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'A shakedown scheme, pure and simple'

Nov 26, 2013

Testimony wrapped up this week in a case important to all businesses that operate around the globe, Chevron's civil litigation against a U.S. trial lawyer, Steven Donziger, and his allies who ginned up a multibillion-dollar lawsuit accusing Chevron of environmental damage in Ecuador.

From The New York Law Journal on the opening day, Oct. 15, of the racketeering case, Chevron Corp. v. Donziger, 11-cv-00691, held in U.S. District Court, Southern District of New York (Manhattan).

Launching his case in opening arguments before Southern District Judge Lewis Kaplan, Mastro said Donziger bribed a judge and had coconspirators ghost-write judicial opinions in the litigation in Lago Agrio, Ecuador, as a part of a plot to "coerce a big pay day out of the company to make the pain go away."

"It's been a long hard road to get here, but judgment day is at hand," said Mastro, a partner at Gibson, Dunn & Crutcher. He urged Kaplan to hold Donziger responsible as the man who "masterminded and orchestrated" the scheme and along the way committed "multiple acts of wire and mail fraud, extortion, bribery, witness tampering and money laundering."

"Your honor, it's a shakedown scheme pure and simple," Mastro said.

News coverage from the trial abundantly supports the validity of Chevron's case. (See below)

Short version of a very long and complicated story: Chevron was originally sued by Ecuadorians in the United States, accused of environmental damage caused by its 1992 acquisition, Texaco, which operated from 1964 to 1990 in the Amazon, part of a consortium with the government oil company, PetroEcuador. The reality is, Texaco mitigated any pollution it was responsible for and was released from liability by the government of Ecuador.

The suit was later moved to Lago Agrio, Ecuador, where, after sundry corruptions, a judge handed down an $18 billion verdict against Chevron in 2011, reduced recently to $9 billion.

The anti-Chevron lawsuit became a cause célèbre for the environmental and anti-business left, received sympathetic and uncritical coverage by such outfits as 60 Minutes and Vanity Fair, and became the subject of an ostensible documentary, "Crude," later shown to arranged, funded and more-or-less directed by Donziger. The leftist government of Rafael Correra embraced the case as part of its anti-American, anti-business approach toward governing.

Chevron filed a RICO suit against Donziger in federal court, using what's known as 1782 motions to force depositions and the release of documents that demonstrated, as Mastro put it, "multiple acts of wire and mail fraud, extortion, bribery, witness tampering and money laundering." Outakes from "Crude" were especially damning, revealing the collusion of Donziger's team with government officials and his open contempt for Ecuador. Chevron is seeking no monetary damages, just a verdict that will prevent Donziger et al. from collecting any damages in other countries' courts.

Chevron could have easily settled this case, perhaps for a $1 billion or so, but it chose not to back down in the face of trial lawyer shakedown. In taking up the fight, the company also found broader implications for businesses with global operations. As Theodore Boutrous of Gibson, Dunn & Crutcher observed in an Oct. 3 media conference call:

This case, to me, is part of a broader picture.  Back around the late '90s, early 2000 period, lawyers in the United States looked around the globe and decided that there was a way to profit from litigation in foreign countries; not just human rights litigation; not pro bono litigation, but a for-profit model and particularly targeting foreign jurisdictions with weak and sometimes corrupt judicial systems and different rules than we have here in the United States... jurisdictions where global companies have been doing business for many years and they embarked on a strategy that I think has, in many instances, shown that the lawyers became embroiled and became part of fraudulent schemes.

This case against Chevron is emblematic and really the most vivid of example of that, that pattern.  And so I think this is an important case, not just for Chevron and its shareholders or for the plaintiff's or Mr. Donziger, the lead defendant in the RICO case, but the lead plaintiffs' lawyer for the Ecuadorian – supposedly for the Ecuadorian plaintiffs – but really for the rule of law in the United States, for global competition, for the global marketplace, and the rule of law around the world.

Exactly so.  

Post-script: Two reporters in particular have closely -- and fairly -- covered the twists and turns of the Chevron/Ecuador/Donziger litigation, scrutinizing the claims and legal strategies of both sides. They are Paul Barrett of BusinessWeek/Bloomberg (trial coverage), who is working on a book about the litigation, and Daniel Fisher of Forbes (trial coverage).

Chevron also operates a blog, The Amazon Post, offering the company's views and opinions on the Ecuador lawsuit.

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