Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Shareholders Criticize Chevron CEO Watson for "Materially Mishandling" $12 Billion Ecuador Environmental Liability

Amazon Defense Coalition (ADC)
Contact: Karen Hinton at +1.703.798.3109

Midland, TX – Chevron's $12 billion environmental liability to rainforest communities of Ecuador will be front and center at the company's annual meeting tomorrow, with debate slated for three resolutions that challenge CEO John Watson's "material mishandling" of the historic litigation which continues to threaten the company's assets on a global scale.

Chevron's liability stems from findings by three layers of courts in Ecuador in 2013 that the oil giant deliberately dumped billions of gallons of toxic waste into the rainforest, decimating indigenous groups and causing an outbreak of cancer that has killed or threatens to kill thousands of innocent civilians. Chevron operated in Ecuador under the Texaco brand from 1964 to 1992.

(Here is background on the overwhelming evidence against Chevron as found by Ecuador's courts. Here is the unanimous judgment of Ecuador's Supreme Court against Chevron. Here is a new report outlining Chevron's bribery and fabrication of evidence before U.S. courts to try to evade the Ecaudor judgment.)

Chevron has refused to pay the judgment, threatening the villagers with a "lifetime of litigation" if they pursue their claims. "We will fight this until hell freezes over, and then fight it out on the ice," vowed Charles James, Chevron's former general counsel.

The affected communities in Ecuador are pursuing Chevron's assets in Canada, where the country's Supreme Court recently ruled unanimously in their favor. A trial on whether Chevron's assets can be seized is expected to begin in Toronto in 2019. Chevron also has failed to block a separate enforcement action against company assets in Brazil while plans are afoot to file more lawsuits targeting Chevron assets around the world if the company does not pay the Ecuador judgment within a reasonable time frame, said Carlos Guaman, the President of the Amazon Defense Coalition (or FDA, by its Spanish acronym), the group that brought the case.

Chevron officials and representatives of the affected communities have met on three separate occasions to try to resolve the lawsuit, said Guaman.

Among the challenges related to the Ecuador liability that Watson is expected to face at the annual meeting tomorrow:

  • A prominent shareholder, Zevin Asset Management, put forth a resolution to remove Watson as Chairman of Chevron's Board while allowing him to retain his job as CEO. Watson was deposed under oath during the Ecuador case and who has spent an estimated $2 billion on legal fees to hire 2,000 lawyers fight the villagers; Zevin cites Watson's "material mishandling" of the Ecuador litigation as a primary reason for the resolution.
  • Another resolution cites the Ecuador liability in proposing the lowering of the threshold to call a special shareholders meeting. It was introduced by Investor Voice and again cites Watson's mismanagement of the Ecuador liability in a supporting statement.
  • A third resolution, by one of Chevron's largest investors (the New York State Common Retirement Fund) specifically requests that the company add to its Board a director with environmental expertise. The New York comptroller, Thomas DeNapoli, has cited the Ecuador liability repeatedly in pressing for changes in the governance structure of the company.
  • Shareholder advisory services also have also backed the Ecuador-related resolutions. ISS, one of the largest such services, has recommended that its clients back all three resolutions – virtually guaranteeing a significant vote against company management, as has happened in years past.
  • The resolutions also follow a groundswell of support for the Ecuadorian villagers from 17 human rights groups and 19 international legal scholars. A bombshell new report documents how Chevron fabricated evidence and bribed a witness before a U.S. court to try to undermine the Ecuador judgment, potentially exposing company officials and their lawyers to criminal prosecution.

Zevon slammed Chevron management in the supporting statement for its resolution, which is on file with the Securities and Exchange Commission.

"Legal and environmental risks facing Chevron also illustrate the importance of more independent oversight," the company wrote. "Proponents are concerned that Chevron's management has materially mishandled legal matters brought against the company by communities in Ecuador – in ways that increased liabilities for the Company, currently amounting to more than $9 billion.

"Moreover, proponents are concerned about the adequacy of the Company's disclosure of those risks to shareholders," the statement says. "Finally, proponents are deeply troubled that the Company has evidently sought to intimidate longstanding shareholders who questioned the Company's approach to these issues."

In previous shareholder meetings, Chevron's management suffered a series of sharp rebukes over its Ecuador liability. One resolution calling on Watson to separate the positions of Chairman and CEO – widely considered a corporate governance anachronism – received a whopping 38% support from all company shareholders. Normally, any shareholder resolution that receives more than 10% support is considered successful.

In addition, in 2011 several of Chevron's institutional shareholders with more than $580 billion in assets under management sent Watson a letter urging the company to settle the Ecuador case. Amazon Watch also organized a letter signed by 43 non-profit human rights and corporate accountability groups blasting the company for trying to silence its critics over the Ecuador issue.

"In failing to negotiate a reasonable settlement prior to the Ecuadorian court's ruling against the company, we believe that Chevron's Board of Directors and management displayed poor judgment that has exposed the Corporation to a substantial financial liability and risk to its operations," said the investor letter.

U.S. Congressman James McGovern (D-MA), who visited the affected area in 2008, also sent a letter to President-elect Obama describing the horrid living conditions caused by Chevron's dumping practices. The company has also been criticized for trying to silence an anti-Chevron activist in Canada, for trying to intimidate lawyers and scientists for the villagers by suing them privately under racketeering laws, and for trying to shut down dissent by issuing subpoenas to more than 100 journalists, bloggers, and even some of its own shareholders who have questioned management.

In 2010, his first year as CEO, Watson lost his cool at the shareholder meeting and had five people arrested who had challenged him over Ecuador.

Deepak Gupta, a prominent U.S. appellate lawyer who represents U.S. attorney Steven Donziger (the main target of Chevron's retaliation campaign), recent called Chevron's litigation strategy an "intimidation model" in an interview with Rolling Stone magazine.

For the past several years, Chevron management has tried to "defend" itself in the annual meetings by showing a highly misleading film focused on supposed "fraud" committed by Donziger. But Chevron's allegations have been thoroughly debunked when its main witness admitted he lied on the stand and was bribed by the company, as this report documents in detail.

"Chevron's false allegations of "fraud" against the villagers and their lawyers are themselves part of the company's fraudulent racketeering scheme to evade paying for a clean-up of its massive environmental damage in Ecuador," said Donziger.

"Chevron is creating enormous risks for its shareholders by fighting what is essentially a company-wide jihad against the very communities it poisoned," he added.

Chevron also faces a critical court hearing in Canada in October that could knock out most of the defenses the company plans to use to evade enforcement of the judgment.

"The environmental damage on our lands is so extensive that it is unclear whether the full amount of the judgment would be sufficient for a comprehensive clean-up," Guaman, the FDA leader, said. "The humanitarian crisis is dire and it is our intention to recover the full amount of the judgment as soon as possible.

"We also appreciate the support from shareholders in our legal battle for justice," he added.