- - Thursday, April 10, 2014

A federal judge’s blocking of a $9.5 billion judgment against Chevron in an Ecuadorean environmental lawsuit this month has generated numerous media reports about how the plaintiffs’ attorneys engaged in bribery, coercion, corruption and fraud to manipulate the legal system over the course of the 20-year-old lawsuit.

But what has not been reported is the inside story of how Chevron fought back — with the help of MDB International, a global investigative firm staffed by former FBI officials and a former Senate investigator.

MDB International hired me last year, and although I did not work on the Chevron case, I gained insights into how the firm employed the FBI’s strict standards for racketeering investigations in its probe of a civil lawsuit.

“The Chevron case was unusual because we took a framework that the Justice Department and FBI had used for decades against organized crime and instead applied it in a civil case — not against a crime syndicate or even a corporation, but plaintiffs’ lawyers,” said Greg Meacham, a former FBI special agent accountant and senior vice president at MDB International.

Under the federal Racketeer Influence and Corrupt Organizations Act (RICO), a person who has committed “at least two acts of racketeering activity” from a list of 27 federal and eight state crimes (known as “threshold crimes”) within a 10-year period can be charged with racketeering if those crimes are related to an “enterprise.” The FBI has used RICO in successful probes of the Hell’s Angels, the Latin Kings, and even the Gambino and Lucchese crime families.

In 1989, the U.S. Supreme Court ruled in H.J. Inc. v. Northwestern Bell Telephone Co. that “threshold crimes” must be linked to a defendant by an “association in fact,” meaning that the facts of a case show a pattern of continuous acts that “have the same or similar purposes, results, participants, victims or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.”

“In civil RICO cases, corporations are usually the targets of a group of plaintiffs and their lawyers,” Mr. Meacham said. “But in the Chevron case, the RICO ‘association in fact’ element was used to link a large group of individuals, such as the plaintiffs, their attorneys, environmental groups, paid consultants, and public relations specialists, together so that they qualified as a RICO enterprise.”

To make that connection clear in the Chevron case, MDB International investigators used rigorous FBI standards that require investigators to go beyond the required elements under the RICO law — by showing that the enterprise had a hierarchical chain of command, coordinated efforts toward a common goal, a central repository of records and a headquarters, regular meetings and a collection of tools (in this case, experts’ reports) to facilitate its crimes.

In the Chevron case, the RICO enterprise was linked to bribery, mail fraud, wire fraud, money laundering, witness tampering, obstruction of justice and extortion.

“The FBI framework is a much higher and more detailed standard than what most law firms would use in a typical civil RICO case,” said Tony Daniels, a former assistant director of the FBI field office in Washington, D.C., and acting CEO of MDB International. “Do I think that proving this standard worked in the Chevron case could deter future frivolous lawsuits against major corporations in the future? Absolutely. It worked once why not again?”

One of the challenges that corporations like Chevron face in civil lawsuits is the massive funding of plaintiffs’ law firms by private equity firms that invest in litigation cases that could reap huge amounts in damages.

In the Chevron case, the plaintiffs’ law firm, Patton Boggs LLP, was financed by Burford Capital, a $300 million publicly traded fund. Burford Capital CEO Christopher Bogart has said in a publicly filed court declaration that the lawyers made “false and misleading representations” about the case, inflating their chances of success. The equity firm gave $4 million to the plaintiffs case in 2011.

The Wall Street Journal reported in 2011 that the Justice Department launched an investigation into the bidding practices of financing firms and asked them to disclose their business practices.

“Although civil RICO has a lower threshold than proving a criminal RICO case, it is still a very high threshold for civil litigation because of the different elements of the statute that need to be established,” Mr. Daniels said.

Chevron has resources most companies do not have, but its recent victory may signal to other businesses that using the civil RICO framework developed by the FBI and applied by the Justice Department is more effective than bowing to intimidation.

Jeffrey Scott Shapiro is an investigative journalist and a lawyer who works with MDB International.

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