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Pattern of fraud

The Fraudulent Case Against Chevron in Ecuador

On March 4, 2014, the U.S. District Court for the Southern District of New York ruled that the $9.5 billion Ecuadorian judgment was the product of fraud and racketeering activity, finding it unenforceable.

Science Fiction: Plaintiffs’ Experts Admit to Fabricating Evidence

According to the plaintiffs’ own experts, their so-called “overwhelming scientific evidence” was completely fabricated.

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The nearly 500-page ruling (2.6 MB) finds that Steven Donziger, the lead American lawyer behind the Ecuadorian lawsuit against the company, violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), committing extortion, money laundering, wire fraud, Foreign Corrupt Practices Act violations, witness tampering and obstruction of justice in obtaining the Ecuadorian judgment and in trying to cover up his and his associates’ crimes.

The court found that Donziger and his team “wrote the [Ecuadorian] court’s Judgment themselves and promised $500,000 to the Ecuadorian judge to rule in their favor and sign their judgment.” As Judge Lewis Kaplan stated in the court’s ruling: “The wrongful actions of Donziger and his Ecuadorian legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador – and they knew it. Indeed, one Ecuadorian legal team member, in a moment of panicky candor, admitted that if documents exposing just part of what they had done were to come to light, ‘apart from destroying the proceeding, all of us, your attorneys, might go to jail.’ It is time to face the facts.”

During the seven-week RICO and fraud trial, Chevron presented unrebutted evidence detailing the extent of the fraudulent acts undertaken and directed by Donziger, his Ecuadorian legal team and other associates, including fabricating environmental evidence, pressuring scientific experts to falsify reports, plotting to intimidate judges into handing down favorable rulings, bribing court-appointed experts, ghostwriting court reports and even drafting the final judgment. Today’s judgment made clear that Donziger and his associates resorted to fraud due to the lack of evidence to support their claims against Chevron.

Today’s ruling prohibits Donziger and his associates from seeking to enforce the Ecuadorian judgment in the United States and further prohibits them from profiting from their illegal acts.

María Aguínda, the lead plaintiff in the initial 1993 case brought against Texaco in New York, and later in the 2003 Lago Agrio litigation against Chevron, admitted on video that she didn’t knowingly sign onto the lawsuit. Rather, she signed a document in return for promises of “free medicine.” Months later “her” attorneys informed her that she was the lead plaintiff in the case. In the Lago Agrio lawsuit, the lawyers cut even more corners: they simply forged the names of at least 20 of the 48 “plaintiffs.”

There have now been several documented instances in which the plaintiffs’ lawyers misled their environmental experts and misused these experts’ work

Plaintiffs’ lawyers’ experts Dave Russell and Dr. Charles Calmbacher repeatedly told their employers that testing results did not support the allegations of environmental contamination by Texaco. In November 2004, Russell told plaintiffs’ lawyers that their testing was “self-defeating” (27 KB) and “counterproductive.” (62 KB) He went on to admit that Texaco’s environmental cleanup was “performing as designed.” (110 KB) Russell continued with admissions that testing for cancer-causing chemicals was proving fruitless; the carcinogenic compounds were simply “not there.” Two months later, Russell provided another update in which he explained: “From the data I have seen so far, we are not finding (23 KB) any of the highly carcinogenic compounds one would hope to see when investigating the oil pits.”

Russell later disavowed (111 KB) his own $6 billion remediation estimate, telling the plaintiffs’ lead American lawyer, Steven Donziger, that the “estimate is no longer valid, and if subpoenaed to testify, I will state that the costs are much lower based upon the knowledge available to me at the time I was released from the project.”

In a sworn declaration (1.8 MB), Russell also testified that he had “personal knowledge that [lead plaintiff attorney] Steven Donziger and the plaintiffs’ representatives” were “lying about the environmental conditions” in Ecuador. Russell outlined how Donziger instructed him to stop testing for standard oil spill markers because the findings suggested that the oil was too fresh and not likely a result of Texaco’s operations. He further noted that by late 2004, the plaintiffs had become unhappy because “the analytical data was turning up blank for both the soil and the water samples” and they “could not prove their claims.”

Dr. Calmbacher, the plaintiffs’ expert who inspected the first four sites in 2004, found that none required further remediation. As environmental testing failed to show the necessary contamination, the plaintiffs’ lawyers began falsifying evidence. In 2005, plaintiffs’ lawyers filed reports in Dr. Calmbacher’s name, claiming he had concluded that two of the sites were contaminated and required millions of dollars of remediation. When subpoenaed by Chevron, Dr. Calmbacher testified (61 KB) under oath that “I did not reach these conclusions, and I did not write this report.”

Additionally, Douglas Beltman, Executive Vice President, and Ann Maest, Managing Scientist, of Boulder, Colo.-based Stratus Consulting, provided sworn declarations (Beltman here (307 KB), Maest here) (169 KB) outlining Stratus’ knowledge of the plaintiffs’ lawyers’ misconduct in the ongoing litigation. The executives also testified that there is no scientific merit to the plaintiffs’ damages claims against Chevron and Texaco Petroleum, which served as the evidentiary basis for the $18 billion judgment issued against Chevron by an Ecuadorian court in February 2011.

