Patton Boggs Lied To Fund $19B Chevron Suit, Investor Says
A British litigation fund that backed the Ecuadorean plaintiffs who secured a $19 billion pollution judgment at the heart of Chevron’s New York racketeering lawsuit on Wednesday struck a deal with the energy giant, saying Patton Boggs LLP duped it into investing in the case.
Burford Capital Ltd. renounced its interest in the litigation in exchange for a mutual release of claims with Chevron, saying it was “deeply concerned” about mounting evidence of fraud and misconduct it alleges have permeated the Ecuadorean judgment and subsequent litigation.
In a declaration filed Wednesday, Burford chief executive Christopher Bogart claims the litigation hedge fund would not have invested $4 million in the Ecuadorean’s legal efforts were it not for their faith in Patton Boggs and lead partner Jim Tyrrell, faith he says proved misplaced when evidence of deception later emerged.
“The Lago Agrio litigation is far afield of Burford’s usual investment matters, and Burford explicitly undertook this investment because of our substantial confidence in Jim Tyrrell,” Bogart said. “As we later learned, the representations that Patton Boggs made to us … during our diligence process were false and misleading in several respects.”
The ties between Burford and Tyrell go back to Tyrell’s days as a Latham & Watkins LLP partner, where he worked alongside four firm partners who would later go on to occupy senior positions with the fund, and it was Tyrell and Patton Boggs’ assumption of leadership in the litigation that “transformed it as an investment possibility,” Bogart said.
The ongoing dispute concerns a group of indigenous Ecuadoreans who say crude oil allegedly dumped in the Amazon rainforest by Texaco Inc., which merged with Chevron in 2001, caused residents to develop cancer and destroyed natural resources.
Chevron has mounted a New York Racketeer Influenced and Corrupt Organizations Act suit seeking to squash the judgment, claiming it is the product of extortion and fraud on the part of attorney Steven Donziger and the so-called Lago Agrio plaintiffs he represents.
Burford, which terminated its funding of the plaintiffs in 2011 amidst concerns of legal improprieties but maintained a financial stake in the litigation, said it was denied the full disclosure to which it was entitled under its funding agreement, particularly with respect to a key damages assessment underlying the unprecedented Ecuadorean judgment.
The fund’s exit from Chevron’s RICO comes less than a week after that assessment, known as the Cabrera Report, was disavowed by an environmental firm hired by Donziger to evaluate the extent and effect of Chevron’s alleged pollution in the Amazon. Chevron has long claimed the report was ghostwritten by the plaintiffs to inflate the eventual damages figure.
While Donziger has maintained that his side’s contact with court-appointed damages assessment expert Richard Stalin Cabrera Vega was limited and allowable under Ecuadorean law, the testimony of two Stratus Consulting Inc. representatives on Friday indicated that the report was “fatally tainted” by Donziger’s influence.
“Chevron believes that Burford has acted responsibly after becoming aware of the fraud, bribery and extortion perpetrated here, and Chevron is pleased that Burford has taken this further action of disclaiming any interest in this matter,” Chevron Vice President and General Counsel Hewitt Pate said in a statement.
In its own statement, Burford praised Chevron’s efforts in the ongoing litigation as “instrumental in bringing to light the facts.”
A representative for the Lago Agrio plaintiffs told Law360 on Wednesday that efforts to discredit the Cabrera report were little more than a public relations gesture, saying the Ecuadorean judge who issued the disputed award excluded the report from consideration in response to Chevron’s objections and that the report therefore had no bearing on the final judgment.
The representative further dismissed the Burford testimony and the Stratus disavowal as a “sideshow” designed to “intimidate and malign” the Lago Agrio plaintiffs, adding that they would not curtail ongoing efforts to secure the Ecuadorean court’s judgment.
“Burford’s dissatisfaction flows out of an old dispute, dating back to 2011, over money they think they are entitled to, and the plaintiffs’ unwillingness to agree,” the representative said. “Dressed up as a complaint about misconduct, it is, at its core, just a disagreement about money.”
Burford’s allegations follow a series of recent setbacks for the Ecuadoreans, including Stratus’ exit from the litigation last week and a magistrate judge’s recommendation Monday that Donziger’s extortion and fraud counterclaims against Chevron be dismissed.
The Ecuadorians are currently seeking to enforce the judgment through asset freezes in Argentina, Brazil and Canada, and have sought to remove U.S. District Court Judge Lewis Kaplan from his role presiding over the New York RICO suit over his purported attempts to hinder those efforts.
Judge Kaplan has set an Oct. 15 trial date for the suit.
Representatives for Patton Boggs and for the Ecuadoreans did not immediately respond to a request for comment Wednesday.
Chevron is represented by Gibson Dunn & Crutcher LLP.
The Lagos Agrio plaintiffs are represented by Smyser Kaplan & Veselka 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 17, 2013