Here’s How Chevron Is Arguing Against a $19B Bill

In a 2003 class-action lawsuit filed in an Ecuadorian court accusing Texaco, now owned by Chevron (NYSE:CVX), of polluting the environment surrounding its Lago Agrio oil field from 1964 to 1992, judgement was only the end of one chapter in the case’s convoluted history.

In 2011, 10 years after Chevron purchased Texaco, New York lawyer Steven Donziger engineered a $19 billion pollution verdict against the U.S. oil company. At the time, the ruling was the culmination of 18 years of litigation that took place in both the U.S. and Ecuador, and the verdict was the biggest of its kind.

Even before Chevron launched a lawsuit of its own that same year, accusations of fraud were made by both sides, with the oil company banking on its claims to discredit the lawyer and hinder his ability to enforce the verdict. The accusations of fraud became official when the 2011 suit against Donziger and his Ecuadorian clients was filed under the federal anti-racketeering statute.

In a trial beginning this week, Chevron’s lawyers will argue that a group of Ecuadorian villagers and Donziger used bribes and intimidation in securing the judgement.

“We believe that any jurisdiction that observes the rule of law will find that the judgment is illegal and unenforceable because it’s a product of fraud,” Chevron spokesman Morgan Crinklaw told Reuters. Despite losing the original lawsuit, the company still maintains that Texaco cleaned up its share of the pollution before turning over the Lago Agrio oil field to Ecuador-owned Petroecuador.

In their defense, Donziger and the villagers have maintained that they engaged in no misconduct of any kind in obtaining the judgement. As Chris Gowen, a spokesman for Donziger and the Ecuadorians, told Reuters, the claims by Chevron are “utterly baseless,” and the group is “completely and utterly denying the allegations by Chevron.”

What Chevron wants is for Donziger to be unable to use U.S. courts to enforce the Ecuadorian judgement. The primary goal of the lawsuit is injunctive relief. If Chevron wins the liability portion of the case, it could ask for an order barring Donziger and his colleagues from enforcing the Ecuadorian judgement in the United States or anywhere else the company has assets.

Because Chevron has almost no assets in Ecuador, the Ecuadorian judgement is virtually worthless, meaning authorities cannot seize any of the company’s assets if it does not pay up. The Amazon Defense Front, the organization that brought the original lawsuit on behalf of Ecuador’s indigenous residents, has filed enforcement petitions in Canada, Argentina, and Brazil, places Chevron does have seizable assets. The cases were dismissed in Canada and Argentina, but the organization is appealing.

In 2011, District Judge Lewis Kaplan did grant Chevron an injunction blocking the enforcement of the $19 billion ruling anywhere outside of Ecuador, but the Second U.S. Circuit Court of Appeals subsequently reversed that decision. According to Donziger and the Ecuadorians, the injunctive relief the oil company is seeking would violate that reversal, Reuters reported Monday.

So far in the current chapter of litigation, Kaplan, who is handling the case, has found at least probable cause to believe that Donziger and the Amazon Defense Front engaged in wire fraud, extortion, witness tampering, obstruction of justice, money laundering, and bribery in the process of securing the Ecuadorian judgment, and that many of those crimes were allegedly plotted or carried out in the United States, according to Reuters.

The district judge also found probable cause to believe that an Ecuadorian judge allowed part or all of the 188-page, $19 billion verdict to be ghostwritten by the plaintiff’s legal team, allegedly in exchange for a $500,000 fee.  The court proceedings that took place in Ecuador were “one of the most egregious litigation frauds in history,” Chevron lawyer Ted Boutrous told Reuters.

The evidence of former Ecuadorian judge Alberto Guerra will be an essential part of Chevron’s case. In a sworn statement, the former judge said that he often wrote opinions for Nicolas Zambrano, the judge who made the award to the villagers. His testimony also details the $500,000 that Zambrano was allegedly paid by Donziger and another lawyer. Both Guerra and Zambrano are expected to testify.

Donziger denies that he wrote the judgement. “Steven Donziger did not ghostwrite a judgment,” Gowen, Donzinger’s spokesman, said. “Steven Donziger did not bribe a judge.” Donziger and the Ecuadorian villagers view the trial is an unfair fight: Not only does Chevron have significantly more resources, they believe that Kaplan is biased toward the oil company. In a court filing acquired by Reuters, their legal team argued that Kaplan’s “contempt” for Ecuador, “its courts, and its laws has only grown more prominent over time.”

However, the Second Circuit Court rejected a request to remove Kaplan from the case on September 26, and because Chevron dropped damages claims, the villagers and Donziger are not entitled to a trial by jury, which deprived Donziger of a key asset — his ability to to appeal to the jurors’ emotions.

Follow Meghan on Twitter @MFoley_WSCS

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