Chevron in Ecuador

The case of the deceptive underdog

In February 2011, the court in the small Ecuadorian town of Lago Agrio sentenced Chevron Corporation to pay $9.3 billion to a group of about 30,000 Ecuadorian residents of the Amazonian region where Texaco, later acquired by Chevron, had been producing oil for 26 years.

The trial was the stuff of which Hollywood movies are made. This legal saga combined fundamental environmental issues, political intrigue, judicial corruption, corporate greed and cliff-hanging courtroom drama. Above all it unveiled the tragedy of a young and brilliant U.S. lawyer who felt he could obtain big money from a giant oil corporation while becoming a hero for the underdogs of this world.

As the events unfolded, he found out that his actions would not turn out as planned.

The leader of the legal team for the plaintiffs was a Harvard-educated lawyer named Steven Donziger, accompanied by well-known Ecuadorian environmentalists Luis Yanza and Pablo Fajardo and a group of Ecuadorian lawyers. It ran from 2003 to 2011 and was followed by related legal actions in the United States and the Netherlands; the proceedings in New York are still active.

Opening Statement

Between 1964 and 1990, the U.S. oil company Texaco operated an oil production concession from the Ecuadorian government on behalf of a consortium made up of Texaco, Gulf Oil Corp. and the Ecuadorian state oil company Petro Ecuador. In 1977, Gulf left the country and Petro Ecuador became the owner of 62.5 percent of the shares while Texaco remained as operator and minority partner. Texaco ceased operations in 1990 and, from this time onward, the sole operator in the area has been the state oil company Petro Ecuador.

On Sept. 30, 1998, the minister of petroleum of Ecuador and representatives of Petro Ecuador and other Ecuadorian government agencies related to the activity signed a full release to Texaco Oil “and all their respective agents, servants, employees, officers, directors, legal representatives, insurers, attorneys, indemnitors, guarantors, heirs, administrators, executors, beneficiaries, successors, predecessors, principals and subsidiaries forever, from any liability and claims by the Government of the Republic of Ecuador, Petro Ecuador and its Affiliates, for items related to the obligations assumed by Texaco … ”

This was not the end of the story. In 1999, Ecuador passed a new Environmental Management Act, allowing individuals to introduce legal actions against potential transgressors of the environment. This became the legal opening used by lawyer Steven Donziger on behalf of the Ecuadorian plaintiffs, Maria Aguinda and others, to introduce a 2003 legal action in Lago Agrio against Chevron, the new owner of Texaco assets and liabilities. The nature and length of this trial, which was based on the retroactive application of the new law, captured much attention in international oil and environmental circles. As a petroleum geologist familiar with the area, I became very interested in the proceedings and started to read all I could about it.

Image Caption

A group of plaintiffs brought to New York City by the Donziger team

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In February 2011, the court in the small Ecuadorian town of Lago Agrio sentenced Chevron Corporation to pay $9.3 billion to a group of about 30,000 Ecuadorian residents of the Amazonian region where Texaco, later acquired by Chevron, had been producing oil for 26 years.

The trial was the stuff of which Hollywood movies are made. This legal saga combined fundamental environmental issues, political intrigue, judicial corruption, corporate greed and cliff-hanging courtroom drama. Above all it unveiled the tragedy of a young and brilliant U.S. lawyer who felt he could obtain big money from a giant oil corporation while becoming a hero for the underdogs of this world.

As the events unfolded, he found out that his actions would not turn out as planned.

The leader of the legal team for the plaintiffs was a Harvard-educated lawyer named Steven Donziger, accompanied by well-known Ecuadorian environmentalists Luis Yanza and Pablo Fajardo and a group of Ecuadorian lawyers. It ran from 2003 to 2011 and was followed by related legal actions in the United States and the Netherlands; the proceedings in New York are still active.

Opening Statement

Between 1964 and 1990, the U.S. oil company Texaco operated an oil production concession from the Ecuadorian government on behalf of a consortium made up of Texaco, Gulf Oil Corp. and the Ecuadorian state oil company Petro Ecuador. In 1977, Gulf left the country and Petro Ecuador became the owner of 62.5 percent of the shares while Texaco remained as operator and minority partner. Texaco ceased operations in 1990 and, from this time onward, the sole operator in the area has been the state oil company Petro Ecuador.

On Sept. 30, 1998, the minister of petroleum of Ecuador and representatives of Petro Ecuador and other Ecuadorian government agencies related to the activity signed a full release to Texaco Oil “and all their respective agents, servants, employees, officers, directors, legal representatives, insurers, attorneys, indemnitors, guarantors, heirs, administrators, executors, beneficiaries, successors, predecessors, principals and subsidiaries forever, from any liability and claims by the Government of the Republic of Ecuador, Petro Ecuador and its Affiliates, for items related to the obligations assumed by Texaco … ”

This was not the end of the story. In 1999, Ecuador passed a new Environmental Management Act, allowing individuals to introduce legal actions against potential transgressors of the environment. This became the legal opening used by lawyer Steven Donziger on behalf of the Ecuadorian plaintiffs, Maria Aguinda and others, to introduce a 2003 legal action in Lago Agrio against Chevron, the new owner of Texaco assets and liabilities. The nature and length of this trial, which was based on the retroactive application of the new law, captured much attention in international oil and environmental circles. As a petroleum geologist familiar with the area, I became very interested in the proceedings and started to read all I could about it.

