Blog Posts
Thursday, Mar. 11th 2010
On Thursday, a U.S. judge granted Chevron’s motion to dismiss the government of Ecuador’s attempt to block the company’s international arbitration claim from proceeding. In his decision, Judge Sand declined to stay international arbitration in a dispute between Ecuador’s government and Chevron. Stating in his ruling that, “a stay of arbitration is inappropriate.”
Chevron is pleased that the Bilateral Investment Treaty arbitration can proceed. Chevron is seeking to hold Ecuador and its government owned oil company, Petroecuador, to the promise they made to complete the environmental cleanup of the Amazon.
Texaco Petroleum did its share of the cleanup as promised, and Petroecuador now needs to own up to its promises and address the environmental problems wrongly being blamed on Chevron.
Only the international arbitration panel can bring Ecuador to the table and compel Petroecuador to do the right thing and clean up its oil fields. With today’s decision, we are one step closer to making that a reality.
Thursday, Mar. 4th 2010
This past Tuesday, executives from Chevron hosted a meeting in San Ramon including Cofan representative Emergildo Criollo and advocates from the Rainforest Action Network (RAN) as well as Amazon Watch. Following the meeting, Chevron’s Manager of Global Issues and Policy, Silvia Garrigo posted the following comment to RAN’s blog:
“This is Silvia Garrigo from Chevron. I want to thank RAN for the opportunity yesterday to meet with Emergildo, Maria, and Mitch. Spending an hour together in our headquarters and hearing Emergildo’s story was a valuable experience. We can all agree that his personal story is moving and heartfelt. And we can all agree that there are unacceptable environmental conditions in Ecuador’s Amazon. While there may be many areas where we do not agree, it is important for us to listen to each other. We believe RAN and Chevron can share common ground on some important points. Thank you again for meeting with us. We look forward to continuing a constructive dialogue.”
Chevron views Tuesday’s meeting as an important first step towards building trust. It is our hope that subsequent meetings can move future conversations past rhetoric and towards a constructive dialogue about solutions.
Tuesday, Mar. 2nd 2010
An independent expert working for Ecuador’s Judiciary Council has filed a report stating that the videotapes Chevron provided to the government of Ecuador and the U.S. Department of Justice are authentic and unaltered.
In late August of last year, it was revealed on video that Judge Juan Núñez, who was then presiding over the lawsuit against Chevron in Ecuador, had prejudged the case (even though evidence was still being submitted and final arguments had not been held) and may be involved in a $3 million bribery scheme.
The judge was willing to talk about his pending decision with businessmen (Hansen) seeking post-verdict remediation contracts. The following is a transcript of that conversation:
- Núñez: “Any other questions for me as a judge?”
- Hansen: “Oh no, I, I know clearly how it is, you say, Chevron is the guilty party?”
- Núñez: “Yes Sir.”
- Hansen: “And the, the, the act (decision) is October or November of this year?”
- Núñez: “Yes Sir.”
- Hansen: “And it’s …?”
- Núñez: “No later than January.”
- Hansen: “January 2010. And the money is twenty-seven (billion dollars)?”
- Núñez: “It might be less, and it might be more.”
After analyzing the videos from which this conversation was transcribed, the expert found that:
- The videos were authentic and showed no evidence whatsoever of any kind of manipulation.
- The videos were proven to a scientific certainty to contain the unaltered voices of purported government officials and others who participated in the meetings.
The expert report puts to rest the false claims that the plaintiffs’ lawyers and Judge Núñez himself have made in attempts to cover up this abuse of the judicial system. Judge Núñez insisted to the Wall Street Journal that he could “see things that have been erased” and that someone “cut and pasted certain things.”
In calling into question the authenticity of the video tapes, the plaintiffs’ representatives had also insisted that the tapes had been digitally altered.
The expert’s report further emphasizes the improper conduct on the part of Judge Núñez as well as individuals affiliated with Ecuador’s ruling political party. To date, Judge Núñez has not been sanctioned for his misconduct and his prior rulings in the Chevron lawsuit remain part of the record.
Friday, Feb. 12th 2010
Earlier in the week it was revealed that the author of a report recommending Chevron pay $27 billion in damages has a conflict of interest that he illegally hid from the court. As it turns out, Richard Cabrera, the report’s author, is the majority owner of an oil field remediation company in Ecuador that stands to gain financially from a judgment against Chevron.
Cabrera has suggested a wholly illegitimate and unsubstantiated damage recommendation against Chevron in excess of $27 billion. Cabrera was not only paid solely by the plaintiffs, but he openly relied on them to staff his effort while seeking to obstruct Chevron’s representatives from even observing his work. In fact, major portions of his submissions to the court are cribbed from the plaintiffs’ own submissions, if not written by them directly. His work product is devoid of scientific content, lacks even the most basic evidentiary support, and assesses monetary relief for alleged environmental damage and health claims he has never even bothered to investigate, inspect, or verify.
In addition to those outlined above, below is a list of other Cabrera Report flaws:
Lack of Causation
Cabrera completely ignored his court-ordered mandate to determine causation and chronology of environmental conditions. Instead, he just arbitrarily assigned liability to Texaco for every instance of alleged environmental impact in the former concession areas. By ignoring chronology and causation, Cabrera even makes Texaco liable for environmental impact caused solely by Petroecuador in the last 20 years.
Failure to Inspect and Falsifying “Evidence”
Cabrera ignored court orders that he must inspect every site, visiting only 48 of 316 wells and one of 19 production stations. Instead, Cabrera reviewed aerial photos to identify pits and used those photos incompetently and dishonestly. For example, Cabrera submitted certain aerial photos with his report and declared that various items in the photos — like trees, tanks and shadows — were pits. He also submitted photos of pits constructed by Petroecuador after 1990, backdated the photos to the 1970s and declared that the pits were constructed earlier by Texaco Petroleum. Cabrera, therefore, fraudulently overstated the number of pits.
Arbitrary Determination of Remediation Scope
With no justification, Cabrera arbitrarily concluded that 80 percent of well pits and 100 percent of production station pits need to be remediated, regardless of past or current remediation efforts. Cabrera then further fabricated and overstated the magnitude of remediation required for each pit, arbitrarily assuming that each pit needs to be remediated to a depth of four meters (13.12 ft) and that an additional area around each pit equal to 50 percent of the pit surface area also needs to be remediated.
