Chevron: Evidence Fabricated

BY CHRONICLE STAFF

The evidence against Chevron in a $16 billion environmental lawsuit in Ecuador has been fabricated, the U.S. company says. Meanwhile, it staunchly defends two of its lawyers who were indicted last week for "fraud" in Ecuador.

"A key report submitted to a court hearing in the lawsuit in Ecuador contains fabricated and erroneous evidence [and] has exaggerated claims for damages and was developed in collusion with the plaintiffs and their U.S. attorneys," Chevron said in a statement today. 

Chevron's subsidiary Texaco operated an oil field consortium with Ecuador's state oil company Petroecuador from 1964 to 1990, when the latter took over management of the oil field. Texaco continued with a minority stake in the consortium until 1992.  In 1995, Texaco agreed with the Ecuadorian government to conduct a $40 million environmental remediation in the area of the former concession. Three years later, 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.

US DISMISSES LAWSUIT

However, in 1993 a group of Indians in the affected areas -- represented by U.S. trial lawyer Cristobal Bonifaz -- filed a lawsuit against Texaco in the United States, claiming the U.S. company had contaminated the area. That case was dismissed by the U.S. Court of Appeals of the Second Circuit in 2002, but another lawsuit was filed in Ecuador.

Meanwhile, Bonifaz filed another lawsuit in the United States, on behalf of alleged victims of cancer caused by Chevron's Ecuador operations. That lawsuit was thrown out by the U.S. District Court for the Northern District of California in San Francisco in August last year. The judge also stated that the plaintiffs had fabricated their claims that they or their relative had cancer, rebuked the lawyers and said the fraud formed part of a larger scheme against Chevron.

That scheme apparently included the pending Ecuadorian lawsuit. In April, the court handling the case received a report from Richard Cabrera, a geologist appointed by the court to investigate the environmental damage. His report stated that Chevron was guilty of the damage and should pay between $7 and $16 billion in compensation.

Chevron counters that the real culprit is Petroecuador, which caused more than 1,000 oil spills in Ecuador during the five-year period between 2002 - ten years after Texaco left Ecuador - and 2007. "Petroecuador has had a woeful track record of spills and has not completed environmental remediation of sites," the U.S. oil giant said in its statement today. "This is Petroecuador’s responsibility, not Chevron’s."

MANIPULATION OF EVIDENCE

Chevron has sought to have the case dismissed in Ecuador, citing judicial misconduct, interference in the case by the country’s executive branch and denial of a right to fair trial. In the case of Cabrera' findings specifically, it has asked the Nueva Loja court in Ecuador to reject them, charging that he "produced an advocacy report for the plaintiffs, not a competent or impartial review of evidence." The U.S. company says that Cabrera manipulated and altered findings to justify false conclusions, including backdating photos. Furthermore, the company says that Cabrera also:
• Presented no evidence of pollution by Texaco Petroleum, erroneously assigning $1.4 billion in remediation costs to pits he did not visit and do not exist;
• Presented no evidence to support cancer claims — neither identifying a single individual nor including a single medical report;
• Did not take a single drinking water sample to establish contamination, yet he assigned $428 million in damages to be paid to improve Ecuador’s potable water system;

Chevron also says that the plaintiffs helped Cabrera compile the report, accompanying and assisting him on field trips, influencing the content of his report by providing him methodological tools such as questionable surveys and pre-written reports to use as report exhibits.

“The findings of the Cabrera report are clearly fraudulent and intended to cause damage to this U.S. company and its shareholders,” Charles James, Chevron’s general counsel, said in the statement today. “This report would not withstand scrutiny — be it technical, scientific or legal — in any responsible, independent court anywhere in the world. What’s more, plaintiffs ensured his work was conducted in an atmosphere of intense political and presidential pressure to avoid government remediation responsibilities, procure an exorbitant judgment for local residents against a foreign company and enhance the bank accounts of plaintiff lawyers. The pro-plaintiffs bias, the lack of supporting data and scientific rigor, and the political interference are all duly reflected in Mr. Cabrera’s report and findings.”

BIASED INVESTIGATION

Even before Cabrera's report, Chevron had repeatedly denounced him as biased an unqualified. In a complaint filed with the court in July 2007, Chevron said Cabrera began his investigation by inspecting a site which Texaco never used. "This poorly intended act committed by Cabrera, to choose a site that has never been operated by [Texaco], is yet another demonstration of the bias he displays towards plaintiffs including his intent to manipulate historic information to try to favor the interests of plaintiffs," Chevron said in its complaint last year.

In its statement, Chevron addresses ten key points of the Cabrera report and investigation that highlight the flaws and errors of the process:

1. Lack of Causation. Cabrera completely ignored his court-ordered mandate to determine causation and chronology of environmental conditions. Instead, he just arbitrarily assigned liability to Texaco for every instance of environmental impact in the former concession areas. By ignoring chronology and causation, Cabrera even makes Texaco Petroleum (Texpet) liable for all impact caused solely by Petroecuador during its 18-plus years of operation of the concession.

2. Failure to Inspect and Falsifying “Evidence.” Cabrera ignored court orders that he must inspect every site, visiting only 48 of 316 wells and one of 19 production stations. Instead, Cabrera reviewed aerial photos to identify pits and used those photos incompetently and dishonestly. For example, Cabrera submitted certain aerial photos with his report and declared that various items in the photos — like trees, tanks and shadows — were pits. He also submitted photos of pits constructed by Petroecuador after 1990, backdated the photos to the 1970s and declared that the pits were constructed earlier by Texpet. Cabrera, therefore, intentionally grossly overstated the number of pits.

