How an American activist lawyer committed a scam to shake down Chevron.

BY JOACHIM BAMRUD

At first glance, it was supposed to be a straightforward story. A multinational oil company polluting a poor area of Ecuador’s Amazon rainforest.  

Yet, while pollution did in fact take place, the story has become one of a gigantic scam aimed at getting Chevron, the second-largest US oil company, to pay billions of dollars in damages for the pollution. Damages that would barely benefit the real victims of the contamination, but instead line the pockets of their supposed champions, ranging from US lawyers, foreign investment firms and local civic groups.

At the center is Steven Donziger, a US activist lawyer who studied at Harvard Law School with future US President Barack Obama. Donziger's combination of unusual drive, high self-esteem and media-savvy strategy, brought his case attention from CBS 60 Minutes, Vanity Fair, filmmaker Joe Berlinger and a bevy of celebrities, including Sting and his wife Trudie Styler and Bianca Jagger.  

“Network television, glossy magazines, and a celebrated filmmaker heralded Donziger as a pioneer,” writes Paul M. Barrett in his new book Law of the Jungle: The $19 Billion Legal Battle Over Oil in the Rain Forest and the Lawyer Who'd Stop at Nothing to Win “Donziger’s choice of the courtroom, even one in Lago Agrio [Ecuador], subjected him to the strictures of lawyerly behavior. He believed his foe violated those limitations, so he could violate them, too. He went further and further, until he drew the skeptical attention of the US judiciary thousands of miles away. He alienated his closest comrades and lost his ethical bearings.”

Barrett, an assistant managing editor at Bloomberg Businessweek, has written the definite story of this sad, but true tale of greed, ambition, hypocrisy and outrageous neglect of the real victims.

There are four key events in this case, which The Wall Street Journal has called the “legal fraud of the century.”

The first obviously is the contamination by Texaco (which was subsequently acquired by Chevron) in the 1970s and 1980s. The second key event was the 1993 lawsuit against Texaco. The third key event was the February 2011, $19 billion verdict against Chevron – the largest environmental fine in world history – and the fourth one is the March 2014 fraud verdict against Donziger by a New York judge.

Barrett has managed to delve into each of those four key events as well as all other relevant issues surrounding the topic. And he has done so through a combination of clear writing, coupled with impressive details.

While Vanity Fair published what had been the most extensive report on the case in May 2007, this book clearly helps set the record straight. Unlike the Vanity Fair story, which was later proven to be the result of Donziger’s micro-editing in violation of basic journalism standards, Barrett has provided an objective and balanced look at the case, with plenty of criticism against Texaco for its pollution.  

“It would have been smart and morally proper for Texaco to obviate the need for a lawsuit in the first place by spending relatively modest sums in the 1970s to line its waste pits and reinject most of its produced water,” he argues.

Texaco operated a joint venture with Ecuador’s state oil company Petroecuador from 1964 to 1990, when the Ecuadorian company took over management of the oil field (although serious oil drilling didn’t start until the early 1970s). Texaco continued with a minority stake in the consortium until 1992.  When Texaco left Ecuador completely in 1992 it undertook a $40 million remediation and in 1998, the government of Ecuador declared that the remediation was completed according to the terms and parameters agreed upon and released Texaco from any future liability.

As Barrett shows, Ecuador shares the blame for the contamination and subsequent lack of a real cleanup in areas that weren’t covered by Texaco’s remediation.

First of all, pollution rules were lax at the time Texaco operated. Second, Petroecuador failed to live up to its remediation pledge and even managed to make things worse by contaminating more.

“Since Texaco left here, Petroecuador has inflicted more damage and many more disasters than Texaco itself,” local activist Pablo Fajardo said publicly in 2003 before he assumed a leading role in the lawsuit. “There’s one spill after another. There’s broken pipes. There’s contamination of wetlands, of rivers, of streams in great magnitude.”

Even worse, has been the total hypocrisy shown by Ecuadorian policymakers – especially current President Rafael Correa – in focusing on Chevron as the sole culprit despite Ecuador’s own failings to avoid pollution and then to fix it.  (Instead, Correa has spent $6.4 million on a US campaign to discredit Chevron, in what The Hill, a Washington publication, calls “a stunning figure in the niche business of foreign government lobbying.” That includes paying for actors Mia Farrow and Danny Glover to visit Ecuador and denounce Chevron).

One reason, Barrett shows, is that Donziger actively pushed for such a strategy.  Amazingly enough, he also opposed any remediation of pollution in fear that it would hurt his lawsuit.

“The lawyer who had raised millions of dollars from environmentalists committed to saving Indians and the rain forest was actively blocking attempts to clean the contamination,” Barrett writes.

Just as bad: Donziger in the end mortgaged any future payout from Chevron to everyone except the victims.  According to a forensic analysis by KMPG done at the behest of Chevron, 99.5 percent of any payout from Chevron would go to investors (69 percent), Donziger and other attorneys and other advisers (22 percent) and administrative expenses (8 percent). A mere 1.5 percent would actually go to repairing damage to the jungle and its inhabitants, Barrett points out.

So in the end Donziger acted no better than the worst examples of charities that supposedly raise funds for suffering victims but end up keeping nearly all of the proceeds.

Thanks to a US court ruling in favor of Chevron, a treasure trove of documents – including Donziger’s personal notes and e-mails and outtakes from the documentary Crude – were released to the oil company’s representatives. Those enabled Chevron’s law firm Gibson Dunn to win its fraud case against Donziger – as a violation of RICO no less – as well as provide ample background for Barrett’s book.

However, the book also benefits from Barrett’s years of reporting on the case and interviews with all the key people involved, including Donziger himself, who at one point screamed at, and threatened, the journalist on a street in Manhattan.

Barrett details how law firms like Patton Boggs and Kohn Swift & Graf first backed, then turned against, Donziger.

Key highlights of the book include how Donziger pressured various Ecuadorian judges (through both blackmail and monetary incentives), how he was behind the selection of the so called “independent expert” and then masterminded the expert’s official report on Texaco’s pollution (he hired a US company to write it and then pass it off as the expert’s) and last, but not least, that Donziger composed large portions of the final verdict against Chevron. The expert report included outright false and exaggerated claims about Texaco’s pollution, aimed at boosting the size of the intended fine.

“But a dirty win in Ecuador did not get any oil cleaned up or any sick children treated,” Barrett points out.

For anyone who has followed this case, and for those who have yet to get acquainted with it, Paul Barrett’s book is clearly a must-read. 

© Copyright Latinvex

See also Chevron & Ecuador: In Their Own Words