The Combine: Activists, Lawyers and Ecuador Attacking Chevron

We posted Thursday on the amazing, welcome, very cool news that Chevron has begun producing from the Tahiti deepwater oil field in the Gulf of Mexico, one of 40 projects costing the company $1 billion or more.

Of course no profitable satisfying of market demand goes unpunished, and Chevron is the target of a particularly ravenous combine of U.S. lawyers and “indigenous activists” suing the company for environmental damage in Ecuador, contamination supposedly caused by Texaco before it was bought by Chevron. The shakedown combine is also supported by U.S. environmental activists and the just reelected left-wing government of Rafael Correa, all out for a piece of $27 billion in damages. That’s right, $27 billion is being claimed — the equivalent of one-fourth of Ecuador’s annual GDP. For purposes of comparison, Chevron’s first quarter earnings were $1.84 billion this year; in 2008, first quarter earnings were $5.17 billion.

For all the details about why the lawsuit is egregious even by the standards of environmental shakedowns, one can visit the Chevron site on Ecuador. The suit was filed in New York City in 1993, is masterminded by attorney Steven Donziger. Recently the media stepped up the coverage of the controversy in anticipation of a ruling from an Ecuadorian judge. There was an NPR Morning Edition story, and a similar piece in The Washington Post, “In Ecuador, High Stakes in Case Against Chevron.” (Similar? They were done by the same reporter, Juan Forero.)

Then last Sunday it was “60 Minutes,” the gold standard of gotcha journalism, in the lead segment on the program, “Amazon Crude.” The usual anti-corporate framing was in abundant evidence: horrible pollution in the Amazonian jungle, suffering poor people, supposedly reliable scientific reports and impassioned advocates.

“It’s a disgrace. They treated Ecuador like a trash heap,” says Doug Beltman, who worked for the EPA on Superfund sites in the U.S.

For balance, one Chevron executive was interviewed in her office.

The trouble with these sorts of stories is that the average viewer has no clue what’s fact and what’s fiction, what’s a bogus legal claims versus what’s a REALLY bogus legal claim. Your Shopfloor blogger is more than passingly familiar with the Chevron controversy and regards the suit as yet another search for deep pocket corporations that lawyers can demonize. Still, watching the “60 Minutes” segment we thought, “Well, that was OK. Wasn’t so bad for Chevron.”

Except the facts weren’t facts, and the “60 Minutes” segment did not allow those fictional claims to be challenged. It wasn’t OK for Chevron, it was a hit piece.

The facts are readily available, and the Business and Media Institute did a good job of citing the more salient ones in response to the segment, “’60 Minutes’ Promotes $27-Billion Leftist ‘Fraud’ Efforts Against Chevron.” Here’s our favorite refutation:

The “60 Minutes” segment included footage from a native Ecuadoran, Manuel Salinas, who contended that pollution from one of the oil well sites in question made his water undrinkable.

“Manuel Salinas’ house is next to one of those pits,” Pelley said. “He’s one of 30,000 people suing Texaco’s owner, Chevron. He says the pollution leaked into his water well.”

However, Salinas lives next to a PetroEcuador site and tests from both Chevron and the plaintiff suing Chevron’s show Salinas’ well (see Table 1, GW-1 Sample) was not contaminated with hydrocarbons, but fecal coliforms (see Table 3A).

That is, people are sick because of poor sanitation, not oil contamination from 20 years ago. But you’d never know that from the “60 Minutes” segment. And that was just one of many other facts left unreported, or perhaps more accurately, unacknowledged by correspondent Steve Pelley, his producers and editors.

In an editorial Thursday, “Ecuador grabs for Chevron’s wallet,” The Washington Times put the lawsuit and media campaign in geopolitical context, as well. President Correa agitates against American oppressors just as Hugo Chavez in Venezuela and Evo Morales in Bolivia do, and Chevron is a handy, wealthy target.

Texaco was a 37.5 percent partner in an exploration venture with PetroEcuador, a company owned by the Ecuadoran government. In 1992, Texaco’s part of the deal expired, with Petro-Ecuador assuming full ownership. On Sept. 30, 1998, Ecuador’s government signed “final release” papers certifying that Texaco had successfully completed environmental remediation at every one of its oil fields and waste pits.

Over the next eight years, Ecuador became politically unstable with a series of administrations reluctant to honor old contracts. In 2006, Ecuador elected anti-American leftist Rafael Correa as president. That’s when the fortunes of Chevron, which merged with Texaco in 2001, drastically changed. Retroactively applying a law passed in 1999 to Texaco’s activities before 1992, and ignoring the 1998 final-release agreement, Mr. Correa openly began backing the long-running lawsuit against the deep-pocketed oil giant.

Environmental activists are busily attacking Chevron as a bad actor, and of course, there’s also involvement from left-leaning members of Congress willing to buy their anti-business sales job. Now add to the mix the stock character of an ambitious, posturing state attorney general.

New York Attorney General Andrew Cuomo has sent a letter to the Chevron Corp., questioning whether executives have been upfront with shareholders about the company’s potential liability for decades of pollution in the jungles of Ecuador.

The thing that’s refreshing about this otherwise familiar story of the lawyer/activist combine winning over the media and politicians is Chevron is having none of it. The company is aggressive in its own defense and calls the claims what they are. From the AP story:

A spokesman for Chevron, Kent Robertson, said the company had received the letter and would respond.

“We presume the inquiry is a result of a campaign by the American trial lawyers behind this case that seeks to pressure Chevron into a settlement,” he said. “We have communicated fully with stockholders about the Ecuador case and we will continue to do so in the future. We believe stockholders will be better served by the successful resolution of this case rather than paying a windfall to a group of American trial lawyers and lobbyists.”

Lobbyists? Yes, indeed. The mighty Ben Barnes of Texas represents the plaintiff’s law firm of Kohn, Swift & Graf.

The Chevron spokesmen will be busy in the months to come. Chevron says a ruling from Ecuador could be near, while the trial lawyer, Donziger, says it’s still months away.

Until then, the combine will be generating stories on many fronts, from the next Chevron shareholders meeting (see this Amazon Watch news release) to Capitol Hill to the airwaves and print media. If the shakedown combine paints Chevron as an environmental exploiter — as they surely will — remember this: They facts say otherwise.

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