A Twist of Fate: Court Declares Ecuador Judgment Against Chevron a Fraud

On March 4, 2014, a federal court in New York added an additional twist to the ongoing drama between Chevron Corporation and indigenous Ecuadorean plaintiffs by ruling that the Plaintiffs would not be allowed to collect on a $9.5 billion dollar judgment entered against Chevron in Ecuador for alleged failure to remediate land and property in an area commonly known as Lago Agrio in the United States. 

The sprawling legal battle grew out of allegations that Texaco, later acquired by Chevron, left toxic pits full of drilling waste behind in Lago Agrio between 1964 and 1992 and that the company should be responsible for the cleanup and damages to the health of the indigenous people. Chevron says that Texaco, which left Ecuador before its acquisition, did its share of cleaning up the pits under agreements with the Ecuadoran government and the state oil firm, which has continued to pollute the area, is responsible for clean up.

Texaco was a minority partner in an oil-production consortium in Ecuador along with the state-owned oil company, Petroecuador, from 1964 to 1992. After Texaco turned its remaining share of the oil operations over to Petroecuador in 1992, pursuant to an agreement with Ecuador, it agreed to conduct a remediation of selected production sites while Petroecuador committed to perform any remaining cleanup. The government of Ecuador oversaw and certified the successful completion of Texaco’s remediation and fully released it from further environmental liability.

An initial verdict in the Ecuadorean trial court said that Chevron owed $19 billion, although the country’s supreme court later reduced the judgment to $9.5 billion. Since Chevron has no assets in Ecuador, the plaintiffs have been trying to collect the money in other countries. Today’s ruling stops these efforts for the moment in the United States.

The nearly 500-page ruling finds that Steven Donziger, the lead American lawyer behind the lawsuit against the company, violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), committed extortion, money laundering and wire fraud, violated the Foreign Corrupt Practices Act, tampered with witnesses and obstructed justice in obtaining the Ecuadorian judgment.

The court found that Donziger and his team “wrote the [Ecuadorian] court’s Judgment themselves and promised $500,000 to the Ecuadorian judge to rule in their favor and sign their judgment.” As Judge Lewis Kaplan stated in the court’s ruling: “The wrongful actions of Donziger and his Ecuadorian legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador – and they knew it. Indeed, one Ecuadorian legal team member, in a moment of panicky candor, admitted that if documents exposing just part of what they had done were to come to light, ‘apart from destroying the proceeding, all of us, your attorneys, might go to jail.’ It is time to face the facts.”

Kaplan said that “even if Donziger and his clients had a just cause they were not entitled to corrupt the process to achieve their goal.”

The company is expected to use Kaplan’s decision to defend itself against claims abroad. The case is Chevron Corp v. Steven Donziger et al, U.S. District Court for the Southern District of New York, No. 11-0691.

Armando Benincasa concentrates his practice in the areas of energy law, environmental law, environmental litigation, administrative law, government affairs and lobbying. His practice consists of cases involving permitting and regulatory requirements for natural resources, including coal and oil and gas, solid waste, water resources, underground storage tanks, voluntary remediation, and the drafting of rules and statutes related to the environment.
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