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Lawyer Describes Fraud, Lies, and Acrimony in $19 Billion Chevron Case

Lawyer Describes Fraud, Lies, and Acrimony in $19 Billion Chevron Case

Photograph by David Paul Morris/Bloomberg

Since its founding 40 years ago, Kohn, Swift & Graf has earned a national reputation for filing sophisticated class-action lawsuits against major corporations. It says so right on the Philadelphia law firm’s website. In humiliating testimony on Nov. 4 in federal court in New York, Joseph Kohn claimed that in the course of representing residents of the Ecuadorian rainforest in litigation against the oil industry, he and his firm were serially defrauded—not by a corporate foe, but by a fellow plaintiffs’ attorney.

Chevron (CVX) used a subpoena to force a reluctant Kohn to testify in the company’s civil-racketeering suit against New York attorney Steven Donziger. The San Ramon (Calif.)-based oil producer is suing Donziger in hopes of undermining a $19 billion pollution verdict he won in February 2011 in a provincial trial court in Ecuador. Chevron alleges that Donziger masterminded an elaborate extortionate conspiracy to secure the Ecuadorian judgment and shake down the corporation for a huge settlement. Donziger denies those accusations and claims that Chevron is merely trying to evade justice and a very big liability bill.

Hoping for a slice of any winnings, Kohn financed Donziger’s lawsuit, which began in New York in 1993, was dismissed in  2001, and was eventually restarted in Ecuador in 2003. After investing roughly $7 million in the case, including $1.1 million paid directly to Donziger, Kohn and his firm backed out of the Ecuador litigation in 2009. He testified that he withdrew because Donziger repeatedly lied to him about the improper ghostwriting of a supposedly “independent” damages report submitted by Donziger’s legal team to the court in Ecuador.

Under cross-examination by Donziger, his former comrade-in-arms, Kohn told a sordid tale that appeared to bolster Chevron’s contention that the Ecuadorian proceedings were shot through with fraud and intramural loathing on the plaintiffs’ side. Chevron has put on a series of witnesses—fellow plaintiffs’ lawyers, technical consultants, and financiers—who have turned on Donziger and accused him of dishonesty.

Kohn testified that in early 2009, he asked Donziger—not for the first time—whether there was any truth to Chevron’s allegations that the plaintiffs’ legal team in Ecuador had secretly done the work for a court-appointed expert who held himself out as unaffiliated with the litigants. Donziger told Kohn “that Chevron’s allegations were overblown, without merit, and b.s.,” Kohn said in a sworn written declaration that accompanied his testimony.

Faced with overwhelming evidence that the expert’s report was ghostwritten, the Kohn Swift firm withdrew from the case, Kohn testified. In 2010, he said that he demanded that Donziger “come clean” about the whole matter. “Mr. Donziger did not respond directly to that,” Kohn said in his declaration. “Instead he looked down at his shoes and said someone on the Ecuadorian team ‘may’ have provided ‘some’ documentation” to the expert “and if it came out, it could be embarrassing for the Ecuadorian plaintiffs’ team.”

At another point in his declaration, Kohn said: “Mr. Donziger lied to me about a number of aspects of the Ecuadorian litigation. … He obtained millions of dollars in litigation funding from Kohn, Swift & Graf on the basis of material misrepresentations and material omissions about the Ecuador litigation.” Since his split with Kohn, Donziger has admitted the ghostwriting of the expert report, but Donziger has argued that this activity was permissible according to Ecuadorian legal custom.

In his cross-examination, Donziger suggested that Kohn didn’t pay close attention to the pollution case against Chevron and didn’t know anything about Ecuadorian law. Kohn, hunching his shoulders and looking pained, conceded that the whole situation in Ecuador got away from him, but he insisted that when he tried to find out what was happening, Donziger blocked him at every turn.

After Kohn’s testimony, Chris Gowen, one of Donziger’s attorneys, issued a statement: “I believe that Mr. Kohn as much as anyone who has been to [Ecuador] knows that Chevron deliberately committed environmental damage in the region and that Chevron is liable to the people of Ecuador for their actions. I am certain that Mr. Kohn would be very pleased if Chevron, instead of spending the billions they are spending on legal costs, directed that money to the clean up in Ecuador for Mr. Kohn’s former clients.” Chevron has argued for years that whatever pollution exists in Ecuador is the responsibility of Petroecuador, the state oil company, and the government of Ecuador.

Before he left the courtroom, Kohn said on the stand that in separate proceedings in state court in Pennsylvania, he and his law firm have reserved their rights to sue Donziger for damages. In other words, the fallout from the acrimonious Ecuadorian litigation is likely to continue for years.

Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, tells the story of the Chevron oil pollution case in Ecuador.

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