Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

On Eve of Key Court Hearing, Chevron Drops Fraud Claims Against Funder of Ecuador Pollution Case

Hinton Communications
Contact: Karen Hinton at +1.703.798.3109

New York, NY – On the eve of an important court hearing and with its key factual evidence of "ghostwriting" firmly rebutted, Chevron has decided to drop a long-running litigation against a small funder of the Ecuador pollution lawsuit in a settlement where no money is being exchanged, according to sources familiar with the negotiation who asked to remain anonymous.

The announcement of the dropping of Chevron's lawsuit in Gibraltar against London-based Woodsford Litigation Funding – the centerpiece of the oil company's strategy to dry up financial support for the indigenous villagers who won a $9.5 billion judgment against the company – is scheduled for Monday at 8 a.m. Eastern Standard Time, according to the sources.

"This settlement is a classic illustration of how when Chevron's intimidation model doesn't work and people stand up for themselves, the company cuts bait and runs for the hills rather put its evidence to the test," said Steven Donziger, the longtime U.S. legal advisor to the villagers. (Donziger recently described Chevron's unethical litigation tactics in a legal publication available here.)

The timing of the planned settlement announcement is tied to the long-awaited argument over the appeal of Chevron's retaliatory RICO case before a three-judge panel of federal judges in Manhattan, which is scheduled for later Monday. Chevron wants the settlement with Woodsford reported by news outlets just before the argument so there will be another story in the event the company has a bad day in court, said the source.

Lawyers for the villagers have long predicted that Chevron's unprecedented RICO case will be vacated on appeal – largely because the federal trial judge (Lewis A. Kaplan) conducted a biased proceeding and excluded all evidence of Chevron's extensive contamination in Ecuador. For background on the case, see here. For the appellate briefs, see here.

In the RICO case, which primarily targeted Donziger, Chevron dropped all money damages claims on the eve of trial to avoid a jury rather than put its evidence to the test before an impartial fact finder – one of the bases for the appeal of that case.

The settlement against Woodsford comes at a time when the Gibraltar litigation was becoming a major headache and huge risk for the oil company in ways that it had not anticipated.

A few weeks ago, lawyers for Woodsford were seeking to convince the judge in that case – Justice Adrian Jack – to make a site visit to Ecuador to see the pollution firsthand. Woodsford also had demanded the Gibraltar court conduct a mini-trial on Chevron's flatly unethical payments of $2 million to its star fact witness in the RICO case, a disgraced former Ecuadorian trial judge who had testified the judgment was ghostwritten.

The mini-trial about Guerra potentially would have forced Chevron to disclose internal emails and other documents about key meetings prior to the RICO trial between its star witness and company lawyers at the law firm of Gibson Dunn & Crutcher. After those meetings, Guerra suddenly switched much of his testimony to fit Chevron's preferred narrative of "ghostwriting" even though that story has now been thoroughly discredited through new forensic evidence.

Donziger and other lawyers for the Ecuadorian villagers have long maintained Guerra lied under oath after he had been prepped for 53 straight days by lawyers at Gibson Dunn, including lead lawyer Randy Mastro, former Assistant U.S. Attorney Avi Weitzman (now a lawyer at Gibson Dunn), and Andrea Neumann. See here for background.

At least one prominent Chevron in-house lawyer is also thought to have participated in the meetings with the Gibson Dunn lawyers and Guerra, said Donziger.

The settlement with Woodsford also comes on the heels of a devastating finding against Gibson Dunn by the High Court of England that the law firm falsified evidence in another case where it tried to help persecute the political opponent of the leader of an authoritarian nation in Africa. See here for background.

Chevron had adamantly opposed the site visit by the Gibraltar judge to Ecuador given the extent of the visible pollution on the ground – a fact that, in yet another growing risk for the company, its own technicians acknowledge in a series of devastating internal videos turned over to an environmental group by a company whistleblower.

Those videos, reported this month by Amazon Watch and VICE News and available here, show Chevron officials finding extensive oil contamination at well sites the company claimed had been remediated as part of what appeared to be an elaborate ruse to defraud the same Ecuador court that ended up ruling against the company in 2011.

That court decision has been affirmed by eight separate appellate judges in Ecuador, including in a unanimous decision in 2013 by the nation's highest court.

"All of these factors tell one story – Chevron bailed out from the Gibraltar litigation when Woodsford, to its great credit, did not capitulate to the company's intimidation tactics," said Donziger, who along with a group of Ecuadorian and international lawyers has been litigating on behalf of the affected communities against the oil giant since the inception of the lawsuit in 1993.

"The settlement is favorable to Woodsford because the fund took the time to confront Chevron on its bogus facts," said Donziger. "Once confronted, Chevron walked away. Chevron recognized that the very able lawyers at Woodsford were fully prepared to fight if needed."

Although the settlement will allow Chevron to get rid of a growing litigation risk in Gibraltar, Woodsford also will receive commercial benefits from the expected agreement.

The company will save on its high litigation defense costs and will now have the ability to return its entire focus to its core business of financing business litigants in various commercial disputes and arbitrations. According to the terms of the settlement, Woodsford also agreed to give up its small share in the winning Ecuador judgment.

That share will be returned to the villagers by operation of contract, allowing them ultimately to spend more money on environmental clean-up once the Ecuadorian judgment is enforced against Chevron assets. (Enforcement actions against Chevron's assets are pending in Canada and Brazil.)

Unlike a previous Chevron settlement against the law firm Patton Boggs, which paid $15 million to Chevron after it ceased representing the villagers after the oil company filed a retaliatory lawsuit, Woodsford is paying Chevron nothing. The source indicated that Woodsford is assigning its equity share to Chevron, but that assignment is a nullity given that the company by the terms of its contract has no such rights without the permission of the plaintiffs in Ecuador.

Although Woodsford's portion of the judgment now will revert by contract to the villagers, Chevron for public relations purposes will try to claim it owns Woodsford's equity share, said Donziger. He called any such assertion "false" and "part of the company's strategy to continue to mislead shareholders and regulators about the true financial risk faced by the company."

"Chevron is going to try to claim this settlement as some sort of victory," he added. "What it really shows is a profound weakening of the company's legal position in recent months. We believe this downward trend for Chevron is likely to continue until the company pays the full amount of what it owes to the people it grievously harmed in Ecuador, many of whom have died of cancer due to exposures to oil contamination."