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Chevron CEO Can’t Avoid Questioning in Ecuador Fraud Case

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May 7 (Bloomberg) -- Chevron Corp. lost a bid to prevent Chief Executive Officer John Watson from being questioned by the attorney the company is suing over claims he committed fraud to win a $19 billion verdict in a pollution case in Ecuador.

Chevron filed a racketeering suit in federal court in Manhattan against Ecuadorean plaintiffs who claim the San Ramon, California-based company is responsible for pollution in the Amazon rainforest. Chevron accuses the plaintiffs and their lawyer, Steven Donziger in New York, of fabricating evidence in the case.

U.S. Magistrate Judge James Francis said in today’s ruling that Watson’s experience in leading Chevron’s 2001 merger with Texaco Inc. is “likely to have given him personal knowledge of the environmental issues underlying the Ecuador litigation.” Watson noted that courts scrutinize requests to depose high-ranking corporate executives because business can be disrupted.

“This is far from a trivial case,” Francis said. “Enough is at stake to justify the deposition of an apex witness like Mr. Watson. Chevron’s motion to quash his deposition is therefore denied.”

Chevron was ordered in 2011 to pay as much as $18.2 billion in compensatory and punitive damages for Texaco’s alleged dumping of toxic drilling wastes in the Ecuadorean jungle from 1964 to about 1992. The judgment came after an 18-year-old lawsuit decided by a judge in Lago Agrio, a provincial capital near the Colombian border. The judgment by the Ecuadorean court has now reached $19 billion.

Second Deposition

Francis also overruled Chevron’s objection to a deposition of Edward Scott, vice president and general counsel for Chevron’s Global Upstream and Gas Group.

“Chevron will of course comply with all orders of the court as it participates in the discovery process that continues to expose the plaintiffs’ lawyers’ fraud,” Kent Robertson, a spokesman for the company, said in an e-mailed statement.

Chevron has denied wrongdoing in the Lago Agrio lawsuit. The company says Texaco cleaned up its share of the pollution at its former oil fields, which were taken over by PetroEcuador, Ecuador’s state oil company. Chevron contends it was released from any future liability by an agreement between Texaco and Ecuador.

The company accuses Donziger of improperly influencing a court expert whose findings were used by the Ecuador judge.

Plaintiffs’ Claim

Donziger has denied wrongdoing and plaintiffs in the Ecuadorian case have said the oil company is attacking him to avoid responsibility for the damages.

“We’re pleased with this ruling,” Bill Hamilton, of Fenton Communications and a spokesman for the Ecuadorean plaintiffs, said today in a statement. “Chevron CEO John Watson, who perhaps more than anyone knew about the grim history of deliberate and negligent dumping of oil and toxic chemicals by his company into the soil and streams of Ecuador’s Amazon region, will not escape his day in court.”

The racketeering case is Chevron v. Donziger, 11-00691, U.S. District Court, District of New York (Manhattan). The case in Ecuador is Aquinda v. Chevron, 002-2003, Superior Court of Nueva Loja, Lago Agrio, Ecuador.

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

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