Gross Overstatement of Remediation Cost
Cabrera grossly overstated the cost to remediate pits. Though Petroecuador has been remediating pits to Ecuador standards for approximately $85,000 per pit, Cabrera recommends remediation costs of $2.743 billion — over 150 times the Petroecuador budget of $18 million for this work.
For more information on other elements contained within Cabrera’s $27 billion damage report, please use the following hyperlinks.
It is clear the Ecuadoran court handling the lawsuit against Chevron has abandoned the due process guarantees mandated by Ecuadorian law, eliminated the plaintiffs’ burden of proof, and substituted in its place the work of Richard Cabrera. Chevron has consistently argued that it is not getting a fair trial in Ecuador. Evidence presented to the court shows Texaco Petroleum’s remediation was thorough and complete. The Amazon Defense Front has teamed up with the government of Ecuador to try to shift the liability of Petroecuador to Chevron by pressuring the company into an unjust settlement using a biased and improperly influenced court and a partisan and unqualified “independent” analyst.
Thursday, Feb. 11th 2010
New revelation of a conflict of interest for the author of a report recommending that Chevron pay $27 billion in damages in the long-running trial in Ecuador has prompted a deliberately misleading response from the Amazon Defense Front, which is the named financial beneficiary of any judgment in the case.
Cabrera has a previously undisclosed majority ownership interest in a company registered to do business with Petroecuador. Petroecuador is the state owned oil company, chief polluter in the region, and beneficiary of Cabrera’s “findings.” This evidence raises additional, serious questions about Cabrera’s independence and completely undermines the integrity of his report.
Seeing its potential payday at risk, the Amazon Defense Front scrambled to respond via press release. While attempting to sidestep the issue, the Amazon Defense Front does not deny that Cabrera improperly failed to disclose his conflict of interest at the time of his appointment or thereafter. Nor does the Amazon Defense Front deny that had Cabrera’s ownership interest been properly disclosed, it would have been disqualifying. Below is a response to four of the many misleading and inaccurate statements from the Amazon Defense Front press release:
“Cabrera disclosed to the court that he owned a clean-up company before his appointment as Special Master. This fact was properly cited by the court as one of the reasons he was qualified to do the damages assessment.”
This is a yet another of the Amazon Defense Front’s blatant attempts to mislead the public.
Exhibit 4 from the filing contains everything that Cabrera has disclosed. Nowhere does Cabrera disclose the fact that he was a co-founder, general manager, majority stockholder, and legal representative of CAMPET at the time of his appointment as an “independent” technician or during his work for the court. CAMPET is a soil remediation company and preapproved contractor to Petroecuador. Cabrera affirmatively swore to the court that he had no conflicts of interest. This has shown to be untrue by virtue of his financial interests in CAMPET.
The Amazon Defense Front’s statement is intended to misrepresent Cabrera’s disclosure about working for a different remediation company, CONGEMINPA, prior to his appointment. Cabrera disclosed that his work with CONGEMINPA ended in 2003, and Cabrera had also sold all of his stock in GONGEMINMPA in 2003, years before his 2007 appointment in this case. This past connection to a remediation company did not present a conflict of interest at the time of his appointment. The Amazon Defense Front’s statement is meant to create the false impression that Cabrera disclosed his interest in CAMPET, the company he continued to own, manage, and legally represent during his entire tenure as a supposedly “independent” expert in the case. But he did not make any such disclosure. In fact, German Yanez, the judge who appointed Cabrera, told Dow Jones Newswires Feb. 9 he didn’t know about CAMPET or whether the company’s registration as a bid contractor for Petroecuador constituted any conflict of interest.
“All I know is what I saw in his curriculum (vitae),” said Yanez. “If there’s missing information, I don’t know why.”
“Chevron thought so highly of Cabrera’s qualifications that it accepted him as a court-appointed expert in an earlier part of the case and paid his fees as required by court rules.”
This is factually incorrect.
Cabrera was appointed by the court in an earlier phase of the trial, but he performed no work and at no time has Chevron paid Cabrera for anything. On the contrary, the plaintiffs paid Cabrera more than $200,000 for his subsequent work.
Chevron has repeatedly and unwaveringly questioned Cabrera’s qualifications since his original involvement in the case, has opposed his report, and has repeatedly told the court that his damages assessment is without basis, is biased, and was developed with and co-written by the plaintiffs. At no time has Chevron ever “thought highly of Cabrera’s qualifications” to be an expert in this case.
“The fact Cabrera’s company is qualified to bid on clean-up contracts offered by Ecuador’s state-owned oil company is irrelevant. That company, Petroecuador, is not a party to the case against Chevron and would have no role in any eventual cleanup.”
This is factually incorrect.
Petroecuador was the majority partner in the consortium and is responsible for every site in question. Moreover, no remediation work in the oil producing region could occur without Petroecuador’s active involvement, participation, and authorization. Simply put, nothing could happen in Petroecuador’s oil fields, including a remediation ordered by the court, without Petroecuador.
Meanwhile, the government of Ecuador has already acknowledged that it expects to participate in any prospective remediation work. At a September 2009 press conference, Ecuador’s Prosecutor General, Washington Pesantez said, “Although I don’t have the exact figures, 10 percent would go to the plaintiffs if Chevron is found guilty; 90 percent would be delivered to the State for remediation or bio-remediation activities that would serve to correct biologic and chemical mechanisms…”
In addition, “the fact Cabrera’s company is qualified to bid on clean-up contracts offered by” Petroecuador is extremely relevant: — Cabrera’s report attempts at every turn to exonerate Petroecuador for 20 years of sloppy practices. In his report Cabrera exonerates Petroecuador of the current environmental conditions in the region, grossly inflates the scope of remediation and costs of the work, and even calls on the court to award $375 million to upgrade Petroecuador’s infrastructure. Cabrera’s company’s registration to do work for Petroecuador provides the perfect incentive for Cabrera to go to such absurd lengths to lavish benefits on Petroecuador in his report, and the perfect opportunity for Petroecuador to return the favor.
