Market News

 October 16, 2013
Chevron lawyer takes stand in trial over Ecuador verdict

 A Chevron Corp. attorney testified Tuesday that he was charged with bogus crimes in a scheme to shake down the oil producer and obtain a $19 billion judgment in Ecuador.

Ricardo Reis Veiga, a senior managing counsel for the second-largest U.S. oil company, was the first witness called by Chevron in a trial that the company says will show that the Ecuadorean verdict was fraudulently obtained by lawyers who operated a racketeering enterprise.

In Veiga's testimony, portions of which were made public Tuesday, he said he and a colleague faced charges in the 1990s over their handling of a cleanup settlement for a drilling site in the Ecuadorean rain forest. The charges were dropped in 2011.

"I experienced an unimaginable nightmare, ranging from stress, anger, pain and frustration from having to face such accusations," Veiga said in written testimony filed with U.S. District Judge Lewis Kaplan. Veiga also took the stand Tuesday in federal court in Manhattan to answer further questions.

Randy Mastro, a lawyer for Chevron, told Kaplan Tuesday that the verdict was obtained by fraud, coercion, extortion, money laundering and the bribery of the Ecuadorean judge who wrote it. In the U.S. case, the San Ramon, California-based company is seeking an order from Kaplan barring enforcement of the 2011 pollution judgment.

'Racketeering Enterprise'

Mastro pointed to the Ecuadoreans' lead lawyer, Manhattan attorney Steven Donziger, and said he headed a "racketeering enterprise" that included two other attorneys, consultants, activists and others to "shake down" the oil producer.

"That's what Steven Donziger was trying to do against Chevron --- coerce a big payday against a big company until the pain went away," Mastro said. "But Chevron refused. It refused to be extorted and defrauded and that's why we're here today."

The company wants to stop Donziger and his associates from trying to enforce the verdict in courts around the world where Chevron has assets, Mastro said. Plaintiffs have sued Chevron for payment in Canada, Argentina and Brazil without success. Donziger could collect as much as $1.2 billion if the judgment is collected in full, Mastro said.

In the underlying 20-year-old environmental case, Donziger and other lawyers for indigenous people in Ecuador's Lago Agrio region sought damages for Texaco Inc.'s alleged dumping of toxic drilling wastes from 1964 until about 1992 that polluted about 1,500 square miles (3,885 square kilometers). The lawsuit continued against Chevron when it acquired Texaco in 2001.

New Paradigm

Chevron contends that state-owned Petroecuador, a former Texaco partner, is responsible for most of the pollution. Texaco paid $40 million to clean up its share and was released from liability under agreements with Ecuador in 1995 and 1998, Chevron said. An international arbitration tribunal affirmed their validity in September.

"This is a new paradigm," Mastro said. "It's fraud and extortion and they're trying to force a payoff. If they do, it will be open season on U.S. companies."

Richard Friedman, a lawyer for Donziger, today denied his client had committed any bribery and wrongdoing and said he'd worked to hold Chevron accountable for polluting the rain forest, comparing his client to U.S. civil rights leaders.

"Like Thurgood Marshall, like Ralph Nader, like a host of human rights lawyers before him, Mr. Donziger understood you need legal and social change," Friedman told the judge.

Powerful Company

Friedman argued Donziger had fought against the powerful oil company and taken up the cause of the indigenous Ecuadoreans who were mistreated and discriminated against in the country. He argued that his client had successfully persuaded the Ecuadorean courts to hold Chevron responsible for its actions in a foreign country.

"It wasn't pretty but it wasn't bribery," Friedman said. "He's changed the way people think. He's here today because of that judgment."

Nicolas Zambrano, the judge who signed the Ecuadorean judgment in favor of the Lago Agrio plaintiffs, will testify on his client's behalf, Friedman said. Zambrano, who is no longer a judge, submitted a declaration denying allegations he'd been bribed.

Mastro said today the trial also will feature another Ecuadorean judge who was involved in the case, Alberto Guerra, who presided over the Chevron pollution case before Zambrano. Guerra has submitted a declaration stating that Donziger and another lawyer bribed Zambrano to decide the case in favor of the Ecuadoreans and permitted them to ghost write the opinion which Zambrano signed.