Thursday, June 22, 2017

George Mason Professor Krauss Is Chevron's New Stooge in Ecuador Pollution Case






















Friday, June 2, 2017

Chevron's Payments To RICO Witness Are Not Just Ugly - They're Criminal

Reposted from The Huffington Post.

Fellow HuffPost contributor Paul Paz y Miño has a great post up on Chevron's payments to the "fact" witness at the heart of its insane civil "racketeering" (RICO) lawsuit against its own Ecuadorian contamination victims, focusing on the fact that the payments are not just unseemly and illustrative of the cynicism of the entire gambit, but also -- oh yeah -- illegal under federal law. This has not gone unmentioned, including most recently in an important amicus brief as described by Michelle Harrison of Earthrights International, but Paul's reminder about the legal framework is helpful.

Perhaps wisely, the Ecuadorian contamination victims have not thus far piled litigation upon litigation by pressing for yet another legal case out of these illegal payments, especially given that a federal law claim would be heard by a U.S. federal court system that has thus far utterly rolled over to Chevron—memorably described by the judge in the RICO case as "a company of considerable importance to our economy." (He went on to opine from the bench that "I don't think there is anybody in this courtroom who wants to pull his car into a gas station to fill up and finds that there isn't any gas there because these folks," i.e. the Chevron's Ecuadorian victims.)

But that doesn't mean the Ecuadorians (or federal prosecutors) wouldn't have a case if they saw fit to bring one before the statute of limitations expires sometime in the next year. Paul set out the relevant statute, 18 U.S.C. § 201 et seq., in his blog. It sets out the crime and associated fines and imprisonment (up to two years) for anyone who "directly or indirectly, gives, offers, or promises anything of value to any person, for or because of the testimony under oath or affirmation given or to be given by such person as a witness upon a trial." § 201(c)(2).

Critically, the only criminal intent required here is the intent to make the payment. If there provable "intent to influence the testimony," the penalty goes up to a maximum of 15 years imprisonment.

Did Chevron and its legal team at Gibson Dunn give "anything of value" to Alberto Guerra "for or because of [his] testimony" in Chevron's RICO case? Did they do so "to influence [Guerra's] testimony"?

Oh yeah. Oh $$$ Yeah.

The point of this blog is not to review all the ugly Guerra details. You've got Paul's blog, the Earthrights blog, and the recent amicus brief. You've got this analysis from when the payments were first uncovered, and this trial motion (to the biased judge above) to strike Guerra's testimony. You've got these reports and blogs about later Guerra recanting his obviously false testimony, and about that testimony later being proven false through a forensic analysis of the hard drive of an Ecuadorian judge. (This analysis showed that Guerra's elaborate story of helping to "ghostwrite" the environmental judgment against Chevron on one of the plaintiffs' laptops was flat-out false. The judgment was properly written by the Ecuadorian judge on his computer in chambers.)

Though we'll get to Chevron's "defense" in a second, this really isn't a subtle or nuanced case. As the snippet in Paul's blog sets out, this is Chevron handing Guerra a suitcase full of $18,000 in cash at their first meeting, and Guerra responding with "Couldn't you add a few zeroes?"

Many zeroes are indeed later added, in the form of more hundreds of thousands of dollars in additional cash payments and a regular "salary," a housing stipend, a car, health insurance, and permanent immigration to the United States—a benefit of priceless value to Guerra because it allowed him to reunite with several of his adult children living illegally in the United States who he hadn't seen in years.

In return, Guerra put himself and his testimony at Chevron's disposal. He was prepped for over 50 days by Chevron lawyers in advance of his RICO testimony, and has been trotted out to testify (falsely) in other subsequent proceedings. His "fact" testimony changed constantly (and dramatically) to fit shifting factual developments in the case and Chevron's needs at any given point. The whole thing was truly a disgrace.

Chevron's defense (and the company has spent well over $1 billion on legal fees in the case, so yes, it purports to have a defense) is that Guerra was paid not for his testimony, but rather for the underlying information he gave Chevron—and subsequently testified about.

You might be thinking: Say what? How is this not paying for testimony? You wouldn't be alone. When famed legal ethics and constitutional law scholar Dean Erwin Chemerinsky heard that Chevron and Gibson Dunn were making this claim, he was so outraged he offered the Ecuadorian a free legal opinion to try to convince the court not to accept the testimony:

[I]f a party or its counsel were permitted to pay a testifying witness for physical evidence, beyond the reasonable value of that evidence, and to pay the witness a salary in exchange for an agreement to testify, there would be little left to the rule against compensating fact witnesses. Lawyers could always circumvent the prohibition of paying non-expert witnesses for their testimony by saying it was to pay for documents or other physical evidence.

