N.Y. comptroller, shareholders again ask Chevron to settle

Jessica M. Karmasek May 29, 2012, 10:15am


NEW YORK (Legal Newsline) - New York State Comptroller Thomas DiNapoli continues to put pressure on Chevron Corp. to settle an ongoing legal battle with a group of Ecuadorians suing the company.

On Friday, DiNapoli joined 39 other investors from the United States, Canada and Europe -- with a combined total of $580 billion in assets under management -- in sending a letter to the oil giant, asking it to resolve the lawsuit over damage to the Amazon rainforest.

As comptroller, DiNapoli serves as trustee of New York's $150.3 billion Common Retirement Fund, which owns 7.24 million shares of Chevron stock worth an estimated $713 million, benefiting more than 1 million public workers, retirees and their beneficiaries.

DiNapoli, citing an $18 billion judgment against Chevron, asked the company to seek a settlement to prevent "further shareholder damage."

"The time for delay is over," he said in a statement. "The company's attempt to undo the court's verdict only keeps the case in the public eye and further damages Chevron's reputation.

"Chevron's actions are hurting shareholders as well as the indigenous people of the rainforest. I urge the company's leadership to settle the case and put this issue to rest."

However, the company shows no sign of giving up.

Earlier this month, a federal judge mostly upheld Chevron's complaint in a separate but related lawsuit over the $18 billion judgment.

U.S. District Judge Lewis Kaplan, of the Southern District of New York, allowed the company's racketeering claims to continue, but dismissed other claims that included tortious interference.

More specifically, Kaplan's May 14 order upheld Chevron's complaint for racketeering, fraud, conspiracy and New York Judiciary Law 487, which provides for civil damages against an attorney who engages in deceit or collusion with intent to deceive a court.

"Chevron's extortion allegations are more than sufficient," the judge wrote in his 55-page order.

Hewitt Pate, vice president and general counsel for Chevron, has said the company is "eager" to move forward with its racketeering case against the Ecuadorians, calling the current judgment the result of "fraud" and "misconduct."

In January, an appellate court in Ecuador upheld the $18 billion judgment for Chevron's "intentional contamination" of the country's rainforest.

The adverse ruling was issued by a panel of three temporary judges presiding over the proceedings in the Provincial Court of Justice of Sucumbios in Lago Agrio.

The ruling, which stems from an environmental lawsuit involving Texaco Petroleum Company, which merged with Chevron more than 10 years ago, confirmed a lower court's ruling in February 2011.

The lower court found Chevron liable for dumping billions of gallons of toxic waste into the Amazon, causing an outbreak of disease and decimating indigenous groups.

Vowing never to pay the hefty judgment against it, the company filed its racketeering lawsuit in the New York federal court in response.

The company alleges that the Ecuador suit has been used to threaten the oil company, mislead U.S. government officials, and harass and intimidate its employees -- all to extort a financial settlement from the company.

In March, Kaplan had issued an injunction blocking enforcement of the judgment. However, in September, the U.S. Court of Appeals for the Second Circuit ordered that the injunction be vacated.

"We note the upholding of the $18 billion Aguinda v. Texaco verdict against Chevron by the Ecuadorian appeals court earlier in January of this year," DiNapoli and the other shareholders wrote last week.

"We urge Chevron to use the occasion of this most recent legal setback to take a fresh look at its options to address Texaco's legacy in the Ecuadorian rainforest. We ask Chevron to meet with the shareholders signed below to discuss how the company will protect its reputation and shareholder value moving forward."

This isn't the first time DiNapoli has pressed the company to come to a settlement.

In a letter in November 2008, DiNapoli asked Chevron's board of directors to come to an "equitable" settlement in order to avoid substantial penalties in an Ecuadorian court.

The company refused. As a result, the court hit the company with the $18 billion judgment.

Then, in May 2011, DiNapoli and other shareholders sent a letter to Chevron, again pleading for it to settle.

"In failing to negotiate a reasonable settlement prior to the Ecuadorian court's ruling against the company, we believe that Chevron displayed poor judgment that has led investors to question whether our Company's leadership can properly manage the array of environmental challenges and risks that it faces," the letter stated.

In October, DiNapoli took to the press to implore Chevron to settle the 20-year dispute.

"Chevron, its shareholders and the general public have not and will not benefit from a never-ending courtroom drama," he wrote in a guest column on the Huffington Post's website.

In recent weeks, shareholders, citing the Ecuador case, have filed three resolutions calling for corporate governance reforms in the company.

One asks Chevron to separate the positions of chief executive officer and chair of the board, another asks the company to lower the thresholds for calling special shareholder meetings, and a third, sponsored by the Common Retirement Fund, calls on Chevron to appoint an independent director with environmental expertise to its board.

Shareholders are expected to vote on the resolutions at the company's annual meeting Wednesday.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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