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Chevron Ecuador: Patton Boggs Veiled Bribes In $19B Judgment, Chevron Says

Date: May 13, 2013

Chevron Corp. accused Patton Boggs LLP of fraud in New York federal court Friday, saying the firm conspired with a group of indigenous Ecuadoreans to cover up the extent to which an Ecuadorean court’s $19 billion pollution judgment was secured through bribery and corruption.

The energy giant claimed Patton Boggs has knowingly mounted an obstructionist campaign to conceal that the unprecedented judgment was secured through illegal interference and based on an inflated damage assessment secretly drafted by representatives for the so-called Lago Agrio plaintiffs. The firm’s contingency fee stake in the judgment could entitle it to hundreds of millions of dollars if the award is ever enforced.

Chevron has vowed to fight the judgment “until hell freezes over” and has launched a New York racketeering suit seeking to invalidate the award while also battling attempts by the Ecuadoreans to secure its enforcement through asset freezes in Latin America and Canada.

“Patton Boggs has stepped far beyond any proper role as ‘litigation counsel’ to the Lago Agrio plaintiffs, and has committed numerous tortious acts aimed at Chevron,” the company said Friday. “It has sought to defraud and mislead numerous courts, as well as federal and state governmental agencies and officials, Chevron’s shareholders, investors, analysts, and the media.”

In a statement Monday, a Patton Boggs representative said the counterclaims are “perhaps the starkest example yet” of Chevron’s efforts to flex its financial muscle in order to intimidate and harass those who are seeking to enforce the Ecuadorean judgment and in doing so divert attention from its alleged liability in the Amazon.

“This cynical strategy will not work,” the firm said. “We are proud that we have helped the indigenous and farming communities that have been so adversely impacted by Chevron’s actions. Patton Boggs has acted conscientiously, ethically and in good faith at all times since becoming involved in this case in 2010 and will not be intimidated by Chevron’s scare tactics.”

The counterclaims come in response to a February 2012 suit brought by Patton Boggs against Chevron in New Jersey seeking to collect a $21.8 million bond the energy giant posted when it obtained an injunction — later overturned — blocking the enforcement of the judgment. That case was transferred to New York in December.

The contested judgment involves damages for crude oil allegedly dumped in the Amazon rainforest by Texaco Inc., which the LAPs say caused residents to develop cancer and destroyed natural resources. Chevron inherited Texaco’s liability when the companies merged in 2001.

Among the counterclaims asserted by Chevron on Friday are allegations that Patton Boggs helped conceal the ghostwriting of the so-called Cabrera Report, a purportedly independent assessment of the scope of those crude oil damages that Chevron claims the Ecuadorean judge overseeing the litigation relied on in reaching the massive judgment. The oil company says the report was ghostwritten by the LAPs and their attorneys.

Patton Boggs took a hit in April when British litigation fund Burford Capital Ltd. renounced its interest in the litigation, specifically citing the Cabrera Report and saying the firm made several false representations to Burford in order to secure its $4 million investment.

Patton Boggs denied these allegations and maintained that the Ecuadorean judgment was fully supported by evidence.

The legitimacy of the Cabrera Report was further tarnished in April when Stratus Consulting Inc., which contributed to the report, disavowed its contributions after striking a deal with Chevron to escape racketeering and extortion claims in the RICO suit.

The extent to which the Cabrera Report played a role in the final judgment has been a source of conflict in the litigation, with Chevron maintaining that it was a key element of the award and the Ecuadoreans and their representatives claiming that the judge who issued the disputed award excluded the report from consideration in response to Chevron’s objections, and that it therefore had no bearing on the case’s outcome.

U.S. District Judge Lewis A. Kaplan, who is overseeing Chevron’s New York suit filed under Racketeer Influenced and Corrupt Organizations Act, has previously held that Chevron has established sufficient probable cause that the judgment was procured by illegal acts, citing those alleged acts in overruling work-product and attorney-client privilege protections under which Patton Boggs sought to avoid document disclosures in that suit.

In compelling the production of those documents, Judge Kaplan asserted that Patton Boggs “has had a hand in almost every major development” in the litigation.

The Ecuadoreans have made no secret of their belief that Judge Kaplan has exercised persistent bias against them, and have moved to boot him from the case over allegations he has attempted to hinder international enforcement efforts and conducted himself as “transnational arbiter” of the disputed judgment, in defiance of rulings by the Second Circuit.

The Second Circuit has granted a bid for expedited consideration of that petition and is set to look at it sometime this month. The RICO suit is set to go to trial Oct. 15.

Patton Boggs is represented by Leader & Berkon LLP.

Chevron is represented by Stern & Kilcullen LLC and Gibson Dunn & Crutcher LLP.

The case is Patton Boggs v. Chevron Corp., case number 1:12-cv-09176 in the U.S. District Court for the Southern District of New York. The RICO suit is Chevron Corp. v. Donziger et al., case number 1:11-cv-00691, in the U.S. District Court for the Southern District of New York.

By Gavin Broady-Law360, May 13, 2013