In 2011, a judge in Ecuador condemned ChevronTexaco to pay a staggering $18.2 billion in environmental damages to a group of Ecuadorian citizens. That ruling, though fraudulent to its core, is now seeping across international borders and making waves in places like Canada, and most recently, Argentina. As a result, the Republic of Ecuador is fast on its way to becoming known as a country where the judicial system can be used as an extortion tool against international corporations.
The decades-long case that culminated in the fraudulent ruling has been hailed by some as a victory of the little people against big oil: Texaco (which was later bought by Chevron) was accused by local citizens, organized by trial lawyers, of causing environmental harm during its oil production operations in a portion of the Ecuadorian Amazon. As evidence, the Ecuadorian judge relied on a highly incriminating report that became the basis of his ruling.
Even a cursory analysis of this litigation shows it to be a significant case of corruption perpetrated by U.S. based trial lawyers and involving judges, pseudo experts, mercenary consultants, members of the Rafael Correa government (including Correa himself), and venal Ecuadorian and U.S. lawyers, all trying to raid the company’s pockets. In their latest attempt to get rich at ChevronTexaco’s expense the plaintiffs succeeded in freezing Chevron’s assets in Argentina in what is a clear demonstration of the strong political undercurrents of this case.
While the plaintiffs and their trial lawyers – led by Steve Donziger – continue to base their case on fraudulent claims and argue that the company must pay, the facts demonstrate a mega extortion scandal against ChevronTexaco.
When Texaco left the country in 1992, the Ecuadorian government gave the company a full release, recognizing that the company had fulfilled all its environmental obligations in a satisfactory manner. For the past 20 years, state-owned oil company Petro Ecuador has operated in the region, leaving in its wake one of the worst environmental records in Latin America. It, not ChevronTexaco, is the obvious responsible party for whatever environmental damages took places during this period.
Still, the action is solely directed against the international corporation having “plenty of money”. Moreover, the report the judge relied on in Ecuador, was produced by an “independent expert” named Richard Stalin Cabrera. But not only was Cabrera not qualified to produce the report, the end result was full of errors and misstatements. Later, it was found out that a group of advisers – not Cabrera – were paid by the plaintiffs’ legal team to draft a report in their favor. Video footage from the documentary “Crude,” reveal candid meetings discussing how the plaintiffs would write the report for Cabrera to sign.
Ecuadorian President Rafael Correa also intervened publicly many times during the trial to side with the plaintiffs. Correa singled out ChevronTexaco on national TV several times, even referring to their lawyers as “vende patria” (sold to foreign interests), who for a fistful of dollars are capable of selling their souls, their country”. Just this week, the media has reported that President Correa has raised the issue with Argentine President Fernandez, as courts there look at the issue
The fraud in this case is clear in outtakes ChevronTexaco was able to obtain from “Crude,” which was financed and coordinated by the plaintiffs. The videos show Donziger dismissing the Ecuadorean court system as corrupt and joking about assassinating an Ecuadorean judge – or at least making him fear he will be assassinated. He also says that Ecuadorean judges make decisions on what they fear the most, not based on what the laws dictate, suggesting the need to intimidate them with marches and protests. At another points in the video, Donziger talks about needing to create your own facts.
Outtakes from “Crude” also show members of Donziger’s legal team conspiring to form a “private army” to be used “to control the court, to pressure the court.” At one point, a member of Donziger’s team can be seen asking if the footage could later be subpoenaed, saying “I just want you to know that…it’s illegal to conspire to break the law.”
The evidence of fraud led a prominent legal firm from Philadelphia - Kohn, Swift & Graf - to withdraw from the case (reported in the Philadelphia Inquirer, December 23, 2010) after financing the plaintiffs and contributing to the production of the documentary. The Inquirer adds that Kohn severed relations with Donziger and the case, when charges of ethical improprieties [by the plaintiffs] began to emerge.
In spite of the mounting evidence of high-level corruption and the fact that seven U.S. federal courts have already made fraud findings related to the plaintiffs, they continue efforts to collect the $18.2 billion judgment. And now, they have set their sights on seizing ChevronTexaco's assets in other Latin American countries. Some leftist regimes in Latin America (such as Ecuador, Argentina, Venezuela and Bolivia) have labeled international business, particularly private oil companies, as enemies, making these countries prime targets for such fraudulent lawsuits against foreign companies. Their message to the international business community is loud and clear: “No need to invest here.”
But in the end, it’s not the governments or the businesses that lose out; it’s the people in Latin America who are shut out of free enterprise and the rule of law, a chance for a better quality of life and the security that comes with the rule of law.
Gustavo Coronel is a petroleum geologist, author and public policy expert, who was elected to the Venezuelan Congress in 1998 before it was dissolved in 1999 following the election of Hugo Chavez as president. He was a member of the Board of Directors of Petroleos de Venezuela from 1976-79.