“Cabrera by virtue of his role in the case would be barred from having a role in a future clean-up.”
This statement is inherently contradictory and is made without any factual support. First the Amazon Defense Front says there is no conflict at all, and then it says that Cabrera does indeed have a conflict of interest. His financial stake in remediation explains why Cabrera, on at least ten different occasions, concealed from the court his conflict of interest — a violation of Ecuador law. Accordingly, Cabrera’s report should be rejected and Cabrera’s connection to Petroecuador should be investigated.
Chevron has consistently argued that it is not getting a fair trial in Ecuador. Evidence presented to the court shows Texaco Petroleum’s remediation was thorough and complete. Amazon Defense Front has teamed up with the government of Ecuador to try to shift the liability of Petroecuador to Chevron by pressuring the company into an unjust settlement using a biased and improperly influenced court and a partisan and unqualified “independent” analyst.
Tuesday, Feb. 9th 2010
Chevron has revealed new information showing that the author of a report recommending the company pay $27 billion in damages has a conflict of interest that he illegally hid from the court. As it turns out, Richard Cabrera, the report’s author, is the majority owner of an oil field remediation company that stands to gain financially from a judgment against Chevron.
Records from 2003-2008 show that Cabrera is co-founder, general manager, majority stockholder, and legal representative of an oilfield remediation company, 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. Yet, Petroecuador was the majority owner of the Petroecuador-Texaco Petroleum consortium which operated until mid-1992. Moreover, there is substantial evidence that Petroecuador has spilled millions of gallons of oil since taking over exclusive ownership and operations.
Instead, Cabrera exclusively attributes pollution in the Amazon region of Ecuador to Texaco Petroleum, now owned by Chevron. Cabrera’s report says Chevron, because it acquired Texaco Petroleum in 2001, is solely liable for $27 billion in damages, citing grossly inflated remediation costs while ignoring Petroecuador’s role in oil operations and its well-documented poor environmental performance. These findings make no sense as a matter of Ecuadorian law or common sense, but are consistent with furthering the interests of Petroecuador, as well as Cabrera’s.
Not only did Cabrera hide his financial interests in the remediation company, he affirmatively represented to the court that he did not have any impediment or conflict that would affect his performance as an “independent” court-appointed witness. Moreover, Cabrera knowingly omitted his interest in CAMPET, as well as CAMPET’s status as a registered Petroecuador contractor, in his submissions to the court. Finally, Cabrera further misled the court by accepting his appointment, which required an explicit acknowledgment of his duties to the court as an impartial analyst—something Cabrera could not have done in good faith, given his financial interests.
Due to the remediation company’s relationship with Ecuador’s state-owned oil company, Petroecuador, Chevron has 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.
Thursday, Jan. 21st 2010
Lawyers for the Government of Ecuador Engage in Revisionist History- Myth of Jurisdiction Exposed
“In a lawsuit filed Thursday, the plaintiffs say Chevron broke a promise Texaco Inc. made in 1999 to a New York federal court to abide by the Ecuadorean legal system if the court dismissed the environmental case.” – Wall Street Journal, 10/14/10
Chevron has never operated in Ecuador, a fact that cannot be disputed. Texaco’s role in oil operations in the country ended in 1992. Since then, Ecuador’s government owned oil company, Petroecuador, has been the exclusive operator of the oil fields and has amassed a deplorable environmental record.
The claim filed against Chevron on January 14 is erroneous and subsequent media statements by the plaintiffs are incorrect and misleading. Chevron did not agree to any stipulation concerning jurisdiction in Ecuador. In fact, Chevron was not a party to the prior New York action. American trial lawyers are once again distorting the record. To clarify, the case that was brought against Texaco in New York is totally different than what has been brought against Chevron in Ecuador. The case against Chevron in Ecuador does not seek an award for the 48 named plaintiffs. Rather, it seeks to force Chevron to pay for the remaining remediation work that the government of Ecuador has never performed. Under an agreement with the government of Ecuador, Texaco spent $40 million performing its agreed-upon share of the clean-up work. Texaco obtained full and complete releases after meeting all the requirements placed upon it by the government of Ecuador. The remaining remediation work required is the exclusive responsibility of the government of Ecuador. The case against Texaco in New York was dismissed. Period. It was not moved, transferred, or refilled. A brand new and totally different case was brought against Chevron in Ecuador. There are no stipulations from the New York action that cover a different claim against a different party in Ecuador. Texaco never waived its rights to seek the enforcement of valid agreements and contracts with the government of Ecuador. Texaco has never waived its rights to resist a verdict that is the product of fraud and a broken legal system.
It is important to understand that the two cases are very different. The case brought against Texaco in New York was about alleged personal injuries and alleged personal damages. The case against Chevron in Ecuador is exclusively about alleged damages to public lands. Of the 48 plaintiffs in the Ecuador case, there are no claims for personal injury or personal damages of any kind.
“In a lawsuit filed Thursday, the plaintiffs say Chevron broke a promise Texaco Inc. made in 1999 to a New York federal court to abide by the Ecuadorean legal system if the court dismissed the environmental case.” – Wall Street Journal, 1/14/10
Chevron has never operated in Ecuador, a fact that cannot be disputed. Texaco’s role in oil operations in the country ended in 1992. Since then, Ecuador’s government owned oil company, Petroecuador, has been the exclusive operator of the oil fields and has amassed a deplorable environmental record.
The claim filed against Chevron on January 14 is erroneous and subsequent media statements by the plaintiffs are incorrect and misleading. Chevron did not agree to any stipulation concerning jurisdiction in Ecuador. In fact, Chevron was not a party to the prior New York action. American trial lawyers are once again distorting the record. To clarify, the case that was brought against Texaco in New York is totally different than what has been brought against Chevron in Ecuador. The case against Chevron in Ecuador does not seek an award for the 48 named plaintiffs. Rather, it seeks to force Chevron to pay for the remaining remediation work that the government of Ecuador has never performed. Under an agreement with the government of Ecuador, Texaco spent $40 million performing its agreed-upon share of the clean-up work. Texaco obtained full and complete releases after meeting all the requirements placed upon it by the government of Ecuador. The remaining remediation work required is the exclusive responsibility of the government of Ecuador. The case against Texaco in New York was dismissed. Period. It was not moved, transferred, or refilled. A brand new and totally different case was brought against Chevron in Ecuador. There are no stipulations from the New York action that cover a different claim against a different party in Ecuador. Texaco never waived its rights to seek the enforcement of valid agreements and contracts with the government of Ecuador. Texaco has never waived its rights to resist a verdict that is the product of fraud and a broken legal system.
