U.S. Judge Kaplan Held Investments In Chevron When He Ruled for Company in Ecuador Pollution Dispute
Donziger Calls On Judge to Review Investments and Make Full Disclosure of All Ties to Oil Company
29 October 2014 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
New York, NY – The U.S. federal judge who ruled in favor of Chevron in the company's campaign to block collection of its $9.5 billion environmental liability in Ecuador held investments in the oil company at the time of his decision, documents reveal.
Financial disclosure documents filed by the judge, Lewis A. Kaplan, show he invested in three J.P. Morgan funds that have holdings in Chevron. The judge never disclosed the investments despite being asked to recuse himself for bias in favor of Chevron during the company's retaliatory "racketeering" (or RICO) trial, which ended in March of this year. Kaplan denied the defendants a jury and ruled in favor of Chevron in what critics have called a deeply flawed proceeding.
During those proceedings, Kaplan repeatedly called the Ecuadorian villagers who won the judgment against Chevron the "so-called" plaintiffs and later said their case was nothing more than a "giant game" akin to "mud wrestling". Kaplan also repeatedly disparaged the main U.S. legal advisor to the Ecuadorians, Steven Donziger. At one point, he said Donziger wanted "to become the next big thing in fixing the balance of payments deficit".
(For more on Kaplan's disparaging comments and his many unprecedented rulings in favor of Chevron – including one that tried to block enforcement of the Ecuador judgment throughout the world but was later reversed – see here and here.)
Javier Piaguaje, a leader of a coalition of villagers that won the judgment against Chevron in Ecuador and a defendant in the U.S. case, said Kaplan's failure to disclose his holdings "is yet another disturbing example" of why the U.S. judicial proceeding has "no legitimacy" in the eyes of the villagers.
"It was obvious throughout that Judge Kaplan conducted a show trial where he served as a prosecutor for Chevron and judge at the same time," he said. "The fact he had investments in Chevron and never told us is more brazen than what I could have imagined."
Piaguaje and Donziger said they were consulting with counsel to discuss what could be done to protect their right to a fair trial at this late stage, with the case on appeal. Enforcement actions filed by the villagers targeting Chevron assets in Canada, Brazil, and Argentina are proceeding and are not affected by Kaplan's decision.
The federal law concerning judicial disqualification, available here, obligates judges to inform themselves about their personal financial interests, as well as those of any spouse or minor children.
Donziger, who lives in New York, said it was "extremely disconcerting" to learn that Kaplan has investments in Chevron.
"It is hard to fathom that a judge who behaved in a controversial way from the start and who favored Chevron almost every step of the way never disclosed that he had significant investments in the company," said Donziger. "Even if it was just one share, he should have disclosed it. His failure to do so deprived me and my clients of our ability to fully litigate the recusal motions. These new facts reinforce our conclusion that we were denied a fair trial."
Donziger said at a minimum Judge Kaplan should now scrub all of his holdings and "clearly disclose down to the last detail and last penny" any investments he has in Chevron. "It is impossible to determine the true extent of Judge Kaplan's investments in Chevron based on the general categories in his financial disclosure forms, which in any event need to be updated," Donziger said. "Only he has the ability to do this and it should be done immediately and in transparent fashion."
In his court-mandated financial disclosure forms, Kaplan also reported that he owns shares in The American Century Equity fund. The fund advertises in its 2013 annual report that it owns roughly 1.7 million shares of Chevron stock worth approximately $201 million. Beyond a general reference to the names of the J.P. Morgan and American Century funds, Kaplan never mentioned Chevron in his financial disclosure forms.
The Ecuador judgment issued in 2011 after an eight-year trial where the court found extensive evidence that the oil giant deliberately dumped billions of gallons of toxic waste into the rainforest, causing a public health crisis and other harm that has lasted to this day. The trial took place in Ecuador at Chevron's insistence after the lawsuit originally had been filed in New York.
In March of this year, after Kaplan invited Chevron to bring the RICO case and then denied repeated requests by Donziger and his clients for a jury, the judge ruled that the Ecuador decision was procured by fraud. The Ecuadorians claim the judge permitted Chevron to bribe its star witness and engage in other corrupt and unethical acts during the proceedings, as explained in more detail in this analysis. Kaplan also refused to hear any of the extensive scientific evidence of Chevron's contamination in Ecuador.
(Donziger's appellate brief, available here, explains the many legal and factual flaws in Kaplan's decision. This recent report on the Huffington Post concludes that Chevron's "fraud" narrative is false and is based on manufactured evidence.)
Federal law requires U.S. judges to disqualify themselves "in any proceeding in which" the judge's "impartiality might reasonably be questioned." By not disclosing his specific investments in Chevron, Kaplan deprived the Ecuadorians and Donziger of their right to seek his recusal on these grounds, said Chris Gowen, an ethics professor the Washington College of Law at American University and a member of the team that defended the villagers and Donziger.