Specifically on the evidence versus information question, Chemerinsky did not entirely reject the notion that a party might be able to pay for "information," but emphasized the key restraint on any such practice—that the payments not enrich the witness.

If a lawyer pays a testifying witness for physical evidence, such payments must be based on the reasonable value of the evidence, and a reasonable fee for the witness's time spent gathering the evidence. For example, if a lawyer were to pay to obtain a computer from a witness, the lawyer should not pay the witness more than the replacement cost of the computer, and any costs incidental to copying the necessary data. In my opinion, the reasonable value of the physical evidence should not be based on its value to the lawyer or the party obtaining the evidence. If that were the rule, there would be virtually no limitation on payments that lawyers could make to fact witnesses under the guise of obtaining evidence.

Now, Chevron got an ethics opinion, too. It got it from Professor George M. Cohen at the University of Virginia Law School, and while it most certainly was not provided pro bono, Chevron apparently did the right thing by consulting with Cohen and explaining the situation before they made any payments to Guerra. The distinguished professor signed-off on some payments to Guerra in some circumstances, setting out clear ethical lines to be followed as Chevron entered such ethically tricky waters. So far, so good. (I have a dim view of the substance of the opinion, which I may explain in a later blog, but at least the approach thus far was minimally adequate.)

But then, Chevron and Gibson Dunn decided they didn't like all those ethical lines after all. For example, throughout his 20-page, gold-plated opinion, Professor Cohen repeatedly emphasized the importance of the fact that the substantial payments for information were okay because it was just a cash-for-information deal, unconnected from the focus of § 201, namely testimony . He wrote:

On its face, §201(c)(2) does not seem to apply to payments purely for information or documents, as opposed to testimony. Because Chevron intends to pay for pre-existing information, and currently has no intention to call the witness to provide testimony in the pending federal proceeding in New York, or any other federal proceeding, the payment does not seem to violate the statute.

But Chevron and Gibson Dunn decide they do want Guerra to testify after all. (Or maybe that was the plan from the beginning.) In any event, that's a problem given the do-not-cross lines set out in the opinion, right?

No sir, no problem at all! They go back to the good professor, who provides a revised version of the same opinion, neatly excising out the inconvenient (italicized above) parts:

On its face, § 201(c)(2) does not seem to apply to payments purely for information or documents, as opposed to testimony. Because Chevron intends to pay for pre-existing information, the payment does not seem to violate the statute.

Gee thanks Professor! What a pro. No wonder these guys are paid the big bucks.

With the "information versus testimony" distinction in mind, Chevron and Gibson Dunn and their agents met with Guerra. Their attempt to "stay within the ethical lines" is, frankly, comical. The meeting was recorded:

CHEVRON: The money we're talking about is for, the money has to be for information—

GUERRA: Yes, yes, yes.

CHEVRON: It cannot be for testimony. It has to be for, it has to be for—

GUERRA: Yes, yes, yes, but not for only—

CHEVRON: —or for creating any of that [VOICES OVERLAP]—

GUERRA: For example, for example, right now, of all that—right? I don't earn anything and neither do you.

CHEVRON: Uh-huh.

GUERRA: We can talk about gold, old man.

CHEVRON: Of course.

GUERRA: But, damn, in practice, nothing.

CHEVRON: Of course, but I mean, it has to be information, not— [OVERLAP]

GUERRA: Sure, this is a matter of "here you are, these are my documents ...

CHEVRON: There, that's it.

GUERRA: —and that has value. It's worth one, or worth a million. But that does have value.

CHEVRON: Exactly.

GUERRA: That's the whole issue. Sure, it's clear to me.

It's clear to us too, Alberto. All too clear.

You can almost see the grins on their faces as they go through this charade, knowing the recorder is running. At the end of this conversation, they "purchase" from Guerra the "information and evidence" listed on this Appendix: a used hard drive and a handful of flash drives, a few old calendars ("day planners"), and "permission to access, inspect, copy, and preserve" two email accounts. The reasonable value of all this, to Guerra? What do you think? Fifty bucks? One hundred?

Guerra gets a suitcase with $18,000.

Of course, that's not the "million" Guerra wanted. As was made "clear" to him, he would get it—he would have to wait a little bit.

At this point (or after another "purchase" of old technology and records for an additional $20,000), Chevron and Gibson Dunn start shifting the payments into a new "ethical" theory: witness expenses. For this theory, Guerra will indeed be a witness, utterly reversing the central fact that justified the first two Cohen opinions.

They need another ethics opinion. How to get it? Perhaps they approached a second ethics professor without telling him or her about Cohen? No, don't be silly. Remember, Cohen is a pro. He can handle anything.