It is important to understand that the two cases are very different. The case brought against Texaco in New York was about alleged personal injuries and alleged personal damages. The case against Chevron in Ecuador is exclusively about alleged damages to public lands. Of the 48 plaintiffs in the Ecuador case, there are no claims for personal injury or personal damages of any kind.
Wednesday, Jan. 20th 2010
In 1993 Ecuador and United States inked a bilateral investment treaty (BIT) designed to encourage private sector development in Ecuador and to protect U.S. investment in the country.
But the government of Ecuador has long sought to evade its BIT obligations. In fact, Ecuador clearly broke this treaty when the country pursued a bad-faith, coordinated strategy with the Lago Agrio plaintiffs to use them as “stalking horses” in an attempt to avoid its own remediation responsibilities and contractual obligations, and instead to impose public environmental liabilities on Chevron only a few years after having settled and released Chevron from such liabilities. Chevron was therefore compelled to file an international arbitration claim against Ecuador under the BIT.
This filing likely came as no surprise to Ecuador. In fact, the government of Ecuador is notorious for unilaterally breaking contracts and evading its obligations. It was not until 2001 that the country of Ecuador was sued for the first time by a foreign company. However, since 2008, the year after President Rafael Correa took office, a large number of foreign companies began to file lawsuits. Currently, Ecuador is 2nd in the world in terms of pending international arbitration claims against the country; so much so that the cumulative sum of the 11 pending lawsuits would now equal nearly one-half of the country’s annual budget.
Desperate to avoid arbitration, Ecuador petitioned to have a U.S. court halt Chevron’s BIT claim. In doing so, Ecuador is seeking to delay arbitration and avoid ever having to own up to its treaty obligations. Further, it has become clear that Ecuador is aware that the country’s repudiation of its contractual obligations — combined with its denial of due process to foreign investors litigating in its courts — will not stand up to international scrutiny. Given the volume of international arbitration currently pending against the government of Ecuador, its action was unsurprising and suggests that the government must recognize that it will lose if this case proceeds before a legitimate and impartial forum.
There is no basis in fact or law for Ecuador to get a federal judge to stay arbitration that Ecuador agreed to by treaty with the United States. For that reason, on Jan 19th, Chevron filed a motion to dismiss the government of Ecuador’s opposition to international arbitration. More importantly, Chevron’s arbitration claim should proceed and the government of Ecuador should abide by its treaty and contractual obligations.
Friday, Jan. 15th 2010
The government of Ecuador and the American trial lawyers behind the lawsuit have colluded yet again in their attempt to extort $27 billion from Chevron.
Fenton Communications, the public relations agency that the government of Ecuador has paid $30,000 per month to “polish” President Rafael Correa’s public profile in the United States, and to lobby the U.S. Congress on its behalf, is now colluding with trial lawyers who are trying to extort money from Chevron Corporation.
On January 13, Correa’s PR firm issued a press release in an effort to tear down, with false accusations, new Chevron chairman and chief executive officer John Watson, just days into his term. In doing so, Fenton partnered with Amazon Watch, a San Francisco-based activist group that has partnered with and donated at least $67,889 to the Amazon Defense Coalition, the named financial beneficiary in the environmental lawsuit in Ecuador.
The New Yorker described Fenton Communications as a “firm that the government of Ecuador has hired to help Correa polish his profile in America,” while the agency’s own website touts its strategy to push for Ecuadorian trade benefits in Washington, D.C. over the past several years.
Time and again, President Correa has openly sided with the plaintiffs who are suing Chevron. This latest revelation weaves the web of connections even tighter between the forces that have levied fraudulent claims against Chevron and the supposedly impartial government of Ecuador.
This episode also further reinforces the fact that Chevron cannot receive a fair trial in Ecuador. It is clear the Government of Ecuador, its consultants and activist NGO partners are driving an illegitimate court process that will likely result in an unjust and unsubstantiated verdict against Chevron.
Thursday, Dec. 17th 2009
U.S. trial lawyers representing 48 Ecuadorian plaintiffs (not 30,000) are attempting to hold Chevron liable for more than $27 billion. Amazingly, this astronomical number mostly goes unquestioned. So what goes into creating a figure that is 10 times the cost to remediate the nation of Kuwait post Gulf War?
First, one must consider its origin. The $27 billion was presented by Richard Cabrera, a mining engineer with no oilfield remediation experience. Cabrera was named by the court to assess possible environmental damage in the former concession area and, if any, determine the cause and work needed to fix it. In addition to being unqualified, Cabrera ignored court instructions and improperly expanded his work scope to invent categories of damages unrelated to the issues raised by the lawsuit or with environmental remediation. Not surprisingly, his appointment was fully supported by the plaintiffs’ representatives who ultimately paid Cabrera more than $200,000 for his work. Perhaps most egregious, however, is the fact that Cabrera staffed his technical team with plaintiffs’ representatives and portions of his “independent” report were developed by organizations affiliated with the plaintiffs [click here] and [here].
Following is a breakdown of Cabrera’s fraud:
Pit remediation: Proposed damages ($2.743B)
Petroecuador has publicly acknowledged responsibility for remediation of all existing oilfield pits associated with their nearly 40 years of operations in the Oriente region of Ecuador, including all of the remaining pits in the former Petroecuador-Texaco concession. In 2005, Petroecuador initiated a $121-million remediation program, termed the “Pit Remediation Project of the Amazon District” (PEPDA), with the goal of completing the closure of all pits, spills, and other affected areas in accordance with applicable Ecuadorian regulatory standards by 2010. As of December 2007, the PEPDA program had initiated and/or completed remediation of more than 40% of the 370 open pits identified in the former concession area, with formal inspection and approval by the government regulatory agency, DINAPA (Dirección Nacional de Protección Ambiental). Under a new program, designated UMR (Unidad de Mitigación y Remediación), a successor program to PEPDA, Petroecuador remains committed to completing the remediation of all remaining pits and oil spill areas in the Oriente within the next few years.
