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Chevron Ecuador Lawsuit: Plaintiffs Engaged in New Fraud Against Chevron, Justice System?

Date: Feb 21, 2012

In the past week, there have been notable developments in the various Ecuador cases: the international tribunal hearing Chevron’s arbitration claim issued a Second Interim Award directing the Republic of Ecuador and all of its branches—including the judiciary—to prevent the Lago Agrio judgment from being enforced, Chevron’s RICO claims  were restarted, and Chevron’s appeal is advancing to Ecuador’s National Court of Justice.  The appellate court in Lago Agrio also declined Chevron’s request to suspend the bond requirement and declined to abide by the tribunal’s First Interim Award instructing the Republic to take measures to prevent enforcement.  And while these events have been widely covered, there are additional aspects to the overall Ecuador story worth noting:

  • Impact of the Second Interim Award: While the Sucumbíos court has defied the First Interim Award issued by the international tribunal, it did not address the Second Interim Award issued on February 16.  It remains to be seen what the Republic will do to comply with the tribunal’s Award, but the tribunal has put Ecuador on notice that if Chevron is ultimately successful in its arbitration, the Republic may ultimately be liable for any damages Chevron incurs.
  • The President’s Control of Ecuador’s Judiciary: The world was given a vivid example of corruption in Ecuador courts last week when Ecuador’s National Court of Justice upheld President Correa’s $40 million award and confirmed a three-year prison sentence for three directors and a journalist from El Universo—for criticizing President Correa.  “The handling of the case by the judiciary was,” in the words of the Washington Post, “alas, worthy of a banana republic.  After four changes of judge, a ‘temporary’ magistrate took over the case, held one hearing, and—33 hours after his appointment—issued the 156-page ruling.  A subsequent independent investigation determined that he did not write it, and that the author was probably Mr. Correa’s attorney.”
  • Ghostwriting of the Lago Agrio Judgment: The case against Chevron is similarly fabricated and illegal under Ecuadorian law.  The plaintiffs’ own documents reveal that they secretly wrote a report by a purportedly “independent” court expert upon which the judgment is based, and then ghostwrote the judgment itself, all the while admitting internally that the evidence did not support their allegations and that they could “all go to jail” if their wrongdoing was revealed.  The plaintiffs’ lawyers have never provided an explanation as to how their internal work product found its way into the Lago Agrio judgment.
  • Enforcement: The plaintiffs’ representatives have repeatedly stated that they intend to proceed with enforcement of their fraudulent judgment around the world.  Yet, contrary to past assertions, the plaintiffs’ representatives are cooling to the idea of enforcement in the U.S.  Perhaps that’s because seven federal courts that have found the plaintiffs’ representatives engaged in fraud during the Lago Agrio trial.  That theory is reinforced in the plaintiffs’ lawyers’ Invictus strategy memo suggesting the most efficient approach is to focus on countries that don’t have the authority to consider doubts about “the integrity of the rendering court.”  The memo also discusses a preference to keep any funds recovered “outside the reach of Ecuadorian law.”
  • Collusion with the Government: While the plaintiffs’ lawyers don’t seem to trust Ecuador with their money, they’ve happily solicited the government’s interference with “Ecuador’s independent courts.”  A 2007 e-mail between the plaintiffs’ spokeswoman in Ecuador and lead American lawyer Steven Donziger recaps a meeting the plaintiffs’ representatives held with President Correa, the Attorney General, and the Minister of the Environment.  The report to Donziger relays that the President “asked the Attorney General to do everything necessary to win the trial” and stated that the President “would call the judge” presiding over the case.  According to the e-mail, the President gave the plaintiffs “fabulous support.”

The plaintiffs’ lawyers’ documented fraud and the acknowledged interference of Ecuador’s government long ago compromised the integrity of the Lago Agrio trial.  But these facts raise a new set of questions.  If the plaintiffs’ lawyers had confidence in their judgment, why wouldn’t they seek to enforce it in the U.S.?  Likewise, if there was merit to their case, why engage in fraud?  Finally, does attempting to enforce a fraudulent judgment in a new jurisdiction constitute another fraud on a new court?

The answers appear self evident but it seems the plaintiffs’ representatives have evaded answering these questions so far.  It would be interesting to know what they have to say.