Chevron General Counsel Hew Pate Misleads Financial Markets Over Default Judgment In Ecuador Pollution Case

New York, NY – Hit hard by a series of courtroom setbacks related to its $10 billion Ecuador pollution liability, Chevron's top lawyer R. Hewitt Pate is again misleading the financial markets by falsely claiming that a small default judgment the company obtained in the tiny protectorate of Gibraltar is a major victory against indigenous villagers, according to representatives of the rainforest communities.

The Chevron default judgment in Gibraltar to cover the legal fees of roughly 100 corporate defense lawyers – some of whom billed Chevron as much as $1,200 per hour – is "worthless" in that it is against a dormant investment vehicle that has no money, said Steven Donziger, a U.S. advisor to the indigenous communities that won the underlying environmental judgment.

The amount of the Gibraltar judgment is $28 million, or less than one percent of what the company owes for an environmental clean-up in Ecuador where courts found it responsible for discharging billions of gallons of toxic waste into streams and rivers in the 1970s and 1980s.

"Chevron will not, and indeed should not, ever collect the first penny of an illusory judgment in Gibraltar which is part of the company's strategy to evade its legal obligations to the many thousands of people who face life-threatening harm in Ecuador," said Donziger.

Gibraltar, a British territory of only 2.6 square miles connected to Spain on the southern tip of the Iberian Peninsula, has a population of only 30,000. Gibraltar has only four trial judges while its tiny airport landing strip doubles as the country's main road. The territory is considered an outdated colonial relic from the British Empire.

Gibraltar in it entirety is far smaller than the rural town of Ocala in North Florida – evidence of how desperate Chevron General Counsel Pate is to justify the company's failed litigation strategy, said Donziger.

"Pate forum shopped the world to extract a judgment from an irrelevant jurisdiction that commands no respect on the global stage in a case that was understandably and quite properly never defended on the merits because it does not matter," Donziger said. "The Gibraltar judgment has zero value to Chevron other than as a public relations stunt to distract attention from its growing financial risk due to advances in enforcement actions targeting company assets in Canada and elsewhere."

(For background on Chevron's deception in Gibraltar, see this blog.)

Donziger criticized Pate for distributing a misleading press release this week where he suggested that the default judgment from the "Supreme Court" of Gibraltar – which is actually a trial court with the judgment signed by only one of the four judges – represents a major victory for the oil giant. Ecuador's highest court unanimously confirmed the $9.5 billion judgment against Chevron in 2013; with interest, the judgment is now worth slightly more than $10 billion.

Donziger said Pate's latest press release about the Gibraltar judgment contains other misleading assertions and omits critical facts that the company's shareholders should note, as follows:

• ARL was set up as a legitimate entity by the villagers to manage the proceeds from the case and was not an offshore company of Donziger, as Pate falsely claimed in his press release. In fact, Donziger never had any decision-making authority in the company nor participated in any of its meetings. The directors of ARL were three Ecuadorian villagers, an outside lawyer from the United Kingdom, and a representative from the major international accounting firm Grant Thornton.

• There was no decision in Gibraltar on the merits of the case, which already was decided in Ecuador where Chevron insisted the trial be held. The Gibraltar trial judge simply ruled for Chevron automatically because the villagers chose not to defend the action.

• The villagers set up ARL to transparently manage any clean-up proceeds collected so they can be disbursed without interference from either the Ecuadorian government or Chevron. Given Chevron's attacks on ARL, the villagers decided long ago to forego use of the entity nor expend their limited resources defending it, said Luis Yanza, an Ecuadorian community leader and one of ARL's directors.

• Contrary to Pate's assertions, the Ecuadorian villagers also decided not to defend ARL to avoid falling prey to Chevron's abusive plan to tie up their lawyers on irrelevant collateral issues in far-flung jurisdictions. Instead, the villagers are "focused in an extremely disciplined way" on seizing Chevron's assets to force compliance with the Ecuador judgment so the communities can clean up their ancestral lands, said Yanza.

Under Pate's watch, Chevron recently suffered three major setbacks in the pollution case.

Pate was dealt a major setback when three layers of courts in Ecuador found Chevron deliberately dumped billions of gallons of toxic waste when it operated (under the Texaco brand) in the South American nation from 1964 to 1992. The dumping decimated indigenous groups and caused an outbreak of cancer that has killed or threatens to kill thousands of forest inhabitants, according to the evidence.

In September of this year, the Canada Supreme Court unanimously rejected a Chevron attempt to block the villagers from enforcing their judgment against the company's assets in that country. Chevron has an estimated $15 billion worth of oil fields, refineries, and properties in Canada. Argument on the case is slated to begin March 7 in Toronto.

More recently, media outlets (see here and here) reported that Chevron's discredited star witness, Alberto Guerra, admitted lying on the stand and falsifying evidence after he had been paid $2 million by the company and moved with several family members from Ecuador to the United States. Chevron lawyers coached Guerra for 53 days before he testified untruthfully in the company's retaliatory "racketeering" case.

Without Guerra's testimony being seen as credible, Chevron stands little chance of surviving the enforcement action in Canada, said Donziger. "Pate is hurting because he staked almost all of Chevron's defense on a completely discredited witness who has admitted to lying repeatedly," Donziger said.

For years, Donziger himself has been the main target of an avowed Chevron demonization campaign designed to distract attention from the company's misconduct in Ecuador. (For Donziger's take on Chevron's efforts to corrupt the Ecuador trial and present false evidence, see this legal brief and these counterclaims filed against the company.)

Pate, who makes approximately $8 million annually from Chevron, also has a long history of trying to mislead shareholders on behalf of company management, as this blog explains. Chevron has used roughly 2,000 lawyers and 60 law firms against the villagers and their lawyers.

Under Pate's watch, Chevron also has been criticized by some of its own shareholders for failing to fully disclose the material risk from its Ecuador liability to the Securities and Exchange Commission, as required by law.

Even though it insisted the trial be held in Ecuador, Chevron has vowed never to pay the judgment. A company spokesman said Chevron will litigate against the villagers until "hell freezes over" and then "fight it out on the ice". A Chevron lobbyist also was quoted in Newsweek saying in reference to the case: "We can't let little countries screw around with big companies."

Donziger also criticized Pate for the subtle racism in Chevron's strategy to target the lawyers for the villagers to distract attention from the company's liability.

"Pate and his colleagues in Chevron act as if no indigenous person from Ecuador's rainforest has either volition or intelligence," he said. "They seem to believe the villagers are simply dumb people manipulated by outsiders. I understand this mentality, because that's how Texaco viewed the Ecuadorian people when it deliberately destroyed their lands and waterways.

"Today, that approach reeks of racism. It is also based on patently false assumptions as anybody can see by simply talking to the internationally recognized community leaders who have battled Chevron so successfully for years. All of the individual community leaders are powerful, highly intelligent, and in many ways far more sophisticated than Pate or any of Chevron's high-priced lawyers."