Wed, 30 Dec 2009
WASHINGTON - (Business Wire) The signing this week by President Barack Obama of an extension of trade benefits for Ecuador – over strenuous objections from Chevron -- caps a brutal year of legal and lobbying setbacks for the oil giant in its attempts to evade a multi-billion dollar liability for environmental damage in the Amazon rainforest.
Obama’s signature on the trade deal, consummated this week, is the fourth defeat in three years for Chevron’s A-list lobbying team in its effort to cancel trade preferences for Ecuador as “punishment” for allowing indigenous groups to sue the oil giant in Ecuador’s courts. Chevron is charged in a class action lawsuit brought by 30,000 Ecuadorians with dumping billions of gallons of toxic waste when it operated several large oil fields in Ecuador’s Amazon from 1964 to 1990, decimating indigenous groups and causing a spike in cancer rates and other oil-related diseases.
A court-appointed Special Master found 1,401 people had died of cancer due to the contamination and pegged damages at $27.3 billion, with a final judgment expected in 2010. Experts consider the disaster at least 30 times worse than the damage caused by the Exxon Valdez.
If Chevron had succeeded in canceling the trade benefits, Ecuador’s government estimated the country would have lost 350,000 jobs. Similar lobbying efforts by Chevron in prior years met stiff opposition from a number of Senators and Congressmen, and also failed. Chevron’s effort to use the trade preferences as leverage was led by outside lobbyists Wayne Berman, a longtime Republican operative; Mac McLarty, White House Chief of Staff under President Clinton; and Mickey Kantor, the U.S. Trade Representative under President Clinton.
"The extension of the trade benefits to Ecuador is a major setback to Chevron's campaign to undermine the rule of law in the environmental case," said Steven Donziger, an American legal advisor to the plaintiffs.
Chevron’s defeat over trade preferences capped a terrible 2009 for Chevron on the 16-year Ecuador case, both legally and politically, in the media, and among shareholders.
On the legal front, Chevron suffered multiple defeats in U.S. federal court in New York in its attempt to shift the liability for clean-up to Ecuador’s government. Chevron lost a four-year trial, was unanimously denied on appeal, and suffered the added indignity of being rebuffed by the U.S. Supreme Court when it asked for a review of the case.
In the separate environmental case in Ecuador, Chevron lost a number of motions to delay the six-year proceedings, paving the way for a decision in 2010.
Further, two Chevron lawyers are under criminal indictment in Ecuador for lying about the results of a purported remediation to obtain a legal release from Ecuador’s government. In the United States, New York Attorney General Andrew Cuomo opened a probe of Chevron to determine if the company is misleading shareholders over the Ecuador liability.
Separately, the U.S. Department of Justice has been asked by the plaintiffs to determine whether Chevron orchestrated the appearance of a bribery scheme in Ecuador to undermine the trial. If so, the company might be found in violation of the Foreign Corrupt Practices Act.
Several large shareholders made it a tough year for Chevron management. At least $37 billion in company shares voted to defy CEO David O’Reilly over human rights issues, driven partly by the pending Ecuador liability.
On the lobbying front, Chevron suffered a string of embarrassing defeats over Ecuador in Washington. In December, 26 House members – including several members of the leadership -- signed a letter to the United States Trade Representative asking that the agency ignore Chevron’s efforts to use U.S. trade policy to interfere in the Ecuador legal case. In June, four U.S. Senators wrote a similar letter to the USTR, while no Senator or Congressman wrote a letter in favor of Chevron.
Separately, Rep. Linda Sanchez (D-CA) in November blasted Chevron’s lobbying effort against Ecuador in testimony before the House Ways and Means Trade Subcommittee, likening it to “extortion”. “Apparently, if it can’t get the outcome it wants from the Ecuadorian court system, Chevron will use the U.S. government to deny trade benefits until Ecuador cries uncle,” said Sanchez.
Chevron suffered another setback in December when it was sued in U.S. federal court by Ecuador seeking to enjoin the company’s second international arbitration attempt designed to shift liability to Ecuador’s government. The second arbitration, which would take place under the U.S.-Ecuador bilateral investment treaty, was considered one of Chevron’s final legal options to evade liability, but that effort is now in doubt.
In the media, Chevron endured an unflattering 60 Minutes report that clearly demonstrated the company built hundreds of unlined waste pits in Ecuador that were designed to be drained into nearby streams and rivers; that it never kept a list of the locations of its waste pits so as to warn local residents; and that Chevron’s lawyers, in an effort to discredit Ecuador’s courts, are contradicting years of sworn affidavits filed by the company in U.S. federal court praising those courts as fair and competent.
Chevron also reached a low point when a spokesperson, Sylvia Garrigo, became flustered during her 60 Minutes interview and said the pollution in Ecuador was no more harmful than the oil in the makeup on her face.
Chevron also received unfavorable coverage about the case in The New York Times, Washington Post, Forbes, The Associated Press, Bloomberg Markets magazine, and on the editorial pages of the Los Angeles Times. The LA Times characterized Chevron’s attempts to find a new court after arguing the case should be heard in Ecuador as a “shifty shifting of venue”.
Kerry Kennedy, a lawyer who has led more than 40 international human rights delegations and who is President of the Robert F. Kennedy Center for Justice and Human Rights, visited the region and accused Chevron of being complicit in cultural genocide. Her letter to Chevron’s CEO seeking a meeting was ignored.
Rep. James McGovern (D-MA), the only member of Congress to have visited the disaster zone, previously had called Chevron’s pollution a “terrible humanitarian and environmental crisis” in a letter to President Obama.
Finally, Chevron’s Ecuador liability – which could consume more than 20% of the company’s market value -- appears to have accelerated a shift in the company’s management. Thursday is longtime CEO David O’Reilly’s last day on the job, as he announced his surprise departure earlier this year. O’Reilly had spearheaded the purchase of Chevron in 2001 for $31 billion – an asset that now has a potential liability of $27.3 billion due to the Ecuador problem.