Trial and Verdict

Stunningly, the majority partner in the consortium, the state oil company Petro Ecuador, was not named as co-defendant in the action. The only defendant was Texaco, now Chevron, the foreign company which had left the country years before, although the sole operator in the area since 1992 had been the Ecuadorian state oil company. It seemed to me that a “crime scene” that had been trampled by other actors could not be easily connected to someone who was long absent.

In 2009, I met separately with representatives of the two sides: Karen Hinton, a Washington, D.C. spokesperson for the plaintiffs and Jim Craig, a spokesperson for ChevronTexaco. I told Hinton that in my view, Petro Ecuador was the party primarily responsible for any damages to the environment in the area. She told me they had retained a very competent technical firm, STRATUS, from Denver, Colo., which had been studying the case. Craig let me know his doubts about the transparency of the trial. He later sent me information about an expert named by the court, Stalin Cabrera, whose training and experience in petroleum matters left much to be desired. This expert had submitted a report in March 2007 that described the damages presumably done by Texaco, asking for total remediation and compensation costs close to $8 billion, later doubled to $16.3 billion for “unjust enrichment” on the part of Texaco. In November 2008, the expert updated his report increasing his assessment of damages to $26 billion, in order to compensate for more pollution-related deaths than previously reported.

In February 2011, the Lago Agrio court decided against Chevron, ordering the company to pay around $19 billion, the exact amount fluctuating after several appeals by the company, finally reduced to $9.3 billion.

Chevron Investigations Cast Doubt on the Verdict

In parallel with the trial, Chevron had been investigating the activities of the main actors and progressively discovered very damaging information against the judges, the court experts and the legal team of the plaintiffs. Some of the findings included the following.

In September 2009, Chevron found video information on a $3 million bribe scheme involving the case’s judge and Ecuadorian government officials, including the legal adviser to Ecuadorian President Rafael Correa, an action designed to influence the outcome of the trial in the plaintiff’s favor. Transaction records found in Texas banks further documented the bribe scheme.

It was also found that Cabrera’s report had not been written by him but by the Colorado firm STRATUS and paid for by the plaintiffs. A book on this case, “Law of the Jungle”, by Paul M. Barrett, details (pages 151-157) how STRATUS was paid $1.7 million to generate a 3,000-page report signed by Cabrera, recommending that Chevron pay $16 billion for damages. For his services, Barrett reported, the Donziger team paid Cabrera at least $392,000.

A documentary film titled “Crude,” produced by Joseph Berlinger, highly supportive of the plaintiffs, generated much more material than utilized in the final product. In their New York Tribunal action against the Ecuador verdict, Chevron demanded and successfully obtained the total footage, which revealed meetings of the plaintiffs planning the fraud against Chevron. A video posted at the Chevron–run The Amazon Post website contains abundant graphic material left out of the final version of the documentary showing Donziger describing the Ecuadorean court system as corrupt and joking about assassinating an Ecuadorean judge – or at least making him fear he will be assassinated. In the videos, the plaintiffs discuss the lack of evidence on their side while Donziger points out that “they can simply create their own facts.” During a meeting attended by the court expert Cabrera, Donziger and the consultants retained by the plaintiffs, they also discuss how they will write the court expert’s report. In this video, Donziger is seen and heard stating that the work plan would involve “writing the expert’s opinion.” The meetings can be seen at AmazonPost.com.

A July 2013 report by the New York Times describes how one of the STRATUS consultants tells Donziger that there was no evidence of pollution in the oil pits examined, and how Donziger responded, “This is Ecuador, OK. At the end of the day, there are a thousand people around the courthouse and you will get whatever you want.”

On the basis of these findings, most scientific experts originally contracted by Donziger ended up testifying against him at the New York trial, as reported by The Amazon Post.

In January 2013, Chevron presented evidence that the Lago Agrio judge, Nicolas Zambrano, had not been the author of the judgment. The document had apparently been ghost-written by a former judge, Alberto Guerra, a job for which, Chevron claimed, he had been paid by the plaintiffs. In his book (p. 234), Barrett reports that linguistic experts hired by Chevron demonstrated that about one-third of the judgment had been lifted verbatim from internal memoranda written by the plaintiff’s team.