Beltman and Maest detail the role Stratus and the plaintiffs’ lawyers played in drafting the supposedly independent damages report of Richard Cabrera. Testimony also provides a direct account of Steven Donziger’s control of the “Cabrera Report” process and the pressure Donziger applied to contrive damages attributed to Chevron.

In filings submitted in the Southern District of New York on April 12, 2013, Beltman and Maest state that “Stratus is not aware of any scientific evidence that people in the former concession area are drinking water contaminated with petroleum” and that they are “not aware of any scientific data that shows that any adverse health effects are caused by contamination from petroleum operations in the Oriente.”

The plaintiffs’ lawyers blackmailed the judge presiding over the Lago Agrio trial to cancel the court-ordered site inspections plaintiffs’ experts Dave Russell and Dr. Calmbacher condemned. Their solution was to force the court, by threatening the judge with a sexual harassment complaint, to appoint an “independent” global damages expert, who would work covertly for them.

On June 13, 2007, Richard Stalin Cabrera Vega (Cabrera) was officially sworn in as the global damages expert. The Lago Agrio court required Cabrera to “perform his duties … with complete impartiality and independence vis-á-vis the parties.” But privately, Cabrera—and his official conclusions—had already been predetermined and paid for by the plaintiffs’ lawyers. The plaintiffs’ lawyers opened a “secret” bank account to pay at least $100,000 bribes and hush money to Cabrera. These secret payments were in addition to the $263,000 plaintiffs acknowledged paying Cabrera for the work he was supposed to do independently for the court, but which plaintiffs were secretly doing for him.

“Secret” Bank Account Email 1 (89 KB)
“Secret” Bank Account Email 2 (35 KB)
“Secret” Bank Account Email 3 (500 KB)

Former co-counsel and litigation funder Joseph Kohn told the plaintiffs that he was “shocked by recent disclosures concerning potentially improper and unethical (943 KB), if not illegal, contacts with the court-appointed expert.” The plaintiffs’ Ecuadorian lawyers admitted in an email that if evidence of their collusion and fraud was exposed, “all of us, your attorneys, might go to jail.”

But the plaintiffs’ lawyers doubled-down on the fraud, seeking, as stated by a plaintiffs’ lawyer at Patton Boggs, to “cleanse” (350 KB) the Cabrera Report by obtaining reports from new experts, who in less than a month—without even visiting Ecuador—repackaged the fraudulent Cabrera Report and increased the damages claim by another $86 billion. Several federal courts have found this “cleansing” operation to be evidence of additional fraud.

In January 2013, it was revealed that Burford Capital, one of the largest financial backers of the plaintiffs, accused (352 KB) the plaintiffs’ lawyers of fraud and other misconduct in connection with their pursuit of their case. On April 17, 2013, Burford provided a sworn declaration outlining the firm’s knowledge of the plaintiffs’ lawyers’ misconduct and testifying that the proceeding is irredeemably tainted by fraud. Christopher Bogart, Burford’s Chief Executive Officer, said: “Burford stands by its clients in the face of aggressive litigation tactics by their opponents, but Burford does not sit still for being deceived or defrauded and has no interest in profiting from such conduct.”

As more supporters began abandoning the fraudulent lawsuit, another key member of Donziger’s team came forward with information on how Cabrera was selected by the plaintiffs’ lawyers: Fernando Reyes, an Ecuadorian petroleum and environmental engineer who served as a consultant to Donziger, submitted a sworn declaration (164 KB) describing the process by which the plaintiffs’ lawyers sought out someone who, as Donziger put it, would “totally play ball with us and let us take the lead while projecting the image that he is working for the court.” Reyes’ declaration provides an eyewitness account as to how the plaintiffs’ lawyers have sought to manipulate the trial since its infancy, deceived the court, corrupted the trial process and engaged in the development of a fraudulent “independent” report.

The ultimate $18.2 billion judgment against Chevron was not written by the presiding judge Nicholas Zambrano. Two prominent forensic linguists (see here (73 KB), here (2 MB) and here) (17 MB) compared the Feb. 14, 2012, judgment to Judge Zambrano’s known writings and found substantial differences in writing characteristics. They concluded that the judgment was not written by Judge Zambrano alone.

In fact, a former Ecuadorian judge recently acknowledged his direct involvement in orchestrating a fraudulent judgment against Chevron.

In a sworn declaration (169 KB) filed on January 28, 2013, in New York federal court, Alberto Guerra, who presided over the case when it was first filed in 2003, reveals that he was paid thousands of dollars by the plaintiffs’ lawyers and a subsequent judge, Nicholas Zambrano, for illegally ghostwriting judicial orders issued by Zambrano and steering the case in the plaintiffs’ favor. Guerra, who is no longer a judge, attests that the plaintiffs’ lawyers were permitted to draft the $18 billion judgment in their own favor after they promised to pay Zambrano a $500,000 bribe out of the judgment’s enforcement proceeds, and that Guerra then reviewed the plaintiffs’ lawyers draft for Zambrano before the judge issued it as his own.