In the Chevron case, the plaintiffs have charged that the oilfield pits in the Oriente pose a grave danger to local residents and the environment, and they have demanded that Chevron, whose subsidiary Texaco Petroleum served as a minority partner of Petroecuador nearly 20 years ago, pay the plaintiffs for the cost of remediation – regardless of the fact that these same pits have already been or will soon be remediated by Petroecuador. Indeed, the lead attorney for the plaintiffs, Pablo Fajardo, has even protested the Petroecuador cleanup program, complaining that it is “changing the lawsuit” and “hiding” evidence. In October 2007, he submitted a formal letter to the court demanding that the remediation be stopped.
Coincidentally, Cabrera’s $2.743 billion estimate for pit remediation, over 150 times the Petroecuador budget of $18 million for this work, is based upon a highly inflated unit cost (over 36 times the actual per pit cost reported by Petroecuador) as well as a highly inflated estimate of the number of pits (over 4 times the actual number of oilfield pits remaining in the former concession).
Groundwater remediation: Proposed damages ($3.236B)
Cabrera arrives at this figure with no evidence to substantiate a damage claim. He took NO samples from rivers, streams, wells or potable water sources. His handful of “groundwater samples” in the former concession area, actually come from borings taken from within pit areas and are in no way representative of what geologists or hydrologists would consider groundwater.
Healthcare system: Proposed damages ($480 MM)
While health is a serious concern in the region due to widespread fecal contamination of drinking water, the construction of a health care system is clearly not Chevron’s responsibility, nor has it ever been part of the litigation. Plaintiffs’ attorney Julio Prieto underscored this in a recent Radio Majestad interview when he said, “in the claim we have not requested any health issue in particular.”
It’s the sole responsibility of Ecuador’s government, which encouraged massive migration to the region and failed to provide the most basic sanitation services like sewage treatment.
Impacts on indigenous populations: Proposed damages ($430 MM)
Populations of all indigenous groups in the region have grown markedly throughout the period since oil was discovered in Ecuador’s Amazon. Meanwhile, deforestation and encroachment on indigenous lands by settlers was a direct result of the Ecuadorian state’s colonization policy, not oil development. When oil exploration began in the 1960’s, the population of the region was approximately 25,000 – largely native peoples and missionaries. Today, the region is among the fastest growing in Ecuador, home to more than 300,000 citizens who have converted jungle to agricultural lands at the government’s behest.
Potable water system construction: Proposed damages ($428 MM)
Numerous potable water systems exist in the region, but Cabrera failed to take samples from them. Likewise, Cabrera failed to sample rivers, streams, or wells. So, how does he know more potable water systems are needed? And how does he justify holding Chevron liable for creating a potable water system for the entire region when the main problem with drinking water is bacterial – not hydrocarbon – contamination?
Petroecuador’s infrastructure: Proposed damages ($375 MM)
Ecuador’s government and state took in approximately $25 billion over the 20-year life of the consortium. Texaco Petroleum earned $490 million, its contract expired in 1992 and it left Ecuador after successfully conducting remediation, carrying out social programs and upgrading equipment under an agreement with the state. For two decades, Petroecuador has been exclusive operator of the former consortium oilfields, earning 100 percent of an estimated $50 billion in additional revenue. So, having earned some $75 billion, shouldn’t Petroecuador maintain, replace and build out its own infrastructure?
Excess cancer deaths: Proposed damages ($9.527B)
Neither Cabrera, nor the plaintiffs’ lawyers, have ever presented to the Lago Agrio court the name of a single cancer victim, a single medical report or a single death certificate to substantiate this claim. What’s more, official cancer mortality statistics in Ecuador reveal that, not only are Cabrera’s assertions false, but the cancer rate in the oil-producing region is actually lower than in non-oil producing regions of the country. Finally, the only time a lawyer for the plaintiffs presented specific cancer claims before a court (in U.S. federal court in San Francisco), the claims were thrown out after Chevron showed them to be false. The lawyer, the originator of the Lago Agrio case, was fined $45,000 and sanctioned for the fabrications.
Deforestation of stations, wells and roads: Proposed damages ($875MM-$1.697B)
Ecuador’s government required that the consortium construct roads throughout the region to facilitate the state’s colonization program. Moreover, the total footprint of actual oil operations in the former concession area amounts to roughly 6.8 square kilometers. If roads are included, the footprint grows to just over 44 square kilometers. This is an important fact to consider in a concession area of 4,429 square kilometers that produced approximately $25 billion for the Republic of Ecuador.
Unjust enrichment: Proposed damages ($8.421B)
Central Bank figures show that Texaco Petroleum earned $490 million while the Republic of Ecuador received, through taxes, royalties, internal market subsidies, dividends from Petroecuador’s majority stake and other revenue, approximately $25 billion during the 20-year consortium.
Problems with Cabrera’s work are not limited to his absurd damage recommendations. The reports themselves are filled with mathematical and scientific errors. On a number of occasions he simply fabricates evidence. He gathered much of his “evidence” with the help of the plaintiffs’ technical team. He copied into his reports whole blocks of text from the plaintiffs’ court filings to justify some of his most outlandish assertions, such as his cancer claims and the remediation estimates. He fails to mention Petroecuador’s responsibility for environmental problems in the region despite its 62.5-percent majority stake in the consortium and its status of exclusive operator in the former concession area for almost 20 years.
Cabrera also fails to acknowledge Texaco Petroleum’s $40 million remediation related to its approximate one-third stake in the consortium, or the 1998 release from future claims granted to the company by the government and Petroecuador. Finally, the court’s appointee is unconstrained by the fact that the plaintiffs are suing Chevron strictly for environmental remediation costs. “So,” you may ask, “with all of the above in mind, how could a law-abiding, fair-minded, and independent court allow such absurd damage claims stand as the basis for a verdict?” The answer is, “a law-abiding, fair-minded, and independent court couldn’t.”
