Online Poker Magnate Raises the Ante in Chevron Pollution Case

In the long and sordid tale of the Chevron oil pollution controversy in Ecuador, Russell DeLeon surely qualifies as one of the least likely characters. An American transplant in Gibraltar who made a fortune in the online gambling industry, he helped finance a lengthy lawsuit against the oil company that generated a record $19 billion Ecuadorean court judgment in 2011.

Three years later, however, a federal judge in New York ruled that the suit in Ecuador was actually an elaborate racketeering conspiracy—a corporate shakedown—led by a plaintiffs’ lawyer DeLeon knew from their days together at Harvard Law School. Intent on negating its huge pollution liability and punishing its antagonists, Chevron sued DeLeon for backing the fraudulent suit. Now DeLeon has filed counter-claims against Chevron for damaging his reputation, saying that while the Ecuadorean action may have been a sham, he financed it in good faith.

To recap: New York attorney Steven Donziger has relied on creative financing to sustain a two-decade-long legal-and-media campaign against Chevron. He has sold slices of any potential recovery to a range of investors, including hedge funds and DeLeon. In March, U.S. District Judge Lewis Kaplan backed Chevron’s contention in a civil racketeering suit that Donziger won his stunning 2011 $19 billion verdict by orchestrating a massive fraud involving bribery, coercion, and fabricated evidence. (Donziger has denied wrongdoing and appealed.) Chevron sought the ruling from Kaplan in hopes of blocking enforcement of the Ecuadorean judgment. Ecuador’s top court has upheld the pollution verdict while halving damages to a still-substantial $9.5 billion.

After Kaplan’s ruling, a judge in Gibraltar, a tiny British territory at the southern end of the Iberian Peninsula, declared that Chevron could proceed with a separate suit seeking unspecified damages from DeLeon, who—the oil company alleged—knew he had financed a crooked legal action. In a filing in July that I’ve just caught up with, DeLeon denied wrongdoing and accused Chevron of harming his reputation. The company has denied the DeLeon counter-claim.

DeLeon’s filing provides a fascinating peek behind the veil of the relatively new practice of “litigation finance,” a form of speculation whereby wealthy investors essentially buy a piece of a lawsuit. DeLeon told the court in Gibraltar that from March 2007 through October 2013 he invested a total of $23 million in the case against Chevron. (That’s a lot more than was previously known, at least by me, and I’ve been following the case rather closely.) In exchange, Donziger promised Deleon 7 percent of any judgment proceeds. That’s 7 percent off the top, not 7 percent of the legal fees.

DeLeon told the Gibraltar court that he “did not know of any conspiracy to harm Chevron by fraudulent or improper conduct” in Ecuadorian “or any alleged dishonest global pressure campaign” against the company. At all times, DeLeon added, he relied on assurances by Donziger that the litigation in Ecuador was proper. As a result, DeLeon said, he is “unable to admit or deny whether any conspiracy in fact existed.” Because of his complete lack of awareness of wrongdoing—and his total reliance on Donziger—DeLeon maintained that Chevron has no basis to collect any damages from him. If it should turn out that Chevron’s allegations of racketeering are true (as Judge Kaplan has already ruled they are), DeLeon said, he was “at all times egregiously misled by Mr. Donziger” and was himself a victim of Donziger’s fraud.

Donziger and his allies portray the case against DeLeon as part of a larger Chevron vendetta. In a March 18 dispatch, I quoted Donziger’s spokeswoman, Karen Hinton: “Chevron’s case against Mr. DeLeon is yet another attempt by Chevron to retaliate against anybody who tries to help the [Ecuadorian] communities hold Chevron accountable for its environmental crimes and wrongdoing, as found by three layers of courts in Ecuador.”

In that same earlier piece, I noted that:

“DeLeon and his wife, Ruth Parasol, made a billion-dollar fortune with a digital gambling company called PartyGaming. In 2011, Party Gaming merged with a second corporation. According to media reports, DeLeon and Parasol are in the process of selling their shares in connection with a divorce settlement. If Chevron has its way, some of the proceeds from that sale will flow into the oil corporation’s coffers.”

Mr. DeLeon, though, has signaled that rather than fold, he plans to fight the oil company.

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