US judge backs Chevron bid to avoid toxic waste compensation in Ecuador

March 14, 2014
Workers clean up the toxic waste in the Amazon left by Texaco, which has since merged into Chevron.

A New York judge has overruled the US$9.5 billion (A$10.5 billion) in compensation for toxic waste dumping that Chevron had been ordered to pay to Ecuadorian villagers.

The oil company, the world’s third largest, was found guilty in 2012 by an Ecuadorian court of causing huge environmental damages in the Amazon Basin. At the time, it was the largest environmental damages lawsuit ever.

Texaco oil company, which merged into Chevron Corporation in 2001, operated in the Sucumbios province of Ecuador, in the uppermost headwaters of the Amazon Basin, from 1964 to 1992.

During this time, 72 billion litres of toxic wastewater and 68 million litres of crude oil sludge were deliberately dumped into the surrounding environment.

The quantity is an estimated 87 times greater than BP’s Deepwater Horizon spill in the Gulf of Mexico in 2010.

The oil giant's strategy has been to seek to permanently postpone having to face responsibility for the contamination. When suit was first filed against Texaco in New York in 1993, it tabled 12 affidavits attesting to the independence and transparency of the Ecuadorian judicial system.

When the case was transferred and the suit was refiled in Lago Agrio, Ecuador, Chevron argued Ecuador's courts were too corrupt to hear the case.

In 2011, Ecuadorian Judge Nicolas Zambrano ordered Chevron to pay $19 billion in compensation and clean-up costs. The the figure could be reduced to $9.5 billion if Chevron issued a public apology.

The decision was upheld on appeal in 2012, but with the payment fixed at $9.5 billion.

In response, Chevron filed a suit in New York accusing the Ecuadorian plaintiffs, their legal team and associated activists, advisers and even a cartoonist of conspiracy to defraud and defame Chevron.

Using RICO (Racketeer-Influenced Corrupt Organization) laws originally designed to target the mafia, Chevron was able to turn the New York courtroom into a forum to supposedly pass judgment on the validity of the decision in the Ecuadorian court.

Parts One and Two of Judge Lewis Kaplan’s final verdict in the New York court said any compensation Chevron is ordered to pay as a result of “the enforcement of the judgement [the environmental damages suit] anywhere in the world” will be transferred to Chevron USA. It also bans any enforcement of the ruling in the US.

“The judgment in favour of Chevron mocks Ecuador,” said Spanish paper El Pais after the ruling.

The lawyer for the Ecuadorian plaintiffs, Juan Pablo Saenz, said: “The arrogance of Judge Kaplan allowed him to think he is qualified to question Ecuadorian law [and] the decisions of its judges.”

The Amazonian villagers affected were more circumspect. A spokesperson said: “The affected communities long ago gave up hope that a US court would provide them relief from Chevron’s contamination, which has taken their loved ones, poisoned their lands, and imperilled their cultures.”

After the 2011 damages ruling in Lago Agrio, Chevron began a broad publicity campaign against Ecuador and the Amazonian villagers’ legal team. Fake news websites such as, along with many Google ads, have sprung up with deceptive information about the “fraud” and “campaign of intimidation” against Chevron.

Corporate news outlets have followed their lead. In stirring rhetoric, The Economist reported on March 8: “This case seems made for Hollywood, with one big difference: this time, the victim is not the plucky lawyer but the big oil company.” May as well give them the Oscar now!

On March 4, Bloomberg’s Business Week cited a Los Angeles law firm that advised Chevron, saying that multinational corporations “are bravely forging a new path” in their use of RICO laws.

The firm pioneered the legal strategy a few years ago to negate a multibillion-dollar compensation claim levelled at Dole Food on behalf of plantation workers said to have been poisoned by Dole Food’s pesticides.

Thanks to these daring lawyers, no longer will multinational corporations be held hostage by the threats and extortionate campaigns of peasants and indigenous peoples!

Let’s keep in mind that as of last year, Chevron’s market capitalisation was $219 billion, more than double the GDP of Ecuador.

Chevron’s annual profit in 2012 was $26.2 billion. That is $3 million an hour.

