It's a precedent-setting court case that is playing out like a soap opera. A celebrity lawyer, triumphant after winning the biggest environmental judgment in history, is in danger of causing his own downfall as he is caught on video appearing to admit to misconduct and fraud — just the latest twist in a high-stakes, decadeslong court battle over oil pollution in the Amazon rain forest.
The battle pits Chevron Corp., the giant American oil company hit with a record $19 billion fine by an Ecuadorean court in 2011 for fouling the Amazon rain forest, against Steven R. Donziger, the colorful and well-known New York lawyer who orchestrated the monumental Amazon case. The lawyer even starred in a documentary in which he was portrayed as the hero who brought justice to impoverished Indians in the Amazon whose health and homes were destroyed by a Chevron subsidiary's oil drilling operations there in the 1960s.
The case is playing out in the U.S. District Court in Manhattan, which ruled this summer against bids by Mr. Donziger to delay a trial scheduled for October and to lodge countercharges against Chevron for ruining his reputation and livelihood. Chevron is brandishing evidence based in part on outtakes of the Hollywood-made documentary "Crude," in which Mr. Donziger seems to admit to fabricating evidence and other frauds in his drive to win the Amazon case.
Also playing a bit part in the drama is Ecuadorean President Rafael Correa, who has been the leading cheerleader for the judgment against Chevron, which found the company liable retroactively for damages from not having conducted a more thorough cleanup of the Amazon than required by the laws on the books at the time the company was drilling there. Chevron said its subsidiary Texaco, which the company acquired after the Amazon incident in 2001, obtained a certificate from the Ecuadorean government saying it fulfilled its legal obligation to conduct a cursory cleanup of the 16 billion gallons of toxic drilling waste dumped in the rainforest and streams of the Amazon during the years it drilled there, releasing the company from any future liability.
After two decades of seemingly endless litigation over the drilling incident in Ecuador, the action is centered in New York as Chevron seeks to undermine the widely questioned and oversized Ecuadorean verdict. Environmental groups say Chevron has spent more than $1 billion and hired an army of 2,000 attorneys from 60 top law firms to prosecute the case but spent only about $40 million to clean up the Amazon after a decadeslong wave of contamination there that dwarfs all other environmental spills in size.
A favorable ruling by the Manhattan court might render uncollectable the giant $19 billion 2011 verdict against Chevron, which Mr. Donziger and Ecuadorean groups are seeking to enforce with motions to seize Chevron assets in Canada, Argentina and Brazil. Chevron has refused to pay any of the fine on the grounds that the verdict in Ecuador was a fraud. If it loses the case, the consequences for Chevron also could be severe, giving impetus to the Ecuadorean case against the company in international courts.
N.Y. court favors Chevron
Chevron has scored some early wins as the court showdown nears.
Mr. Donziger recently complained to the Manhattan court that the barrage of charges and court filings Chevron has levied against him in the civil racketeering case may bankrupt him and "devolve into a mockery of justice and due process." Chevron has dropped $60 billion in damage claims against two co-defendants of Mr. Donziger from Ecuador, but it is still seeking the huge sum from the attorney.
Despite charges of foul play, District Judge Lewis A. Kaplan has largely sided with Chevron to the point that Mr. Donziger's original legal team in the case resigned this year, citing bias by the judge. Mr. Donziger also fell behind in paying his legal bills.
The judge noted that Mr. Donziger — in one of the many rich subplots in the case — at one point gained millions of dollars in financing for the legal battle from a hedge fund and Patton Boggs, a deep-pocketed Washington law firm, in exchange for a share of the huge settlement against Chevron. The hedge fund, Burford Capital, backed out of the transaction after providing an initial payment of $4 million, citing the allegations of fraud against Mr. Donziger.
Chevron has been delighted by a sympathetic ear from the New York court and several other courts in the U.S. that have looked into the matter during years of litigation.
"There is abundant evidence before the court that Ecuador has not provided impartial tribunals or procedures compatible with due process of law," Judge Kaplan said in an early ruling in the racketeering case.
Chevron is charging Mr. Donziger with fraud and misconduct for, among other accusations, ghost-writing the Amazon verdict after bribing an Ecuadorean judge, who has admitted to the fraud in an affidavit; paying off witnesses; and engineering a bogus report providing critical scientific evidence that led to Chevron's conviction.
The research firm that wrote the scientific report, Stratus Consulting, later renounced all its conclusions that Chevron had contaminated the drinking water of thousands of Amazon natives, leading to deaths, cancer and other serious health problems. In exchange for recanting its testimony, Chevron withdrew fraud charges against the consulting company.
Mr. Donziger has contributed to his own legal woes in an unusual way.
In outtakes to the "Crude" documentary in which he discussed the Ecuadorean case, the lawyer seemingly confirmed the company's charges over legal irregularities in the original damages trial.
"This is Ecuador. You can say whatever you want and at the end of the day you're going to get what you want," he said at one point as the cameras rolled. "Sorry, but it's true. Because at the end of the day, this is all for the court just a bunch of smoke and mirrors."
Mr. Donziger later opined before the camera that all Ecuadorean judges are corrupt and can be bought off because they are paid so little. Then he talked about how it's necessary sometimes to engineer the facts in a case so that they are convincing to the judge and jury.