So back to Cohen they go, now with the fact that they want Guerra to sign a contract sign a contract obliging himself to testify at Chevron's direction. Witness expenses are typically understood to include travel, accommodation, copying costs, and at most an hourly fee for discrete work. Here, among many other perks as noted above, Chevron put Guerra on an indefinite "salary" of $10,000 per month—20 times what he was earning before he started negotiating with Chevron. Nonetheless, Professor Cohen opines, this is a reasonable understanding of "expenses." (Professor Chemerinsky, meanwhile, makes clear that any payment of a "salary" to a fact witness is "a clear violation" of the rules.)

The problems with the Cohen opinions go on and on. I won't (continue to) digress. Sadly, for Chevron and Gibson Dunn, the opinions have basically the same value as they did on their sell-by date—not based on their ridiculous arguments and client-serving logic, but based their cover-your-ass (CYA) value. No matter how bad they are, Chevron and Gibson Dunn get to say, gee, he's the expert, how could we have known better?

Personally, I don't think it's enough in these circumstances. The fact that Cohen was so acrobatic in adjusting his opinions to suit Chevron's needs as they emerged I think lessens their CYA value considerably. Depending on the context in which a § 201 claim or criminal prosecution might arise, the central issue would still go to a jury: were Chevron's cash payments, $120,000/year "salary," immigration, and other perks, made to Alberto Guerra "for or because of [his] testimony" in the RICO case? (For the more severe sanction in § 201(b)(3), were the payments "corrupt," i.e. to "influence [that] testimony"?)

Not a toughie.

Not surprisingly, Chevron seems more than a bit nervous about l'Affaire Guerra. At Chevron's recent annual shareholders summit, Chevron played a video it had commissioned crafting itself as the hero of the whole Ecuador situation, an unfairly targeted corporation that had the guts to stand up to a criminal band of deceitful Ecuadorians and conniving U.S. lawyers. It then took questions. But when a question was asked about Guerra, Chevron CEO John Watson brusquely turned the entire meeting to another topic and the questioner's microphone was shut off.

But there are a lot of microphones that Chevron can't shut off. Shareholders ended up voting at historic levels to rebuke CEO Watson for his "mishandling" of the Ecuador case; a full 39% (a huge percentage for a shareholder resolution) voted to install an independent chair that analysts claimed would bring more perspective to the company's Ecuador strategy. (The company's self-stated strategy at present is "fight until hell freezes over, and then fight it out on the ice.")

In a year, Chevron and Gibson Dunn might breathe easier, as they will be able to try to fight off any criminal prosecution on the Guerra payments by pointing to the federal five-year the statute of limitations. Until then, Chevron's fight on the ice is more like a cold sweat. We'll see what happens next.

Chevron CEO Is Lying to His Own Shareholders Over $12 Billion Ecuador Liability

One thing clear from the wreckage that was Chevron's annual meeting this week: CEO John Watson is blatantly lying to his own shareholders over the disastrous handling of the company's $12 billion Ecuador environmental liability.

Putting out fake news is not working for Donald Trump and it will not work for John Watson either. But that is exactly what he is trying to do to obfuscate the company's responsibility for dumping billions of gallons of toxic oil waste into the waterways of indigenous groups in Ecuador's Amazon.

Chevron's liability stems from the findings by three layers of courts in Ecuador that the company deliberately discharged the oil waste over two decades and abandoned roughly 1,000 unlined oil waste pits gouged out of the jungle floor. The contamination decimated indigenous groups, causing an outbreak of cancer that has killed or threatens to kill thousands of innocent civilians. Chevron operated in Ecuador under the Texaco brand from 1964 to 1992.

(See here for a summary of the overwhelming evidence against Chevron. See here for a photo essay by journalist Lou Dematteis on the humanitarian catastrophe caused by Chevron's oil pollution in Ecuador.)

Worse, Watson and members of his legal team -- led by Chief Counsel R. Hewitt Pate and outside counsel Randy Mastro -- might face criminal prosecution for bribing a critical witness to try to evade paying the judgment. That's on top of Watson recently being caught red-handed trying to rip off Australia with a tax scheme related to the company's Gorgon natural gas project, costing Chevron shareholders about $300 million in addition to major reputational damage.

As we sit here today, after two decades of the historic battle in Ecuador between Big Oil and indigenous groups, Watson's biggest problem is that a legal case that the company probably could have settled for approximately $100 million in the mid-1990s is now worth $12 billion. That's on top of the estimated $2 billion Chevron has spent on 60 law firms and 2,000 lawyers to defend the case. And it doesn't include the $300 million in annual interest that accrues to the judgment.

