been part of Ecuador's civil code since the 1800s.

Each of the misrepresentations is easily provable with a minimum of investigation, said Fajardo. "It strikes us that the Chevron legal department is absolutely reckless with regard to its public filings on the Ecuador case," he said.