Bloomberg News

Chevron Lawyer Takes Stand in Trial Over Ecuador Verdict

October 15, 2013

Protesters Outside Chevron Headquarters

A police officer looks on as protestors participate in a demonstration outside of the Chevron headquarters in Feb., 2011 in San Ramon, California. Photographer: Justin Sullivan/Getty Images

A Chevron Corp. (CVS:US) attorney testified that he was charged with bogus crimes in a scheme to shake down the oil producer and obtain a $19 billion judgment in Ecuador.

Ricardo Reis Veiga, a senior managing counsel for the second-largest U.S. oil company, was the first witness called by Chevron in a trial that the company says will show that the Ecuadorean verdict was fraudulently obtained by lawyers who operated a racketeering enterprise.

In Veiga’s testimony, portions of which were made public today, he said he and a colleague faced charges in the 1990s over their handling of a cleanup settlement for a drilling site in the Ecuadorean rain forest. The charges were dropped in 2011.

“I experienced an unimaginable nightmare, ranging from stress, anger, pain and frustration from having to face such accusations,” Veiga said in written testimony filed with U.S. District Judge Lewis Kaplan. Veiga also took the stand today in federal court in Manhattan to answer further questions.

Randy Mastro, a lawyer for Chevron, told Kaplan today that the verdict was obtained by fraud, coercion, extortion, money laundering and the bribery of the Ecuadorean judge who wrote it. In the U.S. case, the San Ramon, California-based company is seeking an order from Kaplan barring enforcement of the 2011 pollution judgment.

‘Racketeering Enterprise’

Mastro pointed to the Ecuadoreans’ lead lawyer, Manhattan attorney Steven Donziger, and said he headed a “racketeering enterprise” that included two other attorneys, consultants, activists and others to “shake down” the oil producer.

“That’s what Steven Donziger was trying to do against Chevron -- coerce a big payday against a big company until the pain went away,” Mastro said. “But Chevron refused. It refused to be extorted and defrauded and that’s why we’re here today.”

The company wants to stop Donziger and his associates from trying to enforce the verdict in courts around the world where Chevron has assets, Mastro said. Plaintiffs have sued Chevron for payment in Canada, Argentina and Brazil without success. Donziger could collect as much as $1.2 billion if the judgment is collected in full, Mastro said.

In the underlying 20-year-old environmental case, Donziger and other lawyers for indigenous people in Ecuador’s Lago Agrio region sought damages for Texaco Inc.’s alleged dumping of toxic drilling wastes from 1964 until about 1992 that polluted about 1,500 square miles (3,885 square kilometers). The lawsuit continued against Chevron when it acquired Texaco in 2001.

New Paradigm

Chevron contends that state-owned Petroecuador, a former Texaco partner, is responsible for most of the pollution. Texaco paid $40 million to clean up its share and was released from liability under agreements with Ecuador in 1995 and 1998, Chevron said. An international arbitration tribunal affirmed the accords’ validity in September.

“This is a new paradigm,” Mastro said. “It’s fraud and extortion and they’re trying to force a payoff. If they do, it will be open season on U.S. companies.”

Richard Friedman, a lawyer for Donziger, today denied his client had committed any bribery and wrongdoing and said he had worked to hold Chevron accountable for polluting the rain forest, comparing his client to U.S. civil rights leaders.

“Like Thurgood Marshall, like Ralph Nader, like a host of human rights lawyers before him, Mr. Donziger understood you need legal and social change,” Friedman told the judge.

‘Wasn’t Pretty’

Friedman argued that Donziger had taken up the cause of indigenous Ecuadoreans who were mistreated and discriminated against, and had successfully persuaded the Ecuadorean courts to hold Chevron responsible for its actions.

“It wasn’t pretty but it wasn’t bribery,” Friedman said. “He’s changed the way people think. He’s here today because of that judgment.”

Nicolas Zambrano, the judge who signed the Ecuadorean judgment in favor of the Lago Agrio plaintiffs, will testify on Donziger’s behalf, Friedman said. Zambrano, who is no longer a judge, submitted a declaration denying he had been bribed.

Mastro said today the trial also will feature another Ecuadorean judge, Alberto Guerra, who presided over the Chevron pollution case before Zambrano. Guerra has submitted a declaration stating that Donziger and another lawyer bribed Zambrano to decide the case in favor of the Ecuadoreans and permitted them to ghostwrite the opinion which Zambrano signed.

‘One Half’

Friedman said that Chevron also tried to bribe one of the Ecuadorean judges to disrupt the environmental case.

