Market News

 October 15, 2013
Chevron turns tables on lawyer in pollution case

 In April 2007, New York lawyer Steven Donziger flew to Ecuador convinced he was on the brink of victory against a formidable foe - Chevron Corp.

He had spent years suing the oil company for allegedly polluting the streams and soil of Ecuador's rain forest and poisoning the people who lived there.

The fight, waged in the courthouse of a small town named Lago Agrio, had turned into an international cause celebre, closely watched by environmentalists and oil executives alike. A documentary film was in the works, with a camera crew shadowing Donziger and his team.

Chevron, based in San Ramon, Calif., had fought back hard. But now lawyers representing the company were discussing a settlement. Although not all of his colleagues agreed, Donziger wanted to push for at least $1 billion, maybe even $3 billion, to pay for cleaning up the contamination. As he flew south, he believed a historic achievement lay within reach.

"I cannot believe what we have accomplished," Donziger wrote in a diary he kept of the suit. "Important people interested in us. A new paradigm of not only a case but how to do a case. Chevron willing to settle. Billions of dollars on the table. A movie, a possible book. I cannot keep up with it all. Just four years ago I felt broke and hopeless, unable to gain traction.

"I cannot wait to get off the plane and see my fellow soldiers - often the only people I feel who get me," he continued. "I want to look in their eyes and see if they understand the enormity of what this team has accomplished."

A settlement was never reached. And on Tuesday Donziger, accused by Chevron of masterminding massive judicial fraud, will go on trial in New York,

Although Donziger and his team prevailed in Ecuador, winning a $19 billion judgment against the company, Chevron claims Donziger and his colleagues tampered with the court process, eventually bribing a judge and ghostwriting the judgment itself.

To prove its case, Chevron will use outtakes from the documentary film as well as many of the team's internal emails and memos. Chevron will also use Donziger's diary, wrested from him under a court order.

Diary as evidence

Running from September 2005 to May 2007, the 109-page diary details Donziger's strategies, impressions, hopes and fears about the long-running case. And it presents a paradox.

Some passages seem to back Chevron's claims of judicial tampering, although not of bribery. Throughout the diary, he appears convinced that the residents of Ecuador's oil patch suffered a massive injustice and that Chevron bears the responsibility.

To Chevron, the diary presents ample evidence of wrongdoing. The company has focused in particular on sections it says show Donziger trying to pressure judges and manipulate a court-appointed expert who was supposed to remain independent. Lawyers representing Chevron in the upcoming trial will also present testimony from a former Ecuadoran judge as well as some of Donziger's former contractors who have since switched sides.

"It's a cascade of damaging evidence of fraud and racketeering that we'll be putting out during the trial," said Ted Boutrous, a partner with the law firm Gibson, Dunn & Crutcher, representing Chevron.

Case's history

The Ecuador lawsuit has a long and tortuous history.

Its origins stretch back to 1964, when Texaco started drilling for oil in Ecuador's northeastern corner, a region known as the Oriente. The American company, which Chevron bought in 2001, worked in partnership with state-owned Petroecuador.

In 1992, Texaco pulled out, turning over oil-field operations to its partner. Texaco then reached an agreement with the government in 1995 to clean up a portion of the area for $40 million, leaving the rest to Petroecuador.

Even before the agreement was signed, residents of the Oriente sued Texaco in New York, saying the years of drilling had contaminated their home. Texaco, and later Chevron, fought successfully to move the case to Ecuador.

Donziger, a former journalist and public defender, worked on the case during the 1990s, but only in a supporting role. He became far more involved once the lawsuit moved to Lago Agrio in 2003.

His diary includes graphic, angry descriptions of people living among polluted streams and soil. At one point, he visits an old oil-producing site and finds a system "designed" to dump drilling wastewater, laced with oil and chemicals, into a nearby stream. He compares the wastewater system to "pre-meditated murder."

Doubt for fairness

And yet, for all the confidence he shows in his cause, Donziger often expresses doubt that his team and he will ever win.

He describes an Ecuadoran legal system full of weak judges who only respond to pressure and fear. He worries that Chevron will simply bribe a judge to kill the case.

He also makes allusions to receiving death threats, says people are following his colleagues and him in the street and sometimes wonders if their phones have been bugged.

To win, Donziger keeps his team on the offensive. His colleagues and he try to make allies within Ecuador's federal government, both before and after the election of leftist President Rafael Correa. They meet frequently with the rotating cast of judges presiding over the lawsuit, sharing meals and drinks and urging them to speed up a court process Donziger finds agonizingly slow.

'I am good at it'

"I love it - this lobbying," Donziger writes after lunching with a judge in March 2006. "I am good at it. But I hate it, hate that it is necessary, hate that it is part of the legal culture. ... I think it runs counter to any good person."

It certainly irked Chevron. The company often complained about Donziger and the other Lago Agrio lawyers conferring with judges out of court, with no Chevron lawyers present. But until recently, such meetings were legal in Ecuador. The country adopted a law barring that behavior in 2009.

That kind of intense, personal lobbying extended to the selection of a court-appointed expert to prepare a damage assessment in the case, a person known as the "perito." At one point, Donziger describes interviewing one engineer and asking if he could stand up to Chevron.

"I asked if he could be comfortable slamming them with a ($10 billion) judgment," he wrote in December 2006. "He answered yes ... but I don't know if he has the internal timber to pull it off."

'Play ball with us'

Then he added, "he has to totally play ball with us and let us take the lead while projecting the image that he is working for the court."

Chevron found such comments revealing. The company would later accuse Donziger and his team of conspiring with the man who would eventually be named perito, Richard Cabrera. The team's consultants, according to Chevron, ghostwrote Cabrera's damages assessment, which found widespread contamination.

Those consultants, from a firm called Stratus, have since given Chevron sworn testimony claiming they wrote the report. They have also disavowed its findings.