In Canada Trial, Chevron Fighting Desperately To Hide Embarrassing Information from Public

Toronto, Canada – Chevron lawyers and corporate executives are fighting desperately to prevent critical and apparently embarrassing information from spilling over into public view during the high-stakes enforcement trial over the Ecuador environmental judgment that began this week in a Canadian courtroom.

In the enforcement trial, where Ecuadorian rainforest communities are seeking to seize Chevron assets after the company refused to pay the judgment against it, critical information in the main brief of the communities remained heavily redacted on the second day of the four-day proceeding – resulting in the odd spectacle of the villagers themselves and their supporters watching the argument of their own lawyer with no real way to completely understand what was being said.

"I believe the public has a right to know what is my submissions," said Alan Lenczner, the lawyer for the villagers, to Justice Glen Hainey, who is presiding over the trial. "There is a fundamental principle in Canada of open court proceedings that Chevron is not respecting and that this court must protect."

Lenczner, considered one of Canada's foremost litigators, for weeks has been trying to convince Chevron to lift its "completely overbroad" confidentiality order, according to argument in court yesterday. Lenczner claimed all of what Chevron wants redacted from his briefs is available publicly in the company's annual reports and securities filings and is therefore not proprietary.

Lenczner also argued that Chevron is obviously scared to have all the information about the corporate control of its subsidiary in one place rather than buried in obscure documents where the public would never be able to connect the dots that prove it is lying when it claims its Canadian subsidiary, Chevron Canada, is an independent entity.

Chevron owns 100% of the company, receives 100% of its revenues, and financially guarantees its projects, said Lenczner in the parts of his brief that were not redacted.

"Information Chevron wants to hide should not be kept from the public," said Lenczner.

At that point, some of the roughly 20 Chevron lawyers at the proceeding appeared visibly discomfited and one of them asked for the proceeding to be closed to the public until the issue could be resolved.

The information Chevron is trying to hide mostly concerns the obvious "domination" by Chevron corporation of Chevron Canada, as well as the extent of Chevron's Canada's substantial assets in the country which are estimated to be worth between $15 billion and $25 billion. The communities are trying to collect 100% of $9.5 billion environmental judgment plus statutory interest under Canadian law, which has raised Chevron's total liability to close to $12 billion.

After an eight-year trial in Chevron's chosen forum of Ecuador, three layers of courts found that Texaco (now owned by Chevron) deliberately and systematically dumped billions of gallons of benzene-laden oil waste into streams and rivers, poisoning the water supply and decimating indigenous and farmer communities that populate the isolated area with high cancer rates and other health problems. Chevron quietly sold off its assets in Ecuador during the trial and now refuses to pay the judgment, with a spokesman saying the company plans to create a "lifetime of litigation" for the communities to punish them for bringing their claims.

Chevron for years had insisted the trial over its pollution be held in Ecuador and promised to abide by any judgment there when it requested that a U.S. federal court (where the pollution claims were originally filed in 1993) send the case to the South American nation. Once there, and with evidence of its pollution mounting, Chevron turned its guns on Ecuador's courts and accused them of being unfair. Chevron is now asking – after 22 years of litigation – to re-litigate the entire trial in Canada, which the affected communities oppose.

Paul Paz y Mino, Associate Director of Amazon Watch and a supporter of the affected communities who is observing the proceedings in Canada, blasted Chevron for hiding the information and generally trying to delay and obstruct the Canadian proceedings.

"Everybody in court can see Chevron Canada is taking orders directly from Chevron Corporation and its lawyers, including many of its U.S.-based lawyers from the law firm of Gibson Dunn who are taking up a huge number of the seats in the courtroom," he said. "It is typical of Chevron to try to hide the reality of the way it operates from its shareholders and the public."

In an unredacted part of his brief, Lenczner described Chevron's control of its Canadian subsidiary as follows:

"Chevron earns no revenue and has no direct earnings. All of its money from subsidiaries that carry out its extractive business functions. In four years, a total of $22.275 billion has been paid to Chevron from revenue earned by Chevron subsidiaries."

Yet in another part of the redacted brief, available here, Lenczner appears to outline substantial monies Chevron Canada borrowed from Chevron to fund its own investments. All of Chevron Canada's revenues flowed up to Chevron Corporation, according to the brief. The brief also outlines some of the many monetary guarantees made by Chevron on behalf of Chevron Canada.

The issue of Chevron's control of Chevron Canada is critical because Chevron is trying to block enforcement of the judgment in Canada by making the technical argument that the communities could never collect its assets in the country because they are held by a wholly owned but "independent" subsidiary rather than by Chevron itself. Chevron has never disputed that Texaco created extensive contamination in Ecuador; its main argument is that it is not responsible for paying the judgment, even though it willingly assumed Texaco's liabilities when it bought the company in 2001.

Lenczner has argued that the communities are entitled to seize the shares of Chevron Canada to collect a debt that Chevron owes them, and that the issue has nothing to do with corporate law or subsidiary liability. The Canada Supreme Court already unanimously ruled once in favor of the villagers when Chevron tried to use jurisdictional grounds block the enforcement proceeding, which was filed in 2012.

For background on the first day of the proceedings where Chevron's lawyers made their long-winded arguments related to subsidiary liability, see this blog. On Wednesday, the court began to hear argument on the motion by the communities to knock out Chevron's "fraud" defense on the theory that it is based on fabricated evidence and already had been rejected by Ecuador's courts in the years of proceedings in that country.

(For background on the Canadian enforcement proceeding, see here. Here is a detailed background memo for journalists and observers on the Canadian enforcement action and its policy implications. For the most important legal filing by the villagers for the motions hearing, see here. For a summary of the Canadian Supreme Court decision in favor of the Ecuadorians, see here. For a summary of the overwhelming evidence against Chevron in Ecuador, see here.)