Streetcar Line

Inequitable in Ecuador

Chevron fights a bogus lawsuit.

By 5.21.10

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Today's story, as we shall see, contains a mélange of conservative-favored themes that could easily emerge from a cross between the Rod Blagojevich story and most of the worst elements of Obamaland. There are the secret recordings that appear to depict a bribery scheme. There is the tacit alliance between a government and jackpot-seeking trial lawyers. There is the portrayal of the big, bad United States as a despoiler of third world nations, and a concomitant refusal to defend U.S. interests. And there is the scapegoating of a supposedly evil corporation -- in this case, what Obama would call "an oil giant" allegedly raping the environment without taking the slightest responsibility for its actions.

But in this case the American oil giant is not just fighting back but gaining ground, the trial lawyers are getting their wings clipped, and even the most establishmentarian of American media outlets is defending the corporation against unfair publicity.

It's the story of the $27 billion environmental lawsuit, in Ecuador, against U.S.-based Chevron. It's a case where almost all the recent developments have gone to the advantage -- the rightful advantage -- of Chevron. Corporations easily can, of course, be the "bad guys" in a situation. But this looks to be the story of a corporation fighting an honorable battle against some opponents who play seriously dirty pool.

For 20 years, Texaco was a 37.5 percent partner in an exploration venture with PetroEcuador, a company owned by the Ecuadorean government. PetroEcuador assumed full ownership in 1992. In September of 1998, Ecuador's government signed "final release" papers certifying that Texaco had successfully completed environmental remediation at all its sites. Chevron merged with Texaco in 2001 -- and in 2006, Ecuador elected anti-American leftist Rafael Correa as president. That's when Chevron suddenly found its Texaco acquisition to be problematic. Retroactively applying a law passed in 1999 to Texaco's activities before 1992, and ignoring the 1998 final-release agreement, Mr. Correa openly began backing an existing environmental lawsuit that American plaintiffs' lawyers had been pushing.

In short order, the claims for damages began expanding exponentially, as if by black magic, growing from $1.5 billion up to $27 billion. And all, again, for sites the Ecuadorean government had long ago certified as being clean, and with which the American companies had no involvement after 1992.

Correa's presidency has been a disaster. In recent years, major American business organizations have been joined by the U.S. State Department, the United Nations, and the International Bar Association in labeling Ecuador's court system unreliable or corrupt; in February, a German newspaper reported that "Ecuador emerges as hub for international crime." Ecuador has seized oil fields of other foreign companies and has cracked down on media critics, while a leader of the Colombian terrorist organization known by the acronym FARC was captured on video bragging about giving money to and dealing with emissaries of Correa's 2006 election campaign.

All of which served as prelude to the recent spate of embarrassments for those orchestrating the suit against Chevron. The embarrassments began last August, when the judge assigned to the case was videotaped by two would-be businessmen favorably discussing what sounded like a bribery scheme that also was supposed to involve Correa's sister Pierina. The judge was removed from the case, and the authenticity (and unaltered state) of the video was definitively confirmed in April by the expert audio engineer appointed by Ecuador's own Judiciary Council.

In February, Dow Jones reported that the court-appointed environmental "expert" whose outlandish assessments pushed the suit's damage claims up from $1.5 billion to $27 billion is the main shareholder and manager of an environmental remediation business already registered to do business with PetroEcuador. In other words, he could stand to profit handsomely from any judgment against Chevron. He is no more an "independent" expert than a golfer's caddy is an independent referee.

Also in February, a court-appointed biologist corroborated Chevron's defense by finding that at some of the sites allegedly poisoned, "there are not significant quantities of metals in the water to say that there are hydrocarbon contamination problems."

In late March, in a case unrelated to this one except that it sheds light on the relative trustworthiness of the adversaries, an international arbitration panel at The Hague ruled in favor of Chevron in a separate, $700 million Ecuadorean claim involving previous Texaco work. The Permanent Court of Arbitration ruled that the country's courts violated international law.

In April, the Columbia Journalism Review -- the ultimate arbiter of journalistic ethics for the media elite -- devoted just shy of 3,000 words to an investigation headlined "How 60 Minutes Missed on Chevron." It concluded that the TV news magazine's May 3, 2009 hit piece on Chevron, about this particular case, was "an exercise in innuendo," and that "the main Chevron complaint is warranted."

Also in April, the main U.S.-based expert for the lawsuit's plaintiffs, biologist and industrial hygienist Charles Calmbacher, Ph.D., swore under oath that the plaintiffs' lawyers submitted fraudulent reports under his name. He said they falsely appended the signature from his report to a report he never filed -- and that, despite the claims in the false report, he never found a site that "required any further remediation," nor one that "posed a risk to human health or the environment." And he said he does "believe" that the plaintiffs' lawyer knew he had "not authorized" the reports to be filed on his behalf, and that the lawyer "wanted the answer to be that there was contamination and people were being injured… because it makes money. That wins his case."

Along those same lines, a federal judge on May 6 (quoting the Associated Press) "ordered a documentary filmmaker… to turn over about 600 hours of raw footage from a film about" the $27 billion case. The judge ruled that the filmmaker was not independent because the American plaintiffs' lawyer, Steven Donziger, solicited him to do the film and appeared to be a collaborator with him on it, even going so far as to successfully demand that a particular scene to be cut out so as not to show the lawyer meeting with yet another supposedly "independent" expert appointed by the highly compromised Ecuadorean trial court.

In that same movie, it all becomes clear what the real motivation ("because it makes money") for the lawsuit is. Karen Hinton is the spokesman for the main nonprofit group fronting suit, the Amazon Defense Coalition. Last May 26, she confirmed to a blog called "Bob McCarty Writes" the already understood fact that "the entire lawsuit and its cost is funded" by the law firm of wealthy Philadelphia attorney named Joseph C. Kohn. In the documentary in question, called Crude, Mr. Kohn explains the bottom line: "It was not taken as a pro bono case, you know, a lot of my motivation is, at the end of the day… it will be a lucrative case for the firm."

Lucrative indeed, if what amounts to a $27 billion shakedown of Chevron by the Ecuadorean government somehow succeeds. Meanwhile, the Obama administration still does nothing. Joe Kohn's money? In the past two decades, some $266,000 of it has gone to Democratic Party causes or candidates.

Don't hold your breath, then, waiting for the Obama administration to drop trade preferences enjoyed by Ecuador, or to do anything else in defense of the U.S. company Ecuador keeps trying to abuse. But don't be surprised if Chevron's spirited self-defense, in the long run, puts a permanent cap on this supremely oily lawsuit.

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About the Author
Quin Hillyer is a senior editor of The American Spectator and a senior fellow at the Center for Individual Freedom. Follow him on Twitter @QuinHillyer.