3. Arbitrary Determination of Remediation Scope. With no justification, Cabrera arbitrarily concluded that 80 percent of well pits and 100 percent of production-station pits need to be remediated, regardless of past or current remediation efforts. Cabrera then further fabricated and overstated the magnitude of remediation required for each pit, arbitrarily assuming that each pit needs to be remediated to a depth of 4 meters (13.12 ft) and also that an area around each pit of an additional 50 percent of the pit surface area needs to be remediated.

4. Gross Overstatement of Remediation Cost. Cabrera grossly overstated the cost to remediate pits. Though Petroecuador has been remediating pits to Ecuador standards for approximately $85,000 per pit, Cabrera recommends remediation costs of more than $2.2 million for each of the pits.

5. 90 Percent of Damages Unrelated to Task. Even though Cabrera’s recommended remediation cost of $1.7 billion is wildly overstated, that figure is only approximately 10 percent of the total damages he recommends. The remainder of Cabrera’s alleged damages and proposed remedies are unrelated to the environmental impact that the court ordered him to assess. For example, well beyond his perceived or imagined expertise, Cabrera recommends millions of dollars in damages based on his undocumented and uninvestigated claim that Texpet’s workers committed human rights violations against the local population.

6. Fabricated Cancer Claims. Cabrera’s recommendation of $2.9 billion for alleged “excess cancer deaths” is completely fabricated. Cabrera does not identify a single individual, offer a single medical report or provide a single fact to support this conclusion. Cabrera also disregards official Ecuador health statistics showing that the cancer rate in the former concession area is no different from that of other regions. His recommendation is based entirely on biased surveys, conducted in secret by unknown individuals, the results of which he improperly extrapolated over an assumed population.

7. Arbitrary and Excessive Budgets for Medical Facilities. Cabrera’s recommendation for $480 million for a healthcare system endowed for 50 years and overseen by an unidentified “assembly” has no basis, and there are no plans or facts justifying any aspects of the cost.

8. No Basis for “Indigenous Population Impacts.” Cabrera inexplicably recommends $430 million to repair supposed impacts on indigenous culture, despite that none are related to Texaco Petroleum’s operations. This includes buying back land for the indigenous people, even though the government of Ecuador gave this land to settlers for the express purpose of establishing communities and agriculture in the region.

9. Unjustified Assessment to Improve Petroecuador’s Infrastructure. Cabrera inexplicably recommends $375 million to improve Petroecuador’s infrastructure, despite that Petroecuador conducted an audit and certified that the facilities that Texpet turned over to it were in good condition. Cabrera also ignores Petroecuador’s demonstrated and acknowledged record of failing to invest necessary resources to maintain its equipment and facilities.

10. No Basis Whatsoever for Unjust Enrichment. Cabrera completely fabricated a claim for unjust enrichment damages of $8.3 billion. There is no basis for the claim and no foundation for the number, especially considering that the Republic of Ecuador enjoyed 95 percent of the profits from the concession’s operations, and that Texpet earned only $490 million in profits over the entire history of the concession.

INDICTMENTS

Last week, Ecuador’s Prosecutor General indicted two Chevron attorneys associated with the lawsuit. The indictment, which also includes a former energy and mines minister in Ecuador and six other individuals, claims that Texaco's cleanup wasn't properly performed and the certificates that released it from future liability weren't properly obtained. “By issuing these baseless indictments, it is clear the government of Ecuador is trying to intimidate Chevron into forfeiting its legal rights," Charles James, Chevron Vice President and General Counsel, said in a statement Friday.  "This outrageous tactic won’t work."

Chevron intends to continue pursuing the rights it is owed under the law and its agreements with the government of Ecuador, he added.

"Recent events in Ecuador leave no doubt that there is improper collaboration between the government and plaintiffs’ lawyers, James says.  "The systematic denial of Chevron’s right to a fair trial is obvious, and it is clear that the proceeding has been thoroughly corrupted.  By persecuting Chevron’s counsel and collaborating with the plaintiffs to undermine Chevron’s legal rights, Ecuador’s government has intervened in the legal proceeding.  The Ecuadorian state continues to call into serious question the legitimacy of its judiciary and its commitment to the rule of law.”

AVOIDING RESPONSIBILITY

The indictments mark a renewal of the Ecuadorian state’s attempts to disavow contractual obligations owed to Chevron from contracts signed in 1995 and 1998 and ignore the findings of prior Prosecutor Generals who have repeatedly investigated fraud allegations and found them to be meritless, Chevron says.

"Ecuador’s attempts to undermine the remediation contract took on a new tone in April 2007 when Ecuador’s newly elected president, Rafael Correa, stated in a nationwide radio broadcast that the signatories to the release agreement were traitors and demanded that the Prosecutor General seek criminal indictments against all involved," Chevron said in its statement last week.  "Subsequently the Prosecutor General’s office decided to reopen the investigation without offering any new facts or evidence.”

In July this year, the plaintiffs’ advocates held a news conference in Quito, Ecuador, calling for the filing of indictments against Chevron attorneys.  In the days that followed, Correa announced that he had met with plaintiffs’ advocates to discuss the case and revealed that the Prosecutor General had reopened the fraud investigation. "It has become increasingly clear that the Ecuadorian state and advocates for the plaintiffs are working together to advance their common goal of shifting Petroecuador’s remediation obligations to Chevron," the company said in its statement last week. 

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