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Wednesday, August 15, 2007

Chevron: US Victory, Ecuador Doubts

A US court has dismissed an Ecuadorean lawsuit against Chevron, but the firm is concerned about an even bigger case in Ecuador.
Latin Business Chronicle, Monday, August 13, 2007

U.S.-based oil company Chevron chalked up an important victory recently when a U.S. federal court threw out a lawsuit from three Ecuadorians claiming they had cancer caused by oil spills in Ecuador. However, the company is now concerned about an even larger case - the $6 billion suit against Chevron in Ecuador, claiming that the company is guilty of contaminating a portion of the Amazon. Chevron, which has denied all wrongdoing, has objected against the court-appointed expert and his investigation methods.

"The work he's doing is without scientific merit," says Ricardo Reis Veiga, managing counsel for Chevron Latin America. "If the process continues like this, it will become a judicial farse. We don't see this as a serious process."


On August 3, the U.S. District Court for the Northern District of California in San Francisco threw out complaints against Chevron Corporation filed on behalf of three Ecuadorians, finding that the plaintiffs fabricated their claims that they or their relative had cancer caused by the former operations of a Chevron subsidiary, Texaco Petroleum Company, in Ecuador.

"We are very, very pleased that the court not only has stated that the allegations are false, but also has proven that the lawyers have formed part of the fabrication process," Veiga says.

Judge William Alsup rebuked the lawyers and said the fraud formed part of a larger scheme against Chevron. "This is not the first evidence of possible misconduct by plaintiffs' counsel in this case," he said in a statement. "It is clear to the Court that this case was manufactured by plaintiffs' counsel for reasons other than to seek a recovery on these plaintiffs' behalf. This litigation is likely a smaller piece of some larger scheme against defendants."

Cristobal Bonifaz, a U.S.-based attorney, filed both the United States and Ecuador lawsuits. The U.S. lawsuit was also filed by Terry Collingsworth of the International Labor Rights Fund, who has previously represented Ecuador state oil company Petroecuador in its defense of an arbitration claim brought by Chevron.


Texaco operated an oil field consortium with Petroecuador from 1964 to 1990, when the Ecuadorian company took over management of the oil field. Texaco continued with a minority stake in the consortium until 1992. In 1995, Texaco agreed with the Ecuadorian government to conduct a $40 million environmental remediation in the area of the former concession. Three years later, the government of Ecuador declared that the remediation was completed according to the terms and parameters agreed upon and released Texaco from any future liability.

However, in 1993 a group of Indians in the affected areas - represented by Bonifaz - filed a lawsuit against Texaco in the United States, claiming the U.S. company had contaminated the area. That case was dismissed by the U.S. Court of Appeals of the Second Circuit in 2002, but another lawsuit was filed in Ecuador. That lawsuit has garnered support from Ecuador's current president Rafael Correa and various international celebrities like Daryl Hannah and Trudie Styler (see Celebrities in Latin America, Latin Leaders Travel).

Veiga is harshly critical of the legal process in Ecuador. Chevron has taken 1,300 samples from the Amazon area where the company previously operated, showing that the contamination was below requirements from the U.S. Environmental Protection Agency. A report from five independent investigators appointed by the Ecuadorean court confirmed those results.


However, following requests from Chevron's opponents, the judge in the case then appointed Richard Cabrera to do a
second evidentiary phase of the suit. Although he ordered Cabrera to take samples from 314 sites and 19 areas, the new expert is instead looking at 120 areas that aren't on the official court list and has stated that he will take only 80 samples, Veiga says.
Even worse, Cabrera
began his investigation by inspecting a site which Texaco never used. "This poorly intended act committed by Cabrera, to choose a site that has never been operated by [Texaco], is yet another demonstration of the bias he displays towards plaintiffs including his intent to manipulate historic information to try to favor the interests of plaintiffs," Chevron said in a complaint filed with the court last month.

Cabrera is following a reverse examination, Veiga says - first blame Texaco, then find the evidence. Chevron also charges that Cabrera has shown bias by having received money from an organization affiliated with the plaintiffs and by disregarding Petrocuador’s exclusive 17-year operations of the oilfields when he blamed Texaco for all environmental impacts within the former concession area. This despite Petroecuador's track record of 882 oil spills in the seven-year period from 2000 to 2006, according to Chevron.

Veiga also questions Cabrera's technical qualifications. "He's a mining engineer [and] doesn't have the qualifications to do this type of investigation," he says.

It is still unclear when the case will go to trial in Ecuador, but should Chevron lose the trial, it will appeal within Ecuador first and then internationally, Veiga says.

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