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Chevron confronts unreal damages in Ecuadorian lawsuit

Bob Tippee
Editor

A single fact puts Chevron’s legal mess in Ecuador into all the perspective anyone should need.

Twenty-seven billion dollars.

That’s what damages might total in a lawsuit to be decided soon in the barebones court of a small Ecuadorian town named Lago Agrio.

It’s what a court-appointed expert says would be required to remedy harm caused by oil spilled from production work along the Amazon River that Chevron never conducted.

It’s 31% of Chevron’s total shareholders’ equity.

It’s more than half of Ecuador’s gross domestic product.

Chevron inherited the fight when it acquired Texaco in 2001. Texaco had participated in a consortium that produced oil in Ecuador until its concession ended in 1992. A Texaco unit had been operator until the state-owned oil company replaced it in 1990.

Chevron says Texaco spent $40 million for its share of environmental clean-up and was released from liability by the government.

It also says the state company, Petroecuador, created the environmental problems evident now.

Alleging corruption of Ecuadorian courts and prejudice of the country’s president, Chevron has filed for international arbitration (OGJ Online, Sept. 25, 2009).

Lawyers for the Ecuadorian plaintiffs say outcome of the arbitration, related to a treaty between governments, won’t affect the legal case, which involves individuals and a company.

In public, Chevron has steadfastly defended its position, dedicating part of its web site to reports of developments and not mincing words.

Plaintiffs’ attorneys and the allied activist group Amazon Watch snipe at every move Chevron makes, of course. The spearhead is New York lawyer Steven Donzinger, a law school friend of US President Barack Obama who helped raise funds for his old buddy’s political campaign.

So this isn’t quite David vs. Goliath.

Donzinger threatens to seize Chevron assets if plaintiffs prevail. If damages approach their potential, logistics of that maneuver would be interesting.

A better word than “interesting” in this case, however, is “unreal.”

Twenty-seven billion dollars at stake in a tiny court in Ecuador. From shareholders of a company that never worked there.

In fact, “unreal” doesn’t do justice to this exercise in gold-digging.

“Preposterous” seems more appropriate.

(Online Sept. 25, 2009; author’s e-mail: bobt@ogjonline.com)


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