The $12 billion figure is based on a final and enforceable judgment that was affirmed unanimously by Ecuador's Supreme Court in the venue where Chevron accepted jurisdiction. The company had filed 14 sworn affidavits praising Ecuador's judicial system when it insisted the trial be held in the country. Now, Watson refuses to pay the judgment despite overwhelming evidence of Chevron's toxic dumping, fraud, and other wrongdoing .

One might think that by now Chevron's massive expenditures should have achieved its obvious objective -- the killing off of the environmental claims of the villagers. Instead, the expenditures seem to be backfiring. The villagers simply won't go away. Despite some occasional setbacks through the years, the undeniable truth is that they are now gaining strength both in court and with the company's own shareholders.

In court, Chevron faces a critical hearing this October in Toronto as the villagers try to seize company assets in Canada to recover the full amount of their judgment. Already, two appellate courts in Canada (including the nation's Supreme Court) have ruled unanimously against Chevron as Watson continues to fail in his attempts to try to shut down the the asset seizure action.

Watson's effort to block a similar enforcement action targeting company assets in Brazil also has failed.

Among Chevron shareholders, several large institutional investors put the hurt on Watson at the company's annual meeting. They lined up behind a resolution that accused Watson of "materially mishandling" the Ecuador litigation. This is a startling public rebuke of a CEO that one rarely sees in annual meetings of large companies.

One shareholder resolution that sought Watson's removal as Chairman over the Ecuador disaster received a whopping 39% of all outstanding shares -- a huge level of support. Normally, a shareholder resolution that receives 10% support is considered fantastically successful. Two other resolutions challenging Watson over his mishandling of the Ecuador litigation also received significant support. One received 31%, the other 20%.

In the court of public opinion, Watson's position also seems to be deteriorating as he fails to address shareholder concerns over Ecuador.

After the slap down of Watson's leadership at the annual meeting, Watson made the extraordinary claim that the company's Ecuador policy actually "enjoys overwhelming support from shareholders." Watson later turned off the microphone when a shareholder challenged him over the Ecuador policy. He is burying his head in the sand.

In his terse statements about Ecuador at the meeting, where he looked visibly uncomfortable, Watson refused to acknowledge that 43 civil society groups sent him a letter criticizing the company's attempt to use "racketeering" laws in the U.S. to retaliate against the villagers and their lawyers. He also ignored the 17 environmental and human rights groups and 19 international law scholars who have backed the villagers in legal briefs.

Watson's so-called "disclosure" of the Ecuador liability at the annual meeting and in the company's public filings are part of an elaborately constructed lie.

Watson tries to claim a 2013 decision by a U.S. federal judge in a farcical non-jury trial that has no legal relevance somehow nullifies the entire Ecuador judgment. But even in that one-sided proceeding, called a Dickensian farce by a prominent trial lawyer, the judge said he was not exonerating Chevron from its responsibility for the environmental damage in Ecuador.

Further, the entire factual basis for that U.S. case has collapsed in spectacular fashion -- a reality that Watson also refused to acknowledge to shareholders or in the company's SEC filings. It turns out that Chevron bribed its admittedly corrupt star witness, Alberto Guerra, with $2 million in cash and benefits. That witness later admitted repeatedly lying in U.S. court about several key issues.

Worse, Guerra's lies were corroborated by a scientific forensic analysis that completely debunks Chevron's main defense in the case. This bombshell report also explains in detail how Chevron fabricated evidence to try to evade paying the Ecuador judgment.

Amazon Watch, the environmental group that has battled Chevron for years, posted a blog detailing how the company's illegal witness payments likely violate federal criminal law and could subject those involved to criminal prosecution. Another prominent U.S. environmental group, Earth Rights International, also posted a blog explaining how Chevron fabricated evidence.

We will give the final word to Carlos Guaman, the President of the Ecuador-based Amazon Defense Coalition, known more widely by its Spanish acronym FDA. The FDA is the group that has received international renown for courageously bringing the environmental lawsuit against Chevron on behalf of the affected indigenous and farmer communities.

Guaman warned Watson that the villagers are considering a new plan to file additional judgment enforcement actions in other countries to seize Chevron assets to force the company to abide by the rule of law. "Our people are dying because of Chevron's pollution, so we have no choice but to bring as much pressure to bear on the decision makers," he said.

That's putting it nicely. To Guaman and his followers, we say please continue to kick Watson's posterior until he and his cohorts are held fully accountable.

It is only a matter of time before Watson is either forced out of his job ,or forced to pay the full cost of the grotesque environmental catastrophe his company has visited on the people of Ecuador.