In 2007, Ecuadorian President Rafael Correa mounted a political campaign designed to intimidate the judge in charge of the case and browbeat the defendants. Among other things he declared: “Chevron-Texaco’s attorneys, they (are) lawyers ‘vende patria’ (sold to foreign interests), who for a fistful of dollars are capable of selling their souls, their country. We also have people from Petro Ecuador who in 1998 signed an Agreement declaring everything had been remediated, when many of these pits had not been even covered. I hereby call the Attorney General to present a report to the General Comptroller’s Office establishing criminal responsibilities against Petro Ecuador’s officials who signed this nonsense.”

However, the attorney general never found a basis to write such a report.

In order to pressure Chevron to pay the amount dictated by the Ecuadorian verdict, Correa mounted a campaign called “Dirty Hands in Ecuador.” He visited the area and placed his hands in an oil pool, claiming this was the proof of Chevron’s crime. However, the site where he placed his hand in September 2013 was not one of Texaco’s old oil pits but Petro Ecuador’s.

The campaign recruited Hollywood actors such as Danny Glover, Mia Farrow and Darryl Hannah and other celebrities, some of whom were reported to have received substantial payments to support the campaign.

Courts Absolve Chevron,Condemn Donziger

In February 2011, Chevron filed suit against Donziger in a Manhattan court, based on the Racketeer Influenced and Corrupt Organizations Act (RICO), Judge Lewis Kaplan presiding. Pablo Fajardo, Luis Yanza and the consulting firm STRATUS were named as co-defendants and organizations that had supported Donziger such as Patton Boggs and Kohn Swift, Amazon Watch and Burford Capital were named as co-conspirators. This trial ended in March 2014 with a ruling that stated, “Donziger and the Ecuadorian lawyers fabricated evidence … they handpicked and paid the Court Expert … paid a Colorado Consulting firm to write the expert’s report … promised the judge $500,000 to rule in their favor …”

In a 500-page ruling, the judgment prohibited Donziger and his clients from profiting in any way from their fraud. This decision was unanimously affirmed in August 2016 by the United States Court of Appeals for the Second Circuit, which stated, “Donziger and his team engaged in a parade of corrupt actions … including coercion, fraud and bribery.” Donziger was ordered to pay $32 million in legal expenses and faced potential professional disciplinary action.

In 2018, the International Permanent Court of Arbitration at The Hague upheld the decision of the New York Court, denying the attempt by the Ecuadorian government to collect money from Chevron on the basis of the Ecuadorian judgment. The international court stated that the Ecuadorian judgment had been corrupt and fraudulent and ordered the government of Ecuador to pay the legal costs incurred by Chevron.

An Ideological Twist

The story is still unfolding. Donziger has been convicted but his cause has been taken up by several environmental groups, who see him as a hero battling the all-powerful oil company. The case against Chevron has almost become a religious movement, taken up by some groups that consider Chevron the guilty party. Recently, a group of 30 Nobel Prize winners published a manifesto, which can be found at CourtHouseNews.com, entitled, “30 Nobel Laureates Demand That Chevron Face Justice for Amazon Pollution,” in which they hail Donziger as a champion of the poor and the weak and, as the title conveys, demand that Chevron pay for the damages done in Ecuador.

Although it seems tempting to side with such a distinguished group, the evidence against Donziger and his team is overwhelming. It is perilous to politicize the environmentalist cause as these groups are trying to do. By calling upon environmentalists to defend Donziger and to indict Chevron, these ideologically driven groups exert a subtle form of extortion on all who support the cause of the environment. Many of us defend the environment and favor the development of greener, renewable sources of energy but, knowing the facts of the Chevron-Ecuador case, find it impossible to side with Donziger and against Chevron.

The preservation of our environment is one of the noblest human aspirations. All life should be respected, the preservation of the species is more important than any one individual, and the fate of the planet transcends national boundaries and political ideologies. Environmentalism should never become tainted with partisan politics or ideological astigmatism.

Editor’s Note: The author notes that he does not have, and never has had, any relationship with any of the parties mentioned in this article, nor has he ever received any compensation from any source for expressing his views on this case.

Comments (1)

Villains and losers
There is many a villain in that story, but the loser(s) were and are the indigenous people. There was actually a decent lady lawyer working on that project until Donziger smelled gold and off he went with an outrageous lawsuit that eventually gave an opening for Chevron to escape cleaning up what it should--it did not require such mega-bucks, just some decent people getting to work to clean up pollution sites no different from stripper fields of Louisiana of the 1920s-1940s. It is not hard nor nearly that impossible to separate out the damage of the Texaco consortium vs. the state-owned company. Such work is done all the time in legacy oilfield pollution sites. Texaco was known to be a big polluter in Louisiana through at least the 1940s, such statements by regulators exist. Therefore it would not be a surprise to find they treated Ecuador with about as much care as some of Louisiana fields. But greed ruled this story, and so far all guilty sides are getting away with doing very little to correct the villagers' pollution exposure risks. So very sad.
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2/23/2021 3:28:53 PM