“What Chevron is asking is you hear one half of what happened in Ecuador and not hear the other half,” he said.

Chevron contends that advocates for the Ecuadoreans, guided by Donziger, “sought to inflict maximum damage to Chevron’s reputation.” The effort got more than $10 million in financing from Philadelphia lawyer Joseph Kohn and U.K.-based investment firm Burford Capital Ltd. (BUR), according to the company.

Burford sold its interest in the litigation in 2010, it said in July. Kohn was dropped from the litigation and criticized Donziger in an August 2010 letter uncovered by Chevron. He didn’t respond to a phone call seeking comment on the trial. Mastro said today that Kohn and a second man who helped finance the Ecuadorean litigation would testify as witnesses for Chevron.

‘Green Issue’

Donziger’s team ran a media campaign that helped to secure an article in Vanity Fair’s May 2007 “Green Issue” and the filming of the 2009 documentary “Crude” by Joe Berlinger, featuring villagers stricken with cancer, birth defects and other diseases alleged to be related to exposure to toxins from Texaco’s drilling, according to Chevron.

While the film highlighted the pollution battle, it also gave Chevron evidence for its fraud case. In May 2010, Kaplan ruled that the company could have hundreds of hours of outtakes from “Crude.” Using the footage, excerpts from Donziger’s diary and other materials obtained through U.S. court orders, the company asserts that Donziger’s team pressured environmental consultants and helped draft a report that inflated damages to $27 billion.

Donziger’s team used an “army of protesters” to intimidate the judge and met with him frequently outside of court, Chevron alleged. The plaintiffs’ lawyers also hatched “trumped up” criminal charges to bring against Chevron lawyers in Ecuador, the company said.

Supervised Litigation

Veiga said today in court that he supervised Chevron’s litigation in the Ecuadorean case and updated the company about it. He told the judge in filed testimony that he also oversaw Texaco’s settlements with Ecuador releasing the company from further liability. He was charged with falsifying settlement documents and environmental crimes, he said.

“I suspected that the representatives of the Lago Agrio plaintiffs, including Donziger, were colluding with the Republic of Ecuador” to bring the charges, he said in the filing. “I did not realize at the time, however, the unimaginable extent of the collusion.”

In a Nov. 17, 2005, diary entry, Donziger wrote that two of his associates “were scouring the penal code to find any provision that could be used against” Veiga, according to a court filing.

Donziger Diary

Chevron contends Donziger’s diary shows that he was trying to wage a crusade to shake billions of dollars out of the company. In an April 4, 2007, entry, Donziger called his co-litigants “fellow soldiers” and mused about the possibility of obtaining a settlement from Chevron.

“I sit back and dream,” he wrote. “I cannot believe what we have accomplished. Important people interested in us. A new paradigm of not only a case, but how to do a case. Chevron wanting to settle. Billions of dollars on the table. A movie, a possible book. I cannot keep up with it all.”

A Harvard Law School graduate, Donziger has argued that Chevron took comments from the “Crude” footage out of context and that his team was following customary procedures in Ecuador.

In materials distributed to reporters at the trial, representatives for Donziger called the racketeering proceeding a “rigged show trial designed to allow the overwhelming power of one of America’s largest corporations to crush a single individual who played an instrumental role in holding the company accountable for its abuses abroad.”

Christopher Gowen, a spokesman for Donziger, said the lawyer didn’t “trump up” charges against Chevron attorneys and that they “earned these inquiries by the way they treated the people of Ecuador.”

Donziger Countersuit

Donziger alleged in counterclaims that Chevron manipulated testing at the pollution site, tried to influence Ecuador’s government and unfairly attacked his reputation. Kaplan dismissed Donziger’s countersuit in July, saying he didn’t present strong enough evidence.

Last month, Donziger and his associates failed in a bid to replace Kaplan as the judge overseeing the trial claiming he’s biased in favor of the company. A three-judge panel of the U.S. Court of Appeals in Manhattan rejected the request on Sept. 26.

Kaplan refused to delay the trial while the appeals court considered the request, saying it lacked merit. The judge also sanctioned Donziger and his co-defendants for withholding documents from Chevron during pretrial information sharing.

The case is Chevron Corp. (CVX:US) v. Donziger, 11-cv-00691, U.S. District Court, Southern District of New York (Manhattan). The appeals court case is In Re Naranjo, 13-00772, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporters on this story: Christie Smythe in federal court in New York at csmythe1@bloomberg.net; Patricia Hurtado in federal court in Manhattan at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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