"The facts that we need don't always exist," he said before the cameras. "You have to get the right facts. If they don't exist in an obvious way, you have to go make them. Otherwise, you're going to lose."
Mr. Donziger, the Amazon villagers and farmers, and environmental groups involved in the Amazon case have responded in kind, charging that Chevron has paid off some witnesses and threatened reprisals on others to build its case while manipulating scientific sampling and evidence to exonerate itself of the pollution charges. Chevron denies the charges and maintains that much of the illegal dumping documented by environmentalists was conducted by its drilling partner at the time, the Ecuadorean oil company Petroecuador, which continues to operate in the rain forest.
Ecuadorean and environmental groups say Chevron perpetrated its own "kickback and bribe" schemes in the case, including paying $326,000 to the Ecuadorean judge, Alberto Guerra Bastides, for his affidavit attesting that he was bribed and allowed the verdict to be ghost-written by Mr. Donziger's associates. Chevron later helped him migrate to Miami, where he receives a $12,000 monthly salary from the company plus health insurance and legal costs.
"It always was obvious that Guerra wished to sell himself to the highest bidder, a fact which undermined his credibility and made him a profoundly unreliable witness," said Pablo Fajardo, the lead attorney for the 80 indigenous and farmer communities in Ecuador who won the judgment against Chevron. He noted that Mr. Guerra was removed from the bench in Ecuador after being denounced for acts of corruption or irregular behavior in more than 30 cases.
But Morgan J. Crinklaw, a communications manager at Chevron, said the company relocated the judge out of fear for his safety and that of his family.
"Because of the risks associated with someone coming forward like that, Chevron took reasonable measures to protect him and his family," he said. "It's not every day a former Ecuadorean judge comes forward with this sort of evidence."
Beyond the tit for tat over nefarious doings in Ecuador, the environmental and Ecuadorean groups say the New York judge in the case, Judge Kaplan, has shown extreme bias in favor of Chevron. Last month, the U.S. Court of Appeals for the 2nd Circuit agreed to hear their petition to take the judge off the case.
The groups also charge Chevron with mounting a "show trial," using an unprecedented battalion of legal power to try to "bulldoze its way" to a verdict that lets it off the hook for damaging the ecologically fragile Amazon. Among other tactics in the billion-dollar lawsuit, they say Chevron has dumped more than 6 million pages of discovery documents among hundreds of legal filings before the New York court. About 10 percent of the staff of the Gibson Dunn & Crutcher LLP law firm, one of the world's biggest, have been assigned to the Chevron case to provide the company with overwhelming firepower, they say.
"The total legal cost for Chevron shareholders is likely approaching $2 billion and it is rising fast," said Aaron Page, a U.S. attorney for the Ecuadoreans. "This is probably the most money any company in history has spent defending itself on environmental claims."
Extortion or show trial?
Chevron does not deny that it is incurring extraordinary legal expenses, which Mr. Crinklaw said are justified given the gross crimes involved in the case. "This is to protect our shareholders," he said. "Our response is proportionate to the magnitude of the fraud that's been committed" by Mr. Donziger and his clients.
"They engaged in a massive fraud in an attempt to extort Chevron. The evidence is overwhelming," he said. "Many once associated with Donziger and his team, including funders, scientific experts and others, have all abandoned him as the evidence of fraud has been exposed."
Environmentalists say Texaco's dumping of untreated toxic drilling waste into unlined pits and Amazon streams from 1964 to 1992 created a far bigger environmental disaster than the 2009 Macondo oil well blowout that released millions of gallons of crude oil into the Gulf of Mexico several years ago and was the worst-ever U.S. drilling accident. BP PLC, the oil company responsible for the Macondo incident, in contrast to Chevron, set aside billions of dollars to pay for cleanup and restitution for Gulf Coast residents, averting the kind of legal struggle embroiling Chevron.
"Chevron knows it can't defend itself on the merits, so it is trying to use its unlimited resources to try to crush the lawyers who have bravely defended our rights," said Humberto Piaguaje, coordinator of the litigation for the rain forest communities and a leader of the Secoya indigenous group.
"Chevron's goal is to get rid of the lawyers so we will be defenseless in the face of the company's contamination of our ancestral lands," he said.
The court proceedings are extremely complex and have twists and turns that seem to come out of a medieval labyrinth, but the case is worth following because "it's the most important environmental case of the 21st century," said Paul M. Barrett, a columnist with Bloomberg-Businessweek.
"For all his flaws and misdeeds, Donziger has illuminated the corporate tendency to fumble away opportunities to do the right and reasonable thing in the first place — and thereby avoid liability traps," he said. "For a relatively modest expense in the 1970s and '80s, Texaco could have lined its Ecuadorean waste oil pits and more safely disposed of 'production water' discharged into jungle streams," avoiding today's legal morass, he said.
Chevron has built a strong case that the Amazon judgment was tainted by fraud, and it wants to set an example that discourages foreign governments from using corrupt legal systems to try to swindle U.S. companies doing business overseas. "But these novelistic twists and turns don't do anything to build Chevron's business, enrich its shareholders, or improve the unfortunate lives of innocent Ecuadoreans," Mr. Barrett said.
The case has so many plots and subplots that it's hard for a layman to follow, though doing so is worthwhile, Mr. Barrett added. "To fully appreciate all the facets of this intriguing case, someone should write a book about it," he said.
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