The $19bn elephant in the room at Chevron’s May 29 annual meeting

Oil major’s fight with shareholders over Ecuador pollution ruling rumbles on.

When oil giant Chevron meets its shareholders on Wednesday, May 29, at the Chevron Park Auditorium in San Ramon, California, the elephant in the room will be the continuing battle over the controversial $19bn Ecuador Amazon environmental damages court judgement. In 2011, an Ecuadorian court ruled that Chevron should pay damages for environmental pollution in the country’s rainforest caused by Texaco, which Chevron bought in 2000. Chevron says Texaco had already paid to clear up any pollution. The stand-off is pitching the company in an increasingly bitter fight with shareholders who have called for it to examine settling the case or reassess internal governance structures to look at the issue. In a pre-AGM statement to investors, Chevron reiterated its claims that the Ecuador court ruling is illegitimate and related actions against it are fraudulent and represent criminal extortion. It said: “We do not believe that the interests of the vast majority of the Company’s stockholders are well served when a small group of stockholders (or non-stockholders working through their stockholder allies) attempt to pressure the Company into settling litigation or paying judgments that are the product of fraud and bribery.” Chevron has a website devoted to the Ecuador case, which it called on shareholders to look at: Link
But as RI reports today, the investors are not backing down; indeed they are upping the ante by writing to the SEC asking them to investigate whether Chevron is providing all the necessary legal information to shareholders on the Ecuador case. Their SEC petition follows the update of a report by New York securities lawyer Graham Erion, titled: In the dark: Chevron’s Misrepresentations in Public Filings Regarding its $19.04 Billion Environmental Liability in Ecuador: Link

The report alleges that the company is ignoring its obligations to provide full and complete disclosure of material facts about the Ecuador liability. It says Chevron currently faces seizure actions targeting roughly $20 billion in company assets in Argentina, Brazil, and Canada on the back of the Ecuador ruling.In addition, at the May 29 AGM, the American Federation of State, County and Municipal Employees (AFSCME), will file a shareholder resolution calling for Chevron to publish an annual report disclosing its lobbying practices. According to AFSCME, Chevron spent approximately $22.6m in 2010 and 2011 on direct federal lobbying in the U.S.; not including funds spent lobbying the Republic of Ecuador or lobbying through organizations such as the U.S. Chamber of Commerce. The AFSCME resolution follows a recent report issued by the Amazon Defense Coalition, an Ecuadorian NGO formed to fight the Texaco legal battle, which alleges that Chevron is pressuring high-placed Ecuadorian and U.S. government officials to interfere in the case:
Link
Chevron also has outstanding subpoenas with Trillium Asset Management, the Boston-based SRI firm, which has previously filed resolutions on management oversight of the Ecuador case, and Simon Billenness, a Washington-based SRI consultant, who, on behalf of the Unitarian Universalists, the US faith-based group, has urged Chevron to settle the Ecuador fine. Trillium and Mr. Billenness are contesting the validity of the subpoenas. RI understands that discussions are currently taking place between lawyers on both sides. The SEC said it would take no action against Chevron for omitting a shareholder resolution lodged for this year’s AGM by investors relating to the controversial litigation. It said proposals that affect ongoing litigation are “generally excludable”.
Chevron has also referred Thomas DiNapoli, New York State Comptroller and trustee of the state’s $150.3bn (€114bn) retirement fund to the New York State Joint Commission on Public Ethics, contending that he received campaign contributions from lawyers and consultants seeking settlement in the case. The oil firm’s lawyers have issued Freedom of Information Law (FOIL) requests for Di Napoli’s correspondence with some of the leading responsible investors in the US including the California Public Employees’ Retirement System (CalPERS). DiNapoli has called the claim “baseless”.
Meanwhile, Chevron CEO and Chairman, John Watson, looks like he will be forced to testify in any legal action after New York Judge Joseph Kaplan earlier this month refused a motion by the company to quash a deposition, reaffirming an earlier ruling made by magistrate James Francis.
The $19bn elephant in this corporate/shareholder spat is getting increasingly dirty and potentially damaging to the company’s prospects.
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