Key turning point in 21-year old Ecuador dispute.

BY LATINVEX STAFF

In a historic case, Chevron won a New York court ruling against a group of lawyers who are trying to collect on a $9.5 billion verdict in Lagro Agrio in Ecuador.

“The decision in the Lago Agrio case was obtained by corrupt means,” U.S. District Judge Lewis Kaplan in Manhattan said Tuesday. “The defendants here may not be allowed to benefit from that in any way.”

Kaplan ruled that lawyers Steven Donziger, Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje have to provide Chevron with any proceeds from the Ecuador ruling. While Chevron has refused to comply with that ruling, plaintiffs led by Donziger have tried to get Chevron assets in other countries such as Argentina, Brazil and Canada.

"This ruling is a resounding victory for Chevron and our stockholders,” Chevron said in a statement.

“It confirms that the Ecuadorian judgment against Chevron is a fraud and the product of a criminal enterprise. Steven Donziger and his associates can now be held accountable and will not be allowed to profit from their illegal acts. Any court that respects the rule of law will find the Lago Agrio judgment to be illegitimate and unenforceable." 

Having a judgment like this from a reputable court in the United States will be helpful in preventing enforcement actions elsewhere, John Watson, Chevron’s chairman and chief executive officer, told reporters at the IHS CERAWeek energy conference in Houston yesterday, Bloomberg reported.

Donziger has led an Ecuadorian environmental lawsuit against Chevron that ended with a 2011 verdict in Lagro Agro, which originally asked for $19 billion in damages, but in November was reduced to $9.5 billion. The verdict claims Chevron is responsible for polluting the Amazon, a claim the oil company denies. 

Chevron’s Texaco unit operated a joint venture with PetroEcuador from 1964 to 1990, when the Ecuadorian company took over management of the oil field. 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.

However, with active support from Rafael Correa – Ecuador’s president since January 2007  --  the lawsuit against Chevron advanced until the 2011 verdict.

Instead of settling, Chevron countered the lawsuit with an aggressive campaign that showed how Donziger and his team used fraud to connect Chevron with the pollution. The oil company spent more than $10 million gathering evidence to build the racketeering case against Donziger, according to a January brief filed with Kaplan’s court that was quoted by Bloomberg.

During the trial in New York, which started in October last year,  Chevron’s law firm Gibson Dunn called more than a dozen witnesses, including an environmental expert who provided Donziger with a $6 billion estimate of environmental cost cleanup based on “scientific wild-assed guessing” (SWAG).

The Chevron legal team in the courtroom consisted of 10 members from Gibson Dunn led by Randy Mastro, Co-Chair of the Litigation Practice Group and a former federal prosecutor who gained prominence pursuing mobsters in New York.  He also served as New York’s deputy mayor and chief of staff under Rudolph Giuliani.

During the trial, Mastro managed to get former judge Nicolas Zambrano, who issued the verdict against Chevron, to admit that he never even read his own judgment or key evidence included. 

“I’ve never seen anything like it in my 33 years as a lawyer and public prosecutor,” Mastro told Latinvex before the trial ended. “It’s really the brazenness, the audaciousness  of the conduct, and then to take the false narrative created in Ecuador and trumpet it in the US, to shake down a US company.”

Many foreign investors were quietly cheering on Chevron’s efforts to uncover the truth behind the questionable legal judgments they have faced in Ecuador,  John Price, Managing Director, Americas Market Intelligence, told Latinvex.  “If their efforts help dissuade other opportunists from pursuing frivolous legal cases against investors, then the future of foreign investment and technology transfer into Latin America will be much brighter,” he said.

The case also highlighted Ecuador’s weakness. “The conclusion that the Ecuadorian lawsuit against Chevron was fraudulent has been well documented, and it has been confirmed in the judgment of the international investment community, which sees now that Ecuador is not a safe place to invest,” Jodi Hanson Bond, Vice President for the Americas, U.S. Chamber of Commerce, said.