Chevron: lawyers behind environment report proposal

* Chevron urges 'no' vote on environment report proposal

* Plaintiffs' lawyer calls Chevron letter 'misleading'

* Chevron shareholder meeting May 27

By Braden Reddall

SAN FRANCISCO, May 20 (Reuters) - Chevron Corp (CVX.N) criticized a shareholder proposal for an environmental protection report as part of a "trial lawyer"-led campaign to force the company to settle a long-running case over oil pollution in the Ecuadorean jungle.

Chevron is fighting a $27 billion claim in court in Ecuador, with a ruling expected this year. That case is among a few cited in the proposal, which is also backed by U.S. state and municipal funds and will face a vote at the company's shareholder meeting next week.

In a letter on Wednesday urging investors to vote it down, Chevron said proposal backer Trillium Asset Management, a Boston-based manager of socially responsible funds, had waged carefully orchestrated media campaigns every year over the past half-decade.

"In their campaign for this year's annual stockholder meeting, the plaintiffs' lawyers and their colleagues have added a new dimension to their pressure strategy: a campaign to generate fear in the investment community," Chief Governance Officer Lydia Beebe wrote in the letter filed with regulators.

Two days earlier, Trillium filed with the U.S. Securities and Exchange Commission a report from late April by public policy specialist Potomac Research Group flagging the risks to Chevron of a U.S. congressional spotlight on the Ecuador case.

Potomac also said Chevron lobbying efforts to alter Ecuador's trade status in response were unlikely to be well-received by the administration of President Barack Obama because in 2006 Obama had written a letter to the U.S. Trade Representative in favor of letting the case play out.

Separately, in a letter to Chevron this month, New York Attorney General Andrew Cuomo had asked the company to disclose information to investors about its potential liability in Ecuador. [ID:nN07374919]

"This is their first filing on the issue with the SEC since Cuomo opened his investigation, and they don't even mention it," Steven Donziger, a lawyer for the Ecuador plaintiffs, said of Chevron's letter, which he called "misleading."

Chevron had said it would respond to Cuomo's letter but argued that it had "communicated fully" with its shareholders.

Trillium could not be immediately reached for comment.

PROTECTION BY PROXY

The shareholder proposal, or item 10 on the proxy statement, calls for a report on the protection of people and the environment wherever Chevron operates. [ID:nN08517735]

Chevron has said that votes on similar issues at meetings in the past garnered support of 8 to 10 percent.

The shareholder group, holding about 20 million of Chevron's 2 billion-plus shares, includes pension funds from the city and state of New York, Pennsylvania's treasury, and Amnesty International.

The annual meeting will take place on May 27 at Chevron headquarters in San Ramon, California, about 30 miles (48 km) east of San Francisco.

Plaintiffs in the Ecuador case, first brought by local peasants in the early 1990s, say Texaco -- bought by Chevron in 2001 -- polluted the jungle and damaged their health by dumping billions of gallons of contaminated water from 1972 to 1992.

Chevron, in its letter, repeated its arguments that public denouncements of the company by Ecuador President Rafael Correa make a fair trial impossible; that the $27 billion claim could not be enforced because Chevron had "virtually no assets" in the country; and that the claim is based on a retroactive law.

Donziger countered by saying Chevron had sought to move the case to Ecuador from the United States, and argued that a country's president can discuss a case without influencing it.

"Ultimately, it will be a court that determines whether Chevron is liable, not Chevron itself," Donziger said.