Tuesday, Dec. 15th 2009
Chevron supports the legislation passed today to extend trade preference programs including GSP and the Andean Trade Preferences program. We have long supported trade preference programs for the important benefits they bring to U.S. firms, workers and to the beneficiary countries. We are pleased that Congress has seen fit to include an accelerated review of Ecuador’s compliance with the program, which will provide the Administration with the opportunity to continue to monitor the issues raised about Ecuador in its June 30th report to the Congress on the operation of the Andean Trade Preferences Program.
Concerns about the rule of law, politicization of the judicial process and treatment of U.S. companies in Ecuador require regular monitoring to ensure that Ecuador meets the obligations required in order to enjoy these trade benefits. We also believe the shorter term extension provides an opportunity for the program’s important benefits to be extended while Congress undertakes a broader review of the programs.
Thursday, Dec. 10th 2009
“It will be very expensive to clean up, but far less than the profits they took out of Ecuador.” – Steve Donziger, lead trial attorney. Commondreams.org: 10/29/09.
Mr. Donziger’s math is finally adding up and, perhaps unintentionally, Mr. Donziger has exposed one of the most fraudulent aspects of the Ecuador trial – the $27 billion damage recommendation known as the “Cabrera Report.”
The assessment developed by the plaintiffs’ representatives and delivered to the court by mining engineer Richard Cabrera looks to hold Chevron liable for more than $27 billion in damages. In part of the dubious $27 billion claim, Cabrera recommends Chevron pay damages of $2.743 billion for pit remediation. In comparison, Petroecuador, the government-owned oil company responsible for the current condition of Ecuador’s oil fields, remediates pits to current laws and standards at a cost of $85,000 per pit. Cabrera’s estimates imply a per-pit remediation cost of up to $3 million per pit. This recommendation is more than 30 times higher than the cost the state pays for pit remediation.
Meanwhile, Texaco Petroleum made less than $500 million during the days of the consortium. The vast majority of the proceeds, approximately $25 billion, went to the government of Ecuador. And, at the conclusion of the consortium, Texaco Petroleum performed remediation work at 108 of 321 well sites – work that corresponded with the company’s 37.5% stake in the consortium. The remaining remediation is the admitted responsibility of Petroecuador.
So, no matter how you slice it, Mr. Donziger has finally conceded the truth about remediation costs. Any realistic assessment of the conditions in Ecuador clearly shows that the remediation work for which Petroecuador is responsible would cost a fraction of what Mr. Donziger and his colleagues have contended. Now, if they would only focus their efforts on the responsible party rather than the deep pockets, some solutions might actually occur.
Wednesday, Dec. 9th 2009
“This lawsuit started in the United States and is financed by a law firm.” – Julio Prieto, plaintiff’s attorney
In a December 7th interview with Ecuadorian radio station Majestad, plaintiff’s attorney Julio Prieto makes mention of a law firm bankrolling the environmental lawsuit currently pending against Chevron in Ecuador.
The referenced firm is Kohn, Swift & Graf PC of Philadelphia, the primary entity providing a majority of, if not all of the funding for the lawsuit against Chevron.
When U.S.-based trial lawyer, Cristóbal Bonifaz, first concocted the original lawsuit against Texaco in 1993, he contacted Harold Kohn, a Philadelphia class-action lawyer. Shortly thereafter, Kohn’s son, Joe, who later became a partner at Kohn Swift & Graf, signed on. Subsequently, Kohn enlisted Steven Donziger, a New York-based trial lawyer who went to law school with Bonifaz’s son.
When asked about his motivation for taking on the case against Chevron in the movie Crude, Joe Kohn candidly stated, “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.”
As part of the Kohn, Swift and Graf financed PR campaign to take Chevron’s reputation hostage and ransom it back to the company in the form of a large settlement, Kohn has hired DC lobbyist Ben Barnes to lobby the US Congress on “environmental matters resulting from oil exploration in Ecuador.” Barnes then hired DC based PR representative Karen Hinton to spread misinformation and distort the facts of the case.
Years of misinformation and distortion spread by U.S. trial lawyers and their PR cohorts lead the public and media to believe that 30,000 indigenous Amazonians are behind this lawsuit, and that any financial award from a settlement or verdict would go to the indigenous peoples of the Oriente.
However, the truth tells a different story. Kohn’s firm has coordinated a series of economic and political relationships between the Ecuadorian government, U.S. trial lawyers and activist groups in an effort to put pressure on a small rural courtroom in Lago Agrio, Ecuador, to find Chevron guilty in an environmental lawsuit. Any financial awards as a result of a settlement or judgment against Chevron would invariably go only to the Ecuadorian government and the U.S. contingency fee lawyers driving this frivolous lawsuit. In fact, Washington Pesántez Prosecutor General of Ecuador confirmed that “90% [of any judgment against Chevron] would be delivered to the State…”
One thing is certain, Chevron will continue to fight this misguided and disingenuous lawsuit until justice prevails.
Tuesday, Dec. 8th 2009
A recent Los Angeles Times editorial on Ecuador’s trade preferences with the United States curiously ignores evidence of Ecuador’s hostility to the United States and erroneously asserted that Chevron is calling for an end to beneficiary status for Ecuador under the Andean Trade Preferences Act. While more than one organization is calling for “halting the trade agreement” with Ecuador, Chevron is not. Chevron argues that countries should not be unconditionally rewarded with unilateral trade benefits even as they flout commercial obligations with the United States. Because Ecuador has taken a series of actions to undermine trade and investment rules, Chevron is calling for treating Ecuador differently under the Andean trade act than the other two countries included in the act, Peru and Colombia. Chevron is proposing several ways for Congress and the administration to treat Ecuador differently, including statutory periodic reviews or limiting preferences to private entities and firms in Ecuador, not to government-owned entities such as Ecuador’s state-owned oil company, Petroecuador.
