PJ Media

Stacking the Deck Against Chevron in Ecuadoran Lawsuit

Richard Cabrera, author of a report upon which a 16-year-old $27 billion lawsuit against Chevron Corporation in Ecuador is based, was the subject of a court filing recently in Lago Agrio, Ecuador. It seems that officials at the oil giant based in San Ramon, California, found new “dirt” on the Ecuadoran businessman.

Newly discovered information revealed by Chevron shows Cabrera — the man hired as an “independent expert” by plaintiffs’ lawyers to perform inspection work in what could turn out to be the largest legal judgment in history — is the majority owner of an oilfield remediation company that stands to gain financially from any judgment against Chevron. Due to the remediation company’s relationship with Ecuador’s state-owned oil company, Petroecuador, Chevron called upon the court to immediately reject the work of Cabrera on the grounds that he knowingly hid his relationship and stands to gain from what was supposed to be unbiased work for the court.

Cabrera’s recommendations and independence were already compromised prior to the discovery of his conflict of interests:

• The Amazon Defense Coalition (ADC), the named financial beneficiary of the lawsuit, directly and improperly paid Cabrera more than $200,000 for his work.

• Sections of Cabrera’s $27 billion claim are copied word-for-word from documents written by Amazon Defense Front lawyers.

• Photographs and video show representatives of the ADC conducting Cabrera’s field work as well as preparing soil and water samples for Cabrera, who had promised to carry out his work independently.

• Nearly 90 percent of Cabrera’s $27 billion figure is allocated to issues that he was not directed to examine and that are unrelated to the actual claims in the Ecuador lawsuit.

• Cabrera assessed more than $9 billion as compensation for cancer deaths without providing any medical evidence, or even the name of a single alleged victim or family member beneficiary to support his recommendation.

• Cabrera recommends Chevron pay more than $8.4 billion for what he deems “unjust enrichment,” despite the fact that Texaco Petroleum — merged with Chevron in 2001 — earned less than $500 million in profits during the life of the consortium while the government of Ecuador received in excess of $24 billion, more than ninety percent of the total revenue generated by the consortium. Moreover, there is no basis in Ecuadorian law for such an award.

• Cabrera assessed $3.2 billion for groundwater remediation and $428 million to improve potable water systems even though he did not take any samples from streams, rivers, municipal water sources or drinking water wells, and states in his own report that he did not have enough data to develop a groundwater remediation plan.

• Cabrera recommends more than $2.7 billion for pit remediation, averaging more than $3 million per pit. This figure is vastly inflated compared to the actual cost of $85,000 per pit for Petroecuador’s recent remediation work that has been implemented to the full satisfaction of the government. Proper remediation, therefore, of every pit that Petroecuador is obligated to clean up would cost well under $100,000,000.

• Cabrera claims $1.7 billion in damages for oil infrastructure sites that have been in constant use by Petroecuador for nearly two decades and substantially expanded by Petroecuador since Texaco Petroleum’s departure in 1992.

• Cabrera assessed more than $1 billion in soil remediation for sites he never visited.

“For three years, Mr. Cabrera has concealed clear financial conflicts of interest that disqualify him from acting as an independent and objective evaluator of the evidence in the case,” said Hewitt Pate, Chevron vice president and general counsel, in a company news release. “While Mr. Cabrera’s financial interests alone are sufficient grounds for his report to be rejected, his intentional concealment of those interests further demonstrates that the entirety of his work lacks honesty, integrity, or credibility.”

Recently uncovered records from 2003 through 2008 reveal that Cabrera is co-founder, general manager, majority stockholder, and legal representative of an oilfield remediation company, Compañía Ambiental Minera-Petrolera S.A. (CAMPET), which is registered to perform oilfield remediation and other services for Petroecuador. Cabrera failed to disclose these business interests as required by law.

In the aforementioned report, Cabrera absolves Petroecuador of any responsibility or remediation obligations associated with past or present oil operations despite its majority ownership of the Petroecuador-Texaco Petroleum consortium, which operated until mid-1992, and Petroecuador’s sole ownership and operation of the former consortium fields for the past 18 years.

Disregarding Ecuadorian media reports and other evidence showing that Petroecuador has spilled millions of gallons of oil since taking over exclusive ownership and operations in 1992, Cabrera attributes pollution in the Amazon region of Ecuador to Texaco Petroleum exclusively.

Cabrera’s report says that Chevron, because it acquired Texaco Inc. in 2001, is solely liable for damages, citing grossly inflated remediation costs while ignoring Petroecuador’s role in oil operations and its well-documented poor environmental performance. Cabrera’s report also calls on Chevron to pay $375 million to update Petroecuador’s oilfield equipment, which Petroecuador has for decades failed to properly maintain or replace. These findings make no sense as a matter of Ecuadorian law or common sense, but are consistent with furthering Petroecuador’s interests, as well as Cabrera’s own.

After knowingly omitting to disclose his financial interest in CAMPET, as well as CAMPET’s status as a registered Petroecuador contractor, Cabrera affirmatively misrepresented in court filings that he did not have any impediment or conflict that would affect his performance as an “independent” court-appointed witness. Cabrera violated the law by accepting his appointment, which required an explicit acknowledgment of public duties as an impartial analyst — an acknowledgment Cabrera could not truthfully have made given his financial interests.

Chevron previously challenged Cabrera’s lack of qualifications as well as the biased and baseless substance of his report. But Judge Juan Nuñez, who subsequently was disqualified for his involvement in a scheme to solicit bribes, inexplicably ignored those challenges, thus shielding Cabrera’s work from scrutiny. Now that Cabrera’s clear conflicts of interest are revealed, Chevron has demanded that the court strike his entire involvement in the case. Chevron’s Pate:

Mr. Cabrera has placed his own financial interests, as well as the interests of Petroecuador and the Amazon Defense Coalition, ahead of the interest of justice. … Today’s disclosure further illustrates the illegitimacy of Mr. Cabrera’s fictitious $27 billion recommendation. Taken into account with Mr. Cabrera’s collusion with the plaintiffs’ lawyers and representatives, it is clear that his report should have no bearing in the outcome of this trial.

To gain a better appreciation of the incestuous relationship between parties involved in this bogus lawsuit, I suggest you take a look at the “Web of Influence” published on Chevron’s The Amazon Post blog.

Full of interactive graphics, it offers telling snapshots of the tangled web that connects the ADC, a deep-pocketed Philadelphia law firm, a hungry New York lawyer, an infamous lobbyist, a scorched-truth-policy PR campaign, crooked Ecuadoran government officials, and others in an effort to extract as much as $27 billion from Chevron via what can best be described as distorted jungle justice.

(I’ve written about 30 posts about the Chevron-Ecuador lawsuit during the past nine months.  To read the half-dozen that mentioned Cabrera, click here.)