What Will Be The Outcome of Lawsuit Against Chevron in Ecuador?

Life in the Oriente Region of Ecuador is full of danger, mystery and intrigue.  Located along the border with Colombia in the northeast part of the country, the region is home to ancient people groups who depend largely upon the resources of the Amazon River basin for their survival.  It’s home to thousands of exotic wildlife species.  And, for the past 16 years, has been a home away from home for New York trial lawyer and Harvard Law School classmate of President Barack Obama, Steven R. Donziger.

Since 1993, Donziger has made myriad trips from his New York City office to the oil-rich jungles of South America in search of what he must have hoped would be easy money.  All he had to do was come up with a “tool” he could use to extract boatloads of cash from the deep, oil-soaked pockets of San Ramon, Calif.-based Chevron Corporation.  That tool, it appears, turned out to be a lawsuit against “Big Oil.”

After the nonprofit Amazon Defense Coalition (Spanish: “Frente de Defensa de la Amazonía“) was formed to facilitate the lawsuit in Ecuador, Donziger filed suit in New York against Texaco for personal injuries against local people.  He alleged that the injuries were caused by actions of the company that had operated in Ecuador as far back as 1964 and, from the 1970s to 1990, in partnership with state-owned PetroEcuador.

Several years of litigation followed, the suit was dismissed in the U.S. court and, in 2003, a new case was filed by the plaintiff in Ecuador.  Because it had purchased Texaco in 2001, Chevron was named as the defendant in the new suit.

The suit moved forward and, almost six years later, people on both sides are expecting an Ecuadoran judge to issue a ruling any day. If the plaintiff prevails, the verdict could cost Chevron and its shareholders $27 billion.  But will Donziger/ADC win?  Many in-the-know writers think they might.

In a letter to the editor (”Ecuador’s Attack on Foreign Companies“) published in the Washington Post May 5, Silvia Santa Cruz, declared, “Chevron is correct to argue that it won’t be treated fairly as long as Mr. Correa runs Ecuador.”

Santa Cruz, the Warren Brookes Journalism Fellow at the Competitive Enterprise Institute and writer-editor for the Ecuador Mining News web site, was, of course, referring to the country’s leftist leader, President Rafael Correa.

In an article May 6, Dan Gainor of the Business & Media Institute, asked and answered his own Ecuador-focused question: “What do you do if your country is too incompetent to drill for oil effectively?  Drill an oil company instead.”

Then he took it one step further:

“That’s exactly what tiny Ecuador is trying to do to oil giant Chevron – with the help of brain-dead American celebs, left-wing front groups and American lawyers – including one of Obama’s law school buddies. That select group is trying to rob Chevron and its shareholders of $27 billion.”

A Washington Times editorial (”Ecuador grabs for Chevron’s wallet“) published May 7 summed up the case well by saying, “Corporate America is an easy punching bag in tough economic times, but it often doesn’t deserve the demonization it receives. That’s the case with Chevron, which was attacked by “60 Minutes” on Sunday for an ongoing lawsuit over old oil fields in Ecuador. The CBS show wrongly took the side of the leftist, tinpot government of Ecuador against the 206,000 stockholders (and, indirectly, millions of American pensioners) who own shares of the American oil company.”

While many writers have focused on the battles between lawyers and spin doctors in the kangaroo-court environment that surrounds this case, few have explored the possibility there might be some extra-judicial shenanigans taking place between the plaintiff lawyers and at least one individuals appointed by the court as so-called “technical expert.”

During the past two months, I’ve written several pieces related to the lawsuit, fired hundreds of questions at the media relations people on both sides of the case and came across some very interesting documents.  One of the most-intriguing things I’ve discovered of late, however, is related to the possibility mentioned in the paragraph above.

Recently, I came into possession of copies of six checks totaling more than $206,000 and signed by Luis Yanza, a senior official with ADC [Note: Click here to read post where you can learn more about the checks.].

All of the checks are payable to Richard Cabrera, the man known to followers of the lawsuit as the author of the so-called Cabrera Report (pdf), the document upon which the $27 billion estimate is based.  Similarly, all of the checks were issued by Selviva, a limited-liability company formed in Ecuador in 2004 by Alberto Wray, the lead attorney in charge of the litigation when it began in Ecuador the previous year, and three other individuals.

During its first five years of existence, Selviva seems to have produced no products, provided no services and operated, for the most part, under the radar, giving no visible signs that it was indeed a “going concern.”  It’s only purpose, it seems, was to pay Cabrera.  And then it disappeared.  A highly-placed source tells me that Selviva was declared “inactive” in February 2009 by Ecuador’s Superintendency of Companies, a government agency that organizes and supervises businesses.

Now, I’m not telling you that the money paid to Cabrera was a bribe.  Not at all!  I am, however, pointing out the undisputed fact that a “court-appointed expert” of questionable qualifications was paid large sums of money by an Ecuadoran company established by the ADC, the financial beneficiary of the lawsuit.

Karen Hinton, media advisor for the plaintiff, said that making of such payments is the normal practice of courts in both Ecuador and the United States, and I didn’t argue the point during a phone conversation this afternoon.  However, Hinton’s counterpart at Chevron, Kent Robertson, disputed the point.

Robertson said his company has not paid Cabrera anything — even through the court!  Why? For several reasons, including the fact that Cabrera’s resume (pdf) is extremely weak.  In addition to the weak resume, the content of the last paragraph that appears on page two of a Chevron document filed Sept. 8, 2008, seems to justify Chevron’s reasoning quite well:

Moreover, a preliminary analysis of the 60-page report and accompanying appendices submitted by Richard Cabrera to the Superior Court in Nueva Loja, Ecuador concludes that Cabrera’s report is riddled with so many mistakes, inconsistencies, unsubstantiated conclusions and transparent bias as to render it fatally flawed and unreliable in evaluating the environmental condition of the Oriente region of Ecuador.

Now we know, perhaps, why fighters on one side of this lawsuit were willing to pay for Cabrera’s services and those on the other — the deep-pocketed oil giant from the United States — were, rightfully, not.

Final thought: A “little birdie” who hails from South America told me that Cabrera has submitted what is thought to be his final invoice to the Ecuadoran court for services rendered in the amount of $43,000.  Now, since Selviva is no more, I wonder how Cabrera will be paid his final fee and by whom?

More to come…

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See also: To learn more about the ADC’s spurious lawsuit against Chevron in Ecuador, read the Bob McCarty Writes posts found here.