The claim made by the Los Angeles Times, that Ecuador has “demonstrated a willingness to work with the U.S.” does not reflect what is actually happening with the bilateral relationship. In the last year alone, Ecuador has taken a variety of actions that demonstrate its hostility to U.S. interests. For example, it evicted the United States from an air base where it ran drug interdiction efforts for at least a decade. It also became only the second country in history (after Bolivia) to withdraw from a 156-member international dispute settlement body after calling the body “an atrocity” that “signifies colonialism” and “slavery . . . to Washington.” It also announced intent to withdraw from investment treaties with the United States and a dozen other countries, and it provided Ecuadorian interests a roadmap for using U.S. intellectual property rights without permission. The situation in Ecuador has gotten so bad that in November, Transparency International called Ecuador one of the most corrupt governments in the Americas, with a score worse than 27 of the 31 countries tallied in the Hemisphere and 146th out of 180 countries total worldwide.
Ecuador once was a U.S. ally that respected the rule of law, but that has not been the case in recent years, and its treatment of U.S. investors and its obligations on investment and contractual matters reflects that change. The U.S. government, Transparency International, and the World Bank have all noted serious concerns with Ecuador’s judicial system and adherence to the rule of law. Contrary to the editorial’s assertion, Chevron is not asking the U.S. to force a favorable outcome in the case. It asks for a fair hearing, a hope that Ecuador will honor its contractual obligations, and consideration of Ecuador’s actions on well-established trade and investment treaties and guidelines.
Chevron has been a longstanding supporter of trade preferences program. However, we believe that extending unilateral trade preferences should carry with it some type of recognition that the recipient countries must adhere to the rule of law and trade and investment obligations. We would hope that U.S. policymakers, and Los Angeles Times editorial writers, believe in this same standard.
Saturday, Dec. 5th 2009
“By commencing the arbitration, it is Chevron that is trying to escape its commitments,” – Eric Bloom, attorney representing the Government of Ecuador
On the contrary, the Republic of Ecuador’s complaint against Chevron in the Southern District of New York is frivolous in much the same way as the lawsuit against Chevron in Ecuador. Both are based on the made-up idea that Chevron agreed in 2001 to submit itself to the jurisdiction of Ecuador’s courts. But Chevron, which was in no way involved in the proceedings in 2001, never consented to anything, and Texaco certainly never agreed to submit to jurisdiction in Ecuador to face fabricated claims, biased courts, and corrupt proceedings being dictated against it by Ecuador’s government. That is precisely why Chevron initiated its BIT arbitration. The arguments made by the Republic in its New York lawsuit ignore these basic truths and are not grounds for enjoining arbitration anyway. Given the extensive docket of international arbitration claims challenging Ecuador’s repeated disregard for its legal obligations and the rights of investors in its country, it is not surprising that Ecuador would seek to evade another reckoning by an honest, international panel.
Monday, Nov. 16th 2009
In a statement from the pages of Politico.com, Amazon Defense Coalition PR representative, Karen Hinton asserts that the ADC’s tactics are “above board.” Does Hinton’s definition of “above board” include repeatedly lying about a murder to gain the sympathy and support of a well-intentioned, unsuspecting public? Hinton once again misrepresents a subject we’ve covered here before: the 2004 murder of Wilson Fajardo, brother of plaintiffs’ lawyer Pablo Fajardo.
Hinton asserted her side’s tactics have been above board, adding that, though “no one knows who murdered [the lawyer’s] brother,” the killing came at a time when the lawyer “and other members of the plaintiffs’ legal team had received a number of anonymous death threats connected to the work on the case.”–Politico.com, November 16, 2009
That sounds a lot like the line Pablo Fajardo himself told an audience in Zaragoza, Spain in 2008:
Fajardo has denounced “many problems” during the lawsuit. He mentioned telephone calls, letters and threats. He even said that his brother was murdered during the process. “I cannot say that Chevron killed him, nor can I say they did not.” –EFE Newswire, September 2, 2008
It’s also the same line the Goldman Foundation embraced when it awarded Fajardo its 2008 Environmental Prize:
Fajardo’s brother was killed just months after he joined the legal team; no investigation has taken place and no one has been arrested for the homicide. — Excerpt of narrative from Goldman Environmental Prize
And it’s the line Amazon Watch has disseminated for years:
Fajardo and Yanza have received death threats in Ecuador during their work on the case, and the brother of Fajardo was murdered in 2004 in what observers think may have been a case of mistaken identity. – Amazon Watch Press Release, April 16, 2008
In reality, Wilson Fajardo’s death has been thoroughly investigated and police reports have identified the local individuals responsible. For those interested in the truth, check out a prior post on subject, as well as documents dating back to 2004 that include reports from the police, prosecutors, witnesses and the forensic analysis. You will also find Fajardo’s August 2004 letter asking authorities to investigate his brother’s tragic death, where he identifies the people involved in the crime and never once mentions any connection to Chevron or the Lago Agrio litigation.
With facts and science against them, this is just another example in a long line of lies and fabrications perpetuated by U.S. trial lawyers in an attempt to hold Chevron’s reputation hostage and ransom it back to the company in the form of a settlement.
Thursday, Nov. 5th 2009
The U.S. trial lawyers behind the environmental lawsuit in Ecuador consistently assert that Chevron, a company that has never operated in Ecuador, is somehow responsible for the current state of Petroecuador’s environmental mismanagement. Moreover, when confronted with the reality of Petroecuador’s reckless performance over the last two decades, the lawyers try to claim that Petroecuador’s pollution is Chevron’s responsibility because (as they put it) Petroecuador “inherited” a “flawed production system” from Texaco Petroleum.
Such claims are patently false.
(1) It is well documented that Texaco Petroleum, now a fifth tier subsidiary of Chevron, operated in Ecuador as a minority partner with state owned Petroecuador. All consortium decisions were made jointly by Petroecuador, the Government of Ecuador and Texaco Petroleum. In fact, the system that Petroecuador assumed full responsibility for in 1992 was constructed in a manner consistent with applicable Ecuadorian regulations and with industry practices that are still in use in many places in the world today.
(2) In the last two decades, Petroecuador has spent over a billion dollars to more than double the size number of wells in the concession area. In an effort to increase oil production, Petroecuador has drilled more than 400 wells, which represent a cost of more than $1.2 billion and performed thousands of well workovers (250 at an approximate cost of $170,000 each in 2009). Yet, Petroecuador has spent little on corrosion prevention and maintenance which is critical to prevent oil spills. They also continue to use unlined pits, having constructed at least 270 pits (over 90% of which are located in the former concession area) in the last 3 years.
