Chevron: Tapes Show Bias in Ecuador Case


The U.S. oil company unveils videos secretly recorded in Ecuador by "businessmen" offering "bribes" to a judge and ruling party officials

It's the kind of blockbuster plot twist normally reserved for the movies. Oil giant Chevron (CVX), enduring a barrage of negative publicity from a $27 billion environmental class-action lawsuit filed in Ecuador, unveiled a series of secretly recorded videos that suggests the judge in the case has already decided to rule against Chevron and is scheming with representatives of the ruling party of Ecuadorean President Rafael Correa to collect a $3 million bribe from a company purportedly angling to win some of the cleanup business.

The videos and transcripts in English and Spanish were posted on Chevron's Web site on Aug. 31. Chevron said it has referred the evidence to the prosecutor general in Quito and the U.S. Justice Dept. in Washington. The company is asking that Ecuadorean Judge Juan Nuñez be dismissed and all his prior rulings disqualified. "No judge who has participated in meetings of the type shown on these tapes could possibly deliver a legitimate decision," said Chevron's former general counsel and now Executive Vice-President Charles James.

The lawsuit claims that Texaco, which Chevron acquired in 2001, polluted the rain forest when it drilled for oil in Ecuador from 1960 to 1990. Steven Donziger, the New York attorney who has fought a 16-year battle to win the case on behalf of indigenous people in Ecuador, claims Texaco dumped billions of gallons of contaminated wastewater into the jungle. Chevron maintains that Texaco paid its share of the associated remediation when it left the country for good in 1998. Under an agreement with the government at the time, state-owned oil company Petroecuador was to pay for the remaining cleanup.

Shocked Activists Affirm Their Case

Donziger said the videos raise more questions than answers for him. "It just doesn't add up," he said. "Why did they sit on the video for months? What motivated these people to make this tape?" Of Chevron, he said, "They're desperate and they're doing everything they can to delay and undermine the trial."

The news came as a shock to environmental activists who have promoted the Ecuador case as "the Amazon Chernobyl." In a statement, the activist group Amazon Defense Coalition said: "We understand the seriousness of Chevron's allegations," but added, "The legal and scientific case against Chevron in Ecuador stands on the merits."

Chevron claims the videos were brought to the company in June by Diego Borja, a native Ecuadorean who has worked as a Chevron contractor, and Wayne Hansen, an American businessman it said has no connection to the company. Chevron claims that the pair recorded their meetings without the company's knowledge and that they were not paid for the tapes. The company said the men used a Spy Pen and Spyer Agent Watch, purchased from SkyMall, the catalog retailer familiar to airplane travelers everywhere. Chevron said it took time to authenticate the videos before they could be released. The company said its only compensation for the pair so far has been to fly Borja and his family from the country for their safety.

Judge Said His Decision Would Stand

The tapes show four meetings held in Ecuador in May and June of this year. Borja and Hansen appear as businessmen looking to profit from remediation contracts. The pair first met in Quito with what Chevron claims are representatives of the ruling Alianza Pais party. Those officials then coordinated two meetings with Judge Nuñez. At a June 5 sit-down at a Holiday Inn in Quito, the men bombarded Nuñez with questions about the case and his ultimate decision.

The judge repeatedly stated that he had not issued his final verdict. But by the end of the meeting, when he was asked if the damages will be $27 billion, Nuñez said: "It might be less, and it might be more." The judge also was asked if an expected Chevron appeal of the decision would delay resolution. He responded that his decision would stand and the appeal would cause, at most, a two-month delay.

On June 22, at another meeting at the Alianza Pais party office, the businessmen conferred with a party official as to how their $3 million bribe would be distributed. The answer: one-third for the judge, one-third for the presidency, and one-third for the plaintiffs—whose share, the party official added, would be administered by the party itself, not by the indigenous peasants whose lands were polluted.

Donziger first sued Texaco in New York in 1993. The company's lawyers successfully argued that the case should be tried in Ecuador, filing 14 expert affidavits praising the court system there as fair. The case's legal machinations since then have been closely watched by corporate lawyers, ever curious as to how a company should best handle a large tort claim overseas.

The case has also fascinated Chevron investors, who fear the company may get stuck with billions of dollars in damages.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau. Smith is BusinessWeek's Mexico bureau chief.

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