"This new information is highly relevant given the very credible evidence of Judge Kaplan's bias during the course of the proceedings," Gowen said.
"The onus in such a situation is clearly is on the judge to disclose facts related to any actual or potential conflict rather than play hide and seek with disclosure forms," he added. "This is particularly true for this case given that the outcome could have life and death implications for indigenous groups and a lawyer's reputation is on the line. Even if it was just one share, Judge Kaplan was obligated to disclose it. But this looks like a lot more than just one share."
Gowen added that ignorance was no excuse in a high-profile case that had attracted the world's attention.
"Even if Judge Kaplan didn't know about his financial ties to Chevron – and I have a hard time believing this, given his meticulous attention to detail – it is my opinion that he had an ethical obligation to investigate and disclose," he said.
Donziger said he believes a searching inquiry on appeal would result in another reversal of Judge Kaplan, partly because the judge abused his power during the trial.
"I have made it clear that I dispute every significant aspect of Judge Kaplan's decision," added Donziger. "His hostility toward me and my highly vulnerable clients was palpable. It is thus hard for me to see his failure to disclose these investments as a mere one-time ethical lapse. It is even more disturbing when one considers that to help Chevron Judge Kaplan also condemned the entire judiciary of a foreign nation that is a U.S. ally and commercial trading partner."
Amazon Watch, a U.S.-based environmental organization that had been critical of Judge Kaplan, said it was exploring whether to file a complaint seeking a review of the judge's conduct. "Judge Kaplan's ethical lapses reflect terribly on the U.S. judiciary and undermine the rule of law for everybody," said Paul Paz y Miño, Amazon Watch's Director of Outreach.
Further Background on Judge Kaplan's Ties to Chevron and the Oil Industry
Kaplan's financial report for the year 2011 indicated the judge held interests in roughly 120 investment accounts and trusts. Prior to being appointed to the bench in 1994, Kaplan worked for 17 years as a defense litigator at Paul Weiss, one of the most profitable corporate law firms of that era.
Deep in Kaplan's 2011 disclosure report is reference to his interests in a JP Morgan Equity Income Fund, which lists Chevron among its "top ten" investments (see page 9 of this more recent semi-annual report of the fund). Investments in Chevron also appear to be part of several other investments, including a JP Morgan "Short Duration Bond Fund" and "Core Bond Fund." The American Century fund refers to the Chevron holdings on p. 14.
The relevant funds also have extensive holdings throughout the oil and gas sector, including investments in Exxon, Marathon, ConocoPhillips, Royal Dutch Shell, and Occidental Petroleum. All of these companies arguably would benefit from a Chevron victory given the stakes of what many regard as a paradigm-shifting litigation for the industry, said Gowen.
Normally, judges do not have to disqualify themselves from matters when they have financial ties to a party via a mutual fund, as distinct from holding stock directly. But Gowen pointed out that Kaplan had an affirmative obligation not to hide behind technical rules in a case where credible allegations of the judge's bias were on the table.
Judge Kaplan's bias was so evident during the proceedings that on two occasions, the Second Circuit Court of Appeals – which oversees all federal trial courts in New York – took the highly unusual step of granting oral argument on emergency motions to recuse the judge. The court ultimately declined to remove Kaplan although it was bothered enough by the judge's behavior that it asked him to submit a brief defending his handling of the matter.
Also relevant is that Kaplan appeared to invite Chevron to file the RICO case and then had it assigned to himself, noted Gowen.
While presiding in 2009 over a related discovery matter, Kaplan suggested to Chevron's lawyers that they file a retaliatory RICO case against the Ecuadorians and Donziger. Kaplan then bypassed standard court protocol and assigned the matter to himself. At the time, Kaplan ignored multiple complaints about the way the case ended up in his court.
Kaplan also refused several requests to divulge details of the invoices of his longtime friend and former law partner, Max Gitter. Kaplan appointed Gitter to oversee depositions in the case; Gitter also was accused of bias in favor of Chevron.
Chevron paid 100% of Gitter's fees and then refused a request by Donziger that the amount be disclosed. Gitter never sent an invoice to Donziger or the Ecuadorians. For more on Kaplan's lack of transparency with Gitter and another Special Master paid exclusively by Chevron, see here.
The Center for Public Integrity, a non-profit organization, recently wrote a scathing report that found 24 examples of U.S. federal appellate judges owning stock in parties involved in cases that were before them and already decided. The Center has not reviewed the records of the more numerous U.S. trial judges (including the information about Judge Kaplan) for any conflicts in their cases.
According to the Center, judges who own as little as one share of stock in a company before them are required to disqualify themselves. The rules for mutual funds are more lax but judges are still required to disqualify themselves if their "impartiality" might "reasonably be questioned".
In its report, the Center for Public Integrity quoted William G. Ross, a law professor at Samford University who specializes in judicial ethics.
"Considering the importance of judiciary integrity and the avoidance of conflicts of interest, I don't think it is asking too much of a judge to expect him to know what his or her holdings are," Ross said.