Chevron is defending itself against false allegations that it is responsible for alleged environmental and social harms in the Amazon region of Ecuador. This backgrounder on the case is divided into sections on the history of Chevron's Texaco subsidiary's operations in Ecuador, the fraudulent litigation against Chevron, and subsequent legal actions.
History of Texaco in Ecuador
Chevron has never conducted oil production operations in Ecuador. Its subsidiary Texaco Petroleum Co. (TexPet) did operate in Ecuador, mostly in minority partnership with Ecuador's state oil company, Petroecuador, which owned 62.5 percent. TexPet left Ecuador in 1992, and at that time it fully remediated its share of environmental impacts arising from oil production. The $40 million remediation operation was certified by all agencies of the Ecuadorian government responsible for oversight, and TexPet received a complete release from Ecuador's national, provincial and municipal governments. Chevron acquired TexPet in 2001.
For more than two decades, Petroecuador has been the sole owner of the operations TexPet left behind, and the state oil company has greatly expanded them. Petroecuador has been slow to remediate its majority share of pre-1992 impacts and has amassed a poor environmental record since that time. All remaining environmental conditions in the region are the sole legal responsibility of Petroecuador, and in December 2011, Petroecuador announced a $70 million remediation program that would address the balance of the necessary clean-up.
The Fraudulent Judgment Against Chevron
In February 2011, a court in Lago Agrio, Ecuador issued an $18 billion judgment against Chevron. This judgment is illegitimate because of documented evidence of fraud and unethical action by the plaintiffs' lawyers as well as the Ecuadorian government and judiciary.
A former Ecuadorian judge acknowledged his direct involvement in orchestrating a fraudulent judgment against Chevron. In a sworn declaration filed on January 28, 2013, in New York federal court, Alberto Guerra, who presided over the case when it was first filed in 2003, reveals that he was paid thousands of dollars by the plaintiffs' lawyers and a subsequent judge, Nicholas Zambrano, for illegally ghostwriting judicial orders issued by Zambrano and steering the case in the plaintiffs' favor. Guerra, who is no longer a judge, attests that the plaintiffs' lawyers were permitted to draft the $18 billion judgment in their own favor after they promised to pay Zambrano a $500,000 bribe out of the judgment's enforcement proceeds, and that Guerra then reviewed the plaintiffs' lawyers' draft for Zambrano before the judge issued it as his own.
Guerra's declaration, which is corroborated by computer, bank and shipping records, as well as the plaintiffs' lawyers' own internal e-mails, provides a direct account of corruption that has tainted the trial for years, all of which will be examined at the upcoming RICO trial. Read More About Guerra's Admissions
In addition, the environmental damages claims that underlay the February 2011 judgment have also been proven to be the result of fraud. On April 12, 2013, the plaintiffs' chief environmental consultants, Boulder, Colo.-based Stratus Consulting, filed sworn statements detailing their knowledge of the plaintiffs' lawyers' misconduct and testifying that there is no scientific merit to the allegations against Chevron.
In sworn declarations (here and here), senior Stratus executives detail the role the firm and the plaintiffs' lawyers played in drafting the supposedly independent damages report of Richard Cabrera, which serves as an evidentiary basis of the 2011 judgment against Chevron in Ecuador. The testimony also provides a direct account of lead plaintiffs' lawyer Steven Donziger's control of the "Cabrera Report" process and the pressure Donziger applied to contrive damages attributed to Chevron.
For information on additional evidence of fraudulent behavior by the plaintiffs' representatives, read more.
Subsequent Legal Actions
Chevron does not believe that the Ecuador ruling is enforceable in any court that observes the rule of law. The company will continue to seek to hold accountable the perpetrators of this fraud and is currently pursuing the following actions:
In February 2011, Chevron filed a civil lawsuit under the Racketeer Influenced and Corrupt Organizations Act (RICO) that seeks to hold the plaintiffs' representatives accountable for fraud, extortion and other misconduct associated with the Lago Agrio litigation. Through the lawsuit, Chevron is seeking damages associated with the cost of defending the Ecuador litigation as well as other relief and will proceed to trial in 2013.
Chevron also is pursuing relief against Ecuador through international arbitration. On February 7, 2013, an international arbitration tribunal, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (BIT) and administered by the Permanent Court of Arbitration at The Hague, ruled that the Republic of Ecuador has violated the tribunal's prior interim awards by not preventing the attempted enforcement of an $18 billion judgment against Chevron.
The tribunal found that despite its instructions in earlier awards, the Republic of Ecuador has facilitated the plaintiffs' pursuit of enforcement.
(In prior rulings, the tribunal put the Republic on notice that if Chevron's arbitration ultimately prevails, Ecuador itself could be liable for losses incurred by Chevron as a result of enforcement of the Lago Agrio judgment in other jurisdictions. Chevron filed its request for arbitration in 2009, claiming that the Republic violated its obligations under the BIT and international law. Read more.)
Although the plaintiffs continue to move forward with enforcement attempts outside of Ecuador, their strategy was recently dealt a significant setback when on May 1, 2013, the Ontario Superior Court of Justice stayed an enforcement action in Canada.
In doing so, the court stated that "the plaintiffs have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced and ignored so that its assets become eligible to satisfy a judgment against its ultimate parent. There is no basis in law or fact for such a claim.... Ontario courts should be reluctant to dedicate their resources to disputes where, in dollar and cents terms, there is nothing to fight over." Read more