Was Chevron Scammed For $19 Billion?

In Ecuador, a judge hit the oil major with an eye-popping class-action payout. In New York, the company is suing to get it back. REUTERS / Guillermo Granja

Even by the standards of a legally battle-tested oil industry, the Chevron trial is ugly.

In the case before U.S. District Judge Lewis Kaplan, Chevron puts forth that Steven Donziger, a New York lawyer, masterminded an international conspiracy to obtain a $19 billion judgment against the oil giant in Ecuador in 2011 for contaminating the Amazon. That award was one of the largest class-action payouts ever.

All this stems from a 2003 lawsuit filed in Ecuador by Donziger and an activist group, Amazon Defense Front, which sought damages for contamination it claimed Texaco left behind after drilling there for over 25 years. (Chevron acquired Texaco, its former competitor, in 2001.)

According to the filing, Donziger estimated that he could earn hundreds of millions of dollars should the Ecuador decision stand. It quotes him as saying, "I sit back and dream… billions of dollars on the table. A movie, a  possible book.'"

Chevron further alleges that Donziger blackmailed and bribed Ecuadorian judges to secure the massive judgment against it. And the company maintains that Donziger and the Front, in making their pollution claims to Ecuadorian and  U.S. courts, as well as the U.S. Congress, wrote an environmental damage report themselves -- but presented it as the work of an independent, court-appointed analyst. Chevron also claims to have proof that the 188-page judgement itself was “ghostwritten by the Front."

One of Chevron's most important and intriguing witnesses is Alberto Guerra, an ex-Ecuadorian judge who recently said in court that he accepted bribes from one of Donziger's associate to influence the judge in the original case. He said Donziger’s team agreed to pay $500,000 so that it could draft the final judgment. “Mr. Donziger thanked me for the work that I was going to do,” Guerra testified.

Guerra, however, is not a perfect witness: During cross-examination he acknowledged that Chevron paid him $48,000 "for physical evidence" of said bribery, as well as "travel expenses for his and his son's families to flee Ecuador… attorneys fees...and committed to pay him $12,000 per month for living expenses in the United States for two years.” On Wednesday morning, Donziger's legal team filed a motion to dismiss Guerra’s testimony on the grounds that "Chevron's compensation for his testimony is tantamount to a bribe." (At press time, Kaplan had yet to rule on that motion.)

This type of back-and-forth is typical of the years-long legal proceeding, in which there's evidence of wrongdoing by both sides. A 2012 New Yorker article said that in Ecuador’s Amazon, “Texaco simply dumped [toxic] liquid into swimming-pool-size pits” that Donziger and locals claimed led to “cancer deaths, miscarriages, birth defects, dead livestock, sick fish, and the near-extinction of several tribes.” The article makes clear, however, that Donziger routinely discussed corruption in the Ecuadorian legal system, and questions whether he took the case “too far,” quoting him as saying: “This is Ecuador, O.K.?...at the end of the day, if there’s a thousand people around the courthouse you’re going to get what you want.” The article also quotes him describing the scientific evidence as “just a bunch of smoke and mirrors and bulls***.”

Chevron is suing Donziger and allied activists under a 1970 anti-mob law called the Racketeer Influenced and Corrupt Organizations Act, commonly known as the RICO Act. The company's lawyers, led by Randy Mastro, claim Donziger's camp orchestrated an intricate conspiracy to defraud Chevron similar to the way a drug cartel or mafia-run casino might conduct business with extortion and similar shady tactics.

This has prompted skepticism from some of the lawyers interviewed by Newsweek who are familiar with RICO but not involved in this case.


Chevron “I don't want David to be precluded from suing Goliath. By the same token, I don't want Davids by the thousands ginning up fraudulent lawsuits." REUTERS/Carlo Allegri Jeffrey E. Grell, a Minneapolis-based lawyer who authored a book on RICO, says: "A lot of what's being alleged here by Chevron is disturbing, [but] I'm not sure if RICO is the way we address these kinds of problems."

Susan Bozorgi is a Miami-based criminal defense lawyer specializing in white-collar crime and as such, is quite familiar with RICO; she worries about the implications should Chevron win."[RICO] was meant to be used against the mob," she says. "The danger about a case like this is that it could send a message to a lawyer who wants to take up a cause for an underdog that Big Brother, the big corporate entity, is going to start coming after you for criminal conduct."

Other lawyers contacted by Newsweek were perplexed by the proceedings, but didn’t want to comment on the record either because they were somehow affiliated with a lawyer involved with the case (Mastro’s firm, Gibson Dunn, boasts “1,100 lawyers in 18 offices in major cities throughout the United States, Europe, the Middle East, Asia and South America,” according to its website) or are baffled at how RICO would apply in a civil context.

Mastro dismisses these opinions as uninformed. "I don’t think folks you’ve spoken to know enough about the case to be able to make that kind of assessment," he tells Newsweek. "This is a racketeering enterprise run out of New York by a New York lawyer working in conjunction with other U.S. lawyers and U.S. consultants and funders to try to coerce a U.S. company."

And the fact that a trial, which determined environmental damage, took place in Ecuador?

"The fact that part of the scheme involves creating a false narrative in an easily corruptible foreign jurisdiction is just a piece in the racketeering enterprise," he says.

A Chevron spokesman also points out that the judge has already determined the case can be tried in New York, even though a large portion pertains to activities in Ecuador.

Chevron has allies in this fight, and not all of them are global behemoths."[This strategy] is one my group candidly hopes to make more common," Darren McKinney, spokesman for the American Tort Reform Association, tells Newsweek. "We would argue, generally, that the country would be better off if more companies that could afford to do so would fight back in this manner.

"I'm not talking about a mom-and-pop dry cleaners that gets sued by a psycho for misplacing his pants. I don't want David to be precluded from suing Goliath. By the same token, I don't want Davids by the thousands ginning up fraudulent lawsuits."

Donziger maintains that he has done nothing wrong and that the lawsuit will ultimately go in his favor -- if not in Kaplan's court, then in the Second Circuit or maybe even the U.S Supreme Court. “I've never been in this for the money; no one who is interested in money would ever do this kind of case for this many years,” he tells Newsweek. Of this trial he says, “It’s retaliation against me and my colleagues. It’s a show trial.”

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