If anyone is going to be the victim in a battle of threats and bribes, it is not likely to be Chevron.

The key witness in Chevron’s attempts to prove that it has been victimised was ex-judge Alberto Guerra, who presided over the hearing in Lago Agrio for seven months in 2003-4.

Guerra claims that Zambrano, who issued the 2011 verdict, accepted a $500,000 bribe in exchange for allowing the Ecuadorian plaintiffs to ghost-write the verdict.

Zambrano travelled to New York to deny the accusation in sworn testimony, a fact omitted in reports of the case by CNN and Bloomberg.

The Chicago Tribune said on April 4 last year: “[Zambrano] also claimed … Guerra had told him that the U.S. oil company would offer [him] $1 million in exchange for 'a statement in favour of Chevron.’”

Zambrano wrote in his affidavit: “I did not accept the proposal. After that, Dr. Guerra called me two more times to inquire about my answer. When I absolutely rejected the proposal, he did not ever call again.”

Zambrano told El Telegrafo that he had received many threatening phone calls during his time as judge in Lago Agrio. He also said he was tailed during his trip to New York.

In contrast to the alleged bribe paid to Zambrano, what is not in dispute is the money paid by Chevron to Alberto Guerra. Chevron spokesperson Kent Robertson openly admits that Chevron has been paying the former judge $12,000 a month, along with $38,000 up-front, in his capacity as a witness for Chevron.

Guerra’s testimony is also questionable in light of his admission that he exaggerated his claims against the plaintiffs suing Chevron.

Under cross-examination, he admitted that he invented details in his initial conversations with Chevron to improve his bargaining position.

The payments made to Guerra as a witness for Chevron are both brazen and terribly ironic in a case that centres on alleged bribery.

Yet his testimony was allowed to stand by Kaplan. This was despite expert testimony from the dean of the Irvine Law School at the University of California, who argued that paying money to a witness was “a clear violation” of the law.

Another of Chevron’s allies was Diego Borja, a former Chevron employee. Borja executed a sting involving an offer of $3 million to former Lago Agrio judge Juan Nunez, who was subsequently removed from the case.

He was later outed by a friend who recorded their Skype conversations. In it, Borja bragged that Chevron was paying him $10,000 a month and that he had evidence that would swing the final verdict whichever way he wished.

“I have records of conversations that you couldn’t even imagine, mate,” Borja confided. “Stuff about them [Chevron]. I’m afraid to talk more about it online, but they’re things that will mean the Amazonians win.”

Amid the claims and counter-claims of bribes and threats brought up in this trial, the scale of the pollution of Amazonian communities was lost. In fact, Kaplan explicitly ruled that evidence of environmental contamination was irrelevant to the case.

Chevron’s moral counter-argument against paying compensation is the $40 million Texaco paid in the 1990s in a limited clean-up of the affected region.

Chevron claims this absolves it of responsibility, despite the fact that the agreement was reached with the country it was said, just a few years later, was too corrupt to properly assess an environmental compensation case.

The Lago Agrio trial assessed the $40 million clean-up and found it woefully inadequate for the scale of the contamination. Of the supposedly rehabilitated sites, 83% were found to exceed even Ecuador’s maximum permissible levels of oil pollution, a standard 10 times more lenient than that of the US.

Even were the $9.5 billion in compensation to be paid, it would amount to only $139 per litre of crude oil sludge dumped into the jungle. This is before even considering the impact of the 72 billion litres of wastewater dumped into the Amazon ― the most biodiverse place on Earth.

Studies have demonstrated elevated rates of many types of cancer in the areas around Chevron’s abandoned sites, including “significantly elevated” rates of childhood leukaemia.

In a brutally ironic twist, on the very same day that Kaplan issued his verdict in New York, BP lost an appeal that sought to limit its liability for the Deepwater Horizon spill. Its compensation payouts may now surpass $15 billion, The Financial Times said.

But of course, BP’s claimants are largely shops, hotels and restaurants along the coast of the Gulf of Mexico. Chevron’s claimants are Third World, brown-skinned and broke ― and there seems to be no end in sight to their campaign for restitution.

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