Chevron Claims Trial Showed Proof of Fraud in Ecuador

Chevron Corp. (CVX) asked a federal judge in New York to find that a racketeering plot was behind a multibillion-dollar pollution verdict against the company handed down by an Ecuadorean court.

Closing arguments began today in Manhattan after six weeks of trial in which the company claimed lawyers for the plaintiffs in the Ecuador environmental case bribed judges and drafted much of the actual ruling. Steven Donziger, a New York attorney accused of leading the scheme, has denied allegations of wrongdoing and maintained the judgment is valid.

Randy Mastro, a lawyer for Chevron, the second-largest U.S. energy company, argued to U.S. District Judge Lewis Kaplan that the evidence showed the pollution ruling was a fraud.

“One thing has always been certain: this judgment was ghostwritten by these plaintiffs,” Mastro told Kaplan today.

Mastro said “strings of words” from Donziger’s e-mails and sequences of numbers from an internal database that appear verbatim in the judgment show the plaintiffs’ influence.

“This is like not even fingerprints,” Mastro said. “This is like 10 fingers, both palms. Their internal work product shows up word for word in the document because they wrote it themselves.”

Toxic Waste

Donziger and a team of other lawyers won the $19 billion judgment in 2011 on behalf of Ecuadorean rainforest villagers who claimed Texaco, later bought by Chevron, dumped billions of gallons of drilling-generated toxic waste from the 1960s through the early 1990s. The award was cut in half on Nov. 12 by the Ecuadorean National Court of Justice, the nation’s highest tribunal.

Richard Friedman, an attorney representing Donziger, said many of Donziger’s statements from e-mails and documents have been taken out of context. The case is bigger than Donziger and the thousands of Ecuadoreans who will be affected by the ruling, Friedman said.

“They’ll be looking to see if American courts will follow their own rules of law,” Friedman said. “They’ll be looking to see if there are special exceptions, special rules for large American corporations. What he’s accomplished by legitimate, yet noisy, boisterous, unconventional ways, has caused people around the world to look with fresh eyes at how our corporations treat the Third World.”

Lead Adviser

Chevron, based in San Ramon, California, has refused to pay any of the judgment and is seeking an order from Kaplan barring Donziger from trying to enforce it. The company claims Texaco already cleaned up its share of the damage.

Donziger, a Harvard Law School graduate originally from Jacksonville, Florida, got involved in the Ecuadorean case in the 1990s and became its lead adviser. He contends that his role has since diminished and Ecuadorean lawyers are now in charge.

He said in written testimony that the pollution judgment is “a profound historical accomplishment of indigenous and farmer communities in securing justice for wrongs inflicted upon them by one of the most powerful corporations on the planet.”

If the ruling can be upheld in a country where Chevron has assets to seize, Donziger stands to collect as much as $600 million, he acknowledged in court on Nov. 18 under questioning by Mastro. Donziger has also been paid during the litigation, receiving $150,000 in one year while the lead Ecuadorean lawyer on the team, Pablo Fajardo, received just $24,000, Mastro said.

Making Money

Mastro, the Chevron lawyer, said today that Donziger’s testimony about his smaller role in the case is contradicted by the fact that he makes “six or seven times” more than Fajardo.

“In every business I’ve ever been in the boss makes more money,” Mastro told the judge.

“To him the ends came to justify the means, the methods didn’t matter,” Mastro said. “He set about to make the big score and set his sights on Chevron.”

So far, the team working on behalf of the plaintiffs have filed enforcement actions in Canada, Brazil and Argentina. Canada, in particular has “a history of giving respect to foreign judgments” and is a country where oil companies have “very substantial assets,” Donziger said in an interview with journalists Nov. 15. Chevron has no physical assets in Ecuador.

Two Judges

Two former Ecuadorean judges who handled the pollution case also testified during the trial: Nicolas Zambrano, who issued the ruling, and his former colleague Alberto Guerra.

Guerra told the court that he regularly drafted rulings for Zambrano, who wasn’t as experienced at handling civil cases. He testified that he and his colleague were promised proceeds from the judgment to throw the case in the plaintiffs’ favor.

Guerra, now living in the U.S. and receiving $12,000 a month from Chevron, said he helped write the 188-page judgment against the company based on materials from the plaintiffs.

Zambrano denied he was bribed. He told the court that while Guerra regularly helped him draft some rulings, he worked on the Chevron ruling with help only from an 18-year-old assistant.

Mastro said today in his closing argument that Zambrano lied on the stand when he denied paying Guerra to help with the judgment and denied being bribed to write the ruling in favor of the plaintiffs.

Weak Judiciary

“He couldn’t admit that he was paid to ghostwrite the judgment,” Mastro said. “He admitted too much and he lied way too much.”

Chevron filed its racketeering case against Donziger after pre-trial information exchanges produced materials that included hundreds of hours of outtakes from a 2009 documentary on the Ecuador case called “Crude,” by filmmaker Joe Berlinger.

Chevron alleged the material showed Donziger discussing ways to take advantage of Ecuador’s weak judiciary. Donziger said the outtakes were edited by Chevron and that some of his statements were taken out of context.

Supporters of Donziger’s efforts include Trudie Styler, wife of musician Sting, who helped start a project to provide clean water for the rainforest dwellers. The couple watched Donziger testify in Manhattan federal court Nov. 18.

The racketeering case is Chevron Corp. v. Donziger, 11-cv-00691, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at

cdolmetsch@bloomberg.net; Christie Smythe in Brooklyn federal court at csmythe1@bloomberg.net

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

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