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Chevron Takes Ecuador’s Government to Court – Wall Street Journal

Date: Dec 1, 2014

New York federal judge Lewis Kaplan ruled last week that Chevron may “conduct discovery” regarding a $6.4 million contract between the government of Ecuador and MCSquared, a Brooklyn, N.Y., public-relations firm. Score another victory for the oil company over plaintiffs seeking to blame it for environmental damage in the Ecuadorean jungle.

MCSquared “likely possesses evidence relating to the coordination between the Republic of Ecuador and the plaintiffs behind the fraudulent lawsuit,” Chevron said in a statement on Nov. 24.

The company is attempting to scrutinize Ecuador’s role in what increasingly looks like a corporate shakedown. But Chevron isn’t the only potential beneficiary of what might come to light. Ecuadoreans who live powerlessly under a repressive, secretive regime that bills itself as democratic will also be better informed.

No opposition member of the national assembly has access to public contracts under Ecuadorean President Rafael Correa. Requests for such information are batted away by the government-controlled legislature and ignored by the attorney general and comptroller general. When opposition congressman Andrés Páez asked the government to provide the details of what MCSquared did to earn the $6.4 million, the government launched a smear campaign against him and accused him of being a CIA agent.

In 2011 an Ecuadorean court ruled that Chevron had to pay $18.2 billion for environmental degradation that plaintiffs allege Texaco left behind in the jungle. Last year an Ecuadorean appellate court cut the award to $9.5 billion. But Chevron maintains that Texaco, which it bought in 2001, met its cleanup obligations and was released by Ecuador from further liability in 1998. It’s not about to knuckle under to the lower amount either.

In 2013 Chevron sued plaintiffs’ lawyer Steven Donziger in federal court in New York under the Racketeer Influenced and Corrupt Organizations (RICO) Act—and won. Judge Kaplan found that Mr. Donziger had engaged in coercion, bribery and the fabrication of evidence, among other misdeeds, in the Ecuador court. Mr. Donziger is appealing the verdict.

Regardless of the outcome of the appeal, the plaintiffs are trying to have the Ecuadorean ruling enforced in places where Chevron has assets, including Brazil, Argentina and Canada.

Chevron is fighting back. Discovery is one useful tool. As an example, it yielded incriminating outtakes from a film that Mr. Donziger was making about the lawsuit in Ecuador. The information helped Chevron make its case in the RICO trial. Now the oil company wants the details in the MCSquared relationship that might be relevant to its claim that Mr. Correa’s government is working to discredit Chevron and to “promote enforcement” of what Chevron says was a fraudulent judgment. “That evidence is relevant to Chevron’s ongoing cases in other foreign jurisdictions,” the company said in its statement on Nov. 24.

In 2011 Mr. Correa began a process to close Ecuador’s Supreme Court and to create a new Supreme Court that he controls. He also introduced a law that allows an executive-controlled judicial council to remove any judge for “inexcusable mistakes.” Since then, the practice of jailing adversaries or assigning them hefty fines has chilled public criticism. Yet outside the country it’s more difficult to control the narrative. That’s where MCSquared comes in.

The company filed with the Justice Department as an agent of a foreign government in July, more than a year after its $6.4 million contract with Ecuador was signed. Chevron wasn’t mentioned. But in the contract attached to the filing, Ecuador describes the need to “execute a strategy of immediate containment to reduce any damage or mitigate the effects of” actions by multinational organizations and corporations to diminish Ecuador’s reputation “on the international level.” Mr. Correa seems to have had Chevron in mind. In an amended foreign-agent filing dated Sept. 10, MCSquared included multiple press releases denouncing Chevron as a polluter of the Amazon.

Bloomberg journalist Paul Barrett reported in May that protesters at an anti-Chevron demonstration held at the company’s annual shareholder meeting in Midland, Texas, were paid $85 per person. Hollywood celebrities have also been generously compensated for their “outrage,” as MCSquared’s September amended filing indicates.

Yet a cool $4.5 million is still unaccounted for. That’s the difference between the $1.9 million in disbursements detailed in MCSquared’s September filing and the total amount paid to MCSquared according to the July filing. The government has not denied paying the full amount of the contract but will not answer Andrés Páez’s inquiry about where the rest of the money went.

I called MCSquared’s Jean-Paul Borja, a communications adviser at the company, on Wednesday. He told me to call back on Friday. On Friday he did not answer his phone and did not return messages I left on his voice mail. Perhaps Ecuadoreans will learn more when Chevron goes to discovery with MCSquared.

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