Montage of Ecuador media headlines showing numerous spills.
In the early 1990’s, after the Government of Ecuador made the decision not to renew the concession agreement, Texaco Petroleum spent $40 million remediating its share of the consortium operations. The Government of Ecuador then signed off on this remediation and granted Texaco a full release of liability from any future claims. Petroecuador has repeatedly acknowledged that it is their responsibility to remediate the rest of the sites in the concession area including “all of the pits.”
Since assuming complete control over Oriente oilfield operations, Petroecuador’s operations have generated over 1.2 billion barrels of crude oil and 260 million cubic feet of natural gas, representing a market value of over $57 billion. While the company has recently funneled more than a billion dollars into drilling new wells to maximize oil profits, they have spent little on environmental remediation and socioeconomic projects in the area. The lack of spending on maintenance and proper safeguards against spills has led to crumbling flowlines and pipelines, which has resulted in a deplorable record of oil spills.
Despite Petroecuador’s ongoing pollution, neither the Amazon Defense Coalition nor Amazon Watch has made Petroecuador a focus of their Oriente clean-up campaign, and they have never pursued any legal action against the state oil company. In fact, when Petroecuador began remediating pits in 2006, the Amazon Defense Coalition demanded that the company stop their long awaited cleanup plans as these efforts were “changing the lawsuit.”
While the U.S. trial lawyers and their partners consistently portray Petroecuador’s ongoing environmental mismanagement as the responsibility of Chevron, it is clearly not. The facts are clear – Texaco Petroleum acted responsibly and cleaned up its share of the consortium years ago, while the Government of Ecuador and Petroecuador have chosen profits over environmental stewardship.
Thursday, Oct. 29th 2009
An elaborate series of relationships between the Ecuadorian government, U.S. trial lawyers and activist groups show that strong economic and political ties exist in their efforts to put pressure on a small rural courtroom in Lago Agrio, Ecuador, to find Chevron guilty in an environmental lawsuit.
This interactive diagram highlights these relationships and provides an examination of the forces behind the lawsuit. The Web of Influence diagram shows that the legal case against Chevron in Ecuador is a coordinated effort by U.S. trial lawyers and activist NGOs working with the executive branch of the Ecuadorian government to influence the Ecuadorian judiciary to ensure a guilty verdict against Chevron.
Click here to view this web of influence.
Friday, Oct. 23rd 2009
Chevron is being blamed for a situation that is the sole responsibility of the Ecuadorian government and Petroecuador.
Petroecuador, Ecuador’s state-owned oil company, was the majority partner in the consortium with Texaco Petroleum. Today, Petroecuador still owns and operates the oilfields in the former Concession area as well as other fields in the Amazon. Petroecuador took over consortium operations in 1990 and became the sole owner of the consortium fields and installations when Texaco Petroleum’s concession contract expired in 1992. Since that time, Petroecuador has developed a widely acknowledged record of operational and environmental mismanagement, due to, among other things, widespread corruption, a lack of investment in, or proper maintenance of its equipment and installations, and numerous spills.
Petroecuador’s environmental record is alarming. The company has been responsible for more than 1,400 spills between 2000 and 2008. According to media reports, Petroecuador has spilled over 4.4 million gallons of oil at oil production and storage sites and along its various pipelines.
Meanwhile, Petroecuador has significantly increased the footprint of oil operations within the former consortium fields. For instance, the company has drilled more than 400 new wells since taking over while the consortium operated 321 wells. Likewise, Petroecuador has constructed more than 270 new reserve pits in the last three years alone. All the while, the company has largely ignored its obligations to clean up its portion of the consortium operations based on the remediation agreement with Texaco Petroleum.
View a photo gallery or watch a video of Petroecuador’s environmental mismanagement.
Despite Petroecuador’s dismal environmental record, neither the Amazon Defense Coalition nor Amazon Watch has made Petroecuador a focus of their Oriente clean-up campaign, and the plaintiffs and their lawyers have never pursued any legal action against the state oil company. To the contrary, Petroecuador stands to benefit, directly and indirectly, more than any other Ecuadorian entity if the cost for widespread remediation is shifted to Chevron by:
- Forcing Chevron to pay for remediation work that is clearly the responsibility and obligation of Petroecuador, both under the Settlement and Release entered into by Texaco Petroleum, the Government of Ecuador and Petroecuador, and as the sole owner and operator of the former consortium fields for the past two decades.
- Requiring Chevron to refurbish and upgrade Petroecuador’s deteriorating infrastructure even though Texaco Petroleum transferred all of that property to Petroecuador in good operating condition almost 20 years ago and has had no say in any of Petroecuador’s operational decisions since 1992.
See these photographs of Petroecuador’s operations in Ecuador:
Thursday, Oct. 22nd 2009
There is no question that the people of the Oriente region of Ecuador face a series of challenges regarding health in their communities. However, they are being deceived by the trial lawyers and activists who have brought this lawsuit.
The major health concerns in the Oriente region are not the result of oil operations, but are related to a lack of water treatment infrastructure, a lack of sufficient sanitation infrastructure and inadequate access to medical care. (Read about Texaco Petroleum’s past operations and questions of health.)
Drinking water samples taken during court-ordered inspections of sites remediated by Texaco Petroleum found high levels of bacterial contamination from human or animal waste in 90 percent of the samples, indicating widespread microbial contamination of the water sources.
While the samples contained a high level of microbial contamination, results showed little evidence of contamination from oil. Court-ordered inspections found that 98 percent of surface water and 99 percent of drinking water samples meet international drinking water standards for petroleum hydrocarbons. Those few samples indicating petroleum-related impacts were from areas where Petroecuador’s poor operations had resulted in contamination.
The Government of Ecuador has not fulfilled its obligation to remediate the environmental impacts that it has caused, much less to modernize or even maintain its facilities to mitigate further impact. Nor has the government provided any sewage treatment in the region with raw sewage being discharged directly into streams and rivers used for bathing and drinking water by the local communities. As a result, many rural residents do not have access to potable water.
