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Chevron Ecuador: Enviro Adviser Flips, Says $19B Chevron Judgment ‘Tainted’

Date: Apr 11, 2013

In a surprising reversal, an environmental consultant once named as a defendant in Chevron’s New York racketeering suit over a $19.2 billion Amazonian pollution judgment on Thursday declared that a key damages assessment was “fatally tainted” by the Ecuadorean plaintiffs’ interference.

Stratus Consulting Inc., which contributed to a damages report that played a major role in the unprecedented Ecuadorean judgment, now says that report was compromised by “behind-the-scenes activities” of the indigenous plaintiffs and their attorney.

The announcement comes on the heels of a settlement with Chevron that released Stratus from the company’s New York Racketeer Influenced and Corrupt Organizations Act suit. The remaining defendants in that suit suggest the financially strapped Stratus was bullied into the deal by Chevron.

Chevron has accused attorney Steven Donziger and the Ecuadoreans, known as the Lago Agrio plaintiffs, of fraud and extortion in connection with the judgment, and has called the so-called Cabrera Report disavowed by Stratus on Thursday “one of the most critical issues” in the case.

“Stratus believes that the damages assessment in the Cabrera Report and the entire Cabrera process were fatally tainted and are not reliable,” Stratus said in a statement Thursday. “Stratus disavows the Cabrera Report, has agreed to cooperate fully and to provide testimony about the Ecuador litigation.”

The $19.2 billion judgment concerns dumping of crude oil in the Amazon rainforest allegedly caused by Texaco Inc., which merged with Chevron in 2001. The Lago Agrio plaintiffs say the pollution caused residents to develop cancer and destroyed natural resources.

Stratus was retained by Donziger and the Lago Agrio plaintiffs prior to the issuance of the judgment, and its environmental consultant work was used in the disputed report by court-appointed damages assessment expert Richard Stalin Cabrera Vega.

In its New York RICO suit, Chevron accuses Donziger and other defendants of colluding to ghostwrite the Cabrera Report to include an inflated damages assessment, which the Ecuadorean court relied on in finding liability and damages against it.

All claims against Stratus in the New York suit were dismissed on Monday following its settlement with Chevron, which the remaining defendants say was prompted by Stratus’s ailing financial state and Chevron’s purported smear campaign against it.

“Chevron gets testimony two ways: They pay for it, or they intimidate people until they give in,” Craig Smyser of Smyser Kaplan Viselka LLP, which represents the Lago Agrio plaintiffs, told Law360 Thursday. “Here, we are sorry to say, Chevron bullied Stratus until Stratus had no choice but to succumb: The firm was faced with financial extinction after Chevron engaged in the defamation of Stratus to agencies Stratus did business with.”

Smyser noted that Stratus has testified in court that it stands behind the science underlying its part in the Cabrera Report and that it submitted papers in court holding “in no uncertain terms that justice was done in the Ecuadorian litigation” less than three months ago.

While the settlement imposes a gag order barring Stratus from making public statements about the validity of the Cabrera Report, Smyser said the remaining defendants are “confident” the firm will stand by its previous statements in court.

In an April 3 memo, Stratus dismissed suggestions that the deal was coerced and asserted that the settlement was reached in good faith.

“The non-settling defendants’ insinuations of extortion are meritless,” Stratus said. “As the terms of the agreement reflect, the settlement was the product of extensive negotiations involving their respective counsel, and the agreement is supported by mutual consideration.”

Last May, U.S. District Court Judge Lewis Kaplan stripped Chevron’s claims of tortious interference, trespass to chattels and unjust enrichment against Stratus in the suit, but left intact racketeering and extortion claims.

“Stratus deeply regrets its involvement in the Ecuador litigation,” the company concluded Thursday. “We are delighted to have this matter behind us.”

Judge Kaplan — whom the Ecuadoreans have sought to boot from the case over his purported efforts to hinder efforts to enforce the judgment through asset freezes in Argentina, Brazil and Canada — has set an Oct. 15 trial date for the suit.

Chevron is represented by Gibson Dunn & Crutcher LLP.

The Lagos Agrio plaintiffs are represented by Smyser Kaplan & Veselka LLP.

Stratus is represented by Silver & Deboskey PC and Zeichner Ellman & Krause LLP.

The case is Chevron Corp. v. Donziger et al., case number 2:11-cv-00691, in the U.S. District Court for the Southern District of New York.

By Gavin Broady-Law360, April 11, 2013