Court Appointee in Chevron Ecuador Lawsuit Tied to Ecuador State-Owned Oil Company
Mining Engineer Who Called for $27 Billion Award against Chevron Hides Disqualifying Financial Conflict of Interest
SAN RAMON, Calif., Feb. 9, 2010 - In a court filing today in Lago Agrio, Ecuador, Chevron Corp. (NYSE:CVX) provided newly discovered information showing that the author of a report recommending that Chevron be ordered to pay $27 billion in damages is the majority owner of an oilfield remediation company that stands to gain financially from a judgment against Chevron. Due to the remediation company's relationship with Ecuador's state-owned oil company, Petroecuador, Chevron called upon the court to immediately reject the work of Richard Cabrera on the grounds that he knowingly hid his relationship and that he stands to gain from what was supposed to be unbiased work for the court.
"For three years, Mr. Cabrera has concealed clear financial conflicts of interest that disqualify him from acting as an independent and objective evaluator of the evidence in the case," Chevron Vice President and General Counsel Hewitt Pate said. "While Mr. Cabrera's financial interests alone are sufficient grounds for his report to be rejected, his intentional concealment of those interests further demonstrates that the entirety of his work lacks honesty, integrity, or credibility."
Recently uncovered records, from 2003 through 2008, show Cabrera is co-founder, general manager, majority stockholder, and legal representative of an oilfield remediation company, Compañía Ambiental Minera-Petrolera S.A. ("CAMPET"), which is registered to perform oilfield remediation and other services for Petroecuador. Cabrera failed to disclose these business interests as required by law.
In his report, Cabrera absolves Petroecuador of any responsibility or remediation obligations associated with past or present oil operations despite its majority ownership of the Petroecuador-Texaco Petroleum consortium, which operated until mid-1992, and Petroecuador's sole ownership and operation of the former consortium fields for the past 18 years. Disregarding Ecuadorian media reports and other evidence showing that Petroecuador has spilled millions of gallons of oil since taking over exclusive ownership and operations in 1992, Cabrera exclusively attributes pollution in the Amazon region of Ecuador to Texaco Petroleum, now a fifth-tier subsidiary of Chevron. Cabrera's report says that Chevron, because it acquired Texaco Inc. in 2001, is solely liable for damages, citing grossly inflated remediation costs while ignoring Petroecuador's role in oil operations and its well-documented poor environmental performance. Cabrera's report also calls on Chevron to pay $375 million to update Petroecuador's oilfield equipment, which Petroecuador has for decades failed to properly maintain or replace. These findings make no sense as a matter of Ecuadorian law or common sense, but are consistent with furthering Petroecuador's interests, as well as Cabrera's own.
After knowingly omitting to disclose his financial interest in CAMPET, as well as CAMPET's status as a registered Petroecuador contractor, Cabrera affirmatively misrepresented in court filings that he did not have any impediment or conflict that would affect his performance as an "independent" court-appointed witness. Cabrera violated the law by accepting his appointment, which required an explicit acknowledgment of public duties as an impartial analyst—an acknowledgment Cabrera could not truthfully have made given his financial interests.
Cabrera's recommendations and independence were already compromised prior to the discovery of his conflict of interests:
- The Amazon Defense Front, the named financial beneficiary of the lawsuit, directly and improperly paid Cabrera more than $200,000 for his work;
- Sections of Cabrera's $27 billion claim are copied word-for-word from documents written by Amazon Defense Front lawyers;
- Photographs and video show representatives of the Amazon Defense Front conducting Cabrera's field work as well as preparing soil and water samples for Cabrera, who had promised to carry out his work independently;
- Nearly 90 percent of Cabrera's $27 billion figure is allocated to issues that he was not directed to examine and that are unrelated to the actual claims in the Ecuador lawsuit;
- Cabrera assessed more than $9 billion as compensation for cancer deaths without providing any medical evidence or even the name of a single alleged victim or family member beneficiary to support his recommendation;
- Cabrera recommends Chevron pay more than $8.4 billion for what he deems "unjust enrichment," despite the fact that Texaco Petroleum earned less than $500 million in profits during the life of the consortium while the government of Ecuador received more than $24 billion, more than ninety percent of the total revenue generated by the consortium. Moreover, there is no basis in Ecuadorian law for such an award;
- Cabrera assessed $3.2 billion for groundwater remediation and $428 million to improve potable water systems even though he did not take any samples of streams, rivers, municipal water sources or drinking water wells, and states in his own report that he did not have enough data to develop a groundwater remediation plan;
- Cabrera recommends more than $2.7 billion dollars for pit remediation, averaging more than $3 million per pit. This figure is vastly inflated compared to the $85,000 per-pit actual cost for Petroecuador's recent remediation work that has been implemented to the full satisfaction of the government. Proper remediation, therefore, of every pit that Petroecuador is obligated to clean up would cost well under $100,000,000;
- Cabrera claims $1.7 billion in damages for oil infrastructure sites that have been in constant use by Petroecuador for nearly two decades and substantially expanded by Petroecuador since Texaco Petroleum's departure in 1992;
- Cabrera assessed more than $1 billion in soil remediation for sites he never visited.
Chevron previously challenged Cabrera's lack of qualifications as well as the biased and baseless substance of his report. But Judge Juan Nuñez, who subsequently was disqualified for his involvement in a scheme to solicit bribes in connection with letting remediation contracts that were supposed to be funded with the proceeds of the judgment Cabrera recommended, inexplicably ignored those challenges, thus shielding Cabrera's work from scrutiny. Now that Cabrera's clear conflicts of interest are revealed, Chevron has demanded that the court strike his entire involvement in the case.
"Mr. Cabrera has placed his own financial interests, as well as the interests of Petroecuador and the Amazon Defense Front, ahead of the interest of justice," Chevron's Pate added. "Today's disclosure further illustrates the illegitimacy of Mr. Cabrera's fictitious $27 billion recommendation. Taken into account with Mr. Cabrera's collusion with the plaintiffs' lawyers and representatives, it is clear that his report should have no bearing in the outcome of this trial."
Chevron Corporation is one of the world's leading integrated energy companies, with subsidiaries that conduct business worldwide. The company's success is driven by the ingenuity and commitment of approximately 62,000 employees who operate across the energy spectrum. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and other energy products; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com.
Corroborating evidence of Cabrera's misconduct and collaboration with the Amazon Defense Front can be accessed at http://bit.ly/9Ux9FT.
Published: February 2010