Guerra’s declaration, which is corroborated by computer, bank and shipping records, as well as the plaintiffs’ lawyers’ own internal e-mails, provides a direct account of corruption that has tainted the trial for years.

After failing to clean up their oil operations for years, Ecuador’s state-owned oil company, Petroecuador, finally began to “fulfill their contract, their cleanup contract, with Texaco,” but plaintiffs’ lawyers worried (346 KB) that the cleanup efforts would “undermine [their] legal position.” They worried that the realistic budget of the Petroecuador remediation would undercut their ability to force a large judgment in the case. In an email with the subject line “WORRISOME,” Pablo Fajardo, the plaintiffs’ lead Ecuadorian counsel, warned that a newspaper was reporting that the remediation (encompassing an area far larger than the area at issue in the case), would cost an “extremely low” $96 million. Even this estimate was too high: Petroecuador recently announced plans to remediate all the existing sites in the Ecuadorian Amazon and estimated the cost would be only $70 million.

Fearful that Chevron would, in Fajardo’s words, “say that the state finally assumed its duty and is going to clean up what it ought to,” plaintiffs’ attorney Steven Donziger told Fajardo “to go to [Ecuadorian President Rafael] Correa to put an end to this (2.6 MB) s— once and for all.”

The plaintiffs’ lawyers recognized that they could not publicly oppose Petroecuador’s cleanup because they would “just look like a bunch of bigots[:] we claim that we are just looking for an environmental restoration, and we are opposing it.” (531 KB) So they once again lied, submitting a letter to the Lago Agrio court over the “independent” expert’s signature, requesting that the court order the government to halt remediation activities.

The plaintiffs’ own documents show that the lawyers have no plans to use any damages they receive for remediation, but rather long ago formulated a plan to “keep the proceeds out of Ecuador.”

Most Significant Flaws in the Cabrera Report

A key report submitted to a court hearing by Richard Cabrera contains fabricated and erroneous evidence. Details regarding 12 significant flaws found in the report are outlined below.

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 Texpet liable for environmental impact caused solely by Petroecuador during its 18-plus years operating the concession fields.

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 Texpet. 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 $1.7 billion — more than $2.2 million for each of the pits Cabrera claims.

90 Percent of Damages Unrelated to Task

Even though Cabrera’s recommended remediation cost of $1.7 billion is wildly overstated, that figure is only approximately 10 percent of the total damages he recommends. The remainder of Cabrera’s alleged damages and proposed remedies are unrelated to the environmental impact that the court ordered him to assess.

Fabricated Cancer Claims

Cabrera’s recommendation of $2.9 billion for alleged “excess cancer deaths” is completely fabricated. Cabrera does not identify a single individual, offer a single medical report, or provide a single fact to support this conclusion. Cabrera also disregards official Ecuador health statistics showing that the cancer rate in the former concession area is no different from that of other regions. His recommendation is based entirely on biased surveys, conducted in secret by unknown individuals, the results of which he improperly extrapolated over an assumed population.

Excessive Budgets for Medical Facilities

Cabrera’s recommendation for $480 million for a healthcare system endowed for 50 years and overseen by an unidentified “assembly” has no basis, and there are no plans or facts justifying any aspects of the cost.

Unjustified and Exaggerated Potable Water Cost

Cabrera did not identify any contaminated water supply, yet he recommended a completely arbitrary amount of $428 million to establish potable water facilities.

No Basis for ‘Indigenous Population Impacts’

Cabrera inexplicably recommends $430 million to repair supposed impacts on indigenous culture, for communities that are not identified. This includes buying back land for the indigenous people, even though the Government of Ecuador gave this land to settlers for the express purpose of establishing communities and agriculture in the region.

Unfounded Claim for Ecosystem Losses

Cabrera improperly assesses between $875 million and $1.7 billion for “ecosystem losses” simply because Texpet constructed facilities or roads on a small fraction of the entire concession area. Cabrera makes this claim even though the facilities and roads were legally established — and in some instances mandated by the government — and were necessary to develop Ecuador’s oil resources. The dollar amounts that Cabrera seeks are completely arbitrary as well.

Unjustified Assessment to Improve Petroecuador’s Infrastructure

Cabrera inexplicably recommends $375 million to improve Petroecuador’s infrastructure, despite that Petroecuador conducted an audit and certified that the facilities that Texpet turned over to it were in good condition. Cabrera also ignores Petroecuador’s demonstrated and acknowledged record of failing to invest necessary resources to maintain its equipment and facilities.

No Basis Whatsoever for Unjust Enrichment

Cabrera completely fabricated a claim for unjust enrichment damages of $8.3 billion. There is no basis for the claim and no foundation for the number, especially considering that the Republic of Ecuador enjoyed 95 percent of the profits from the concession’s operations and that Texpet earned only $490 million in profits over the entire history of the concession.