To be honest, when I first read about a lawyer who was suing
Texaco for the environmental damage caused by the drilling of oil, on behalf of
Ecuadorian inhabitants of the Amazon rain forest, I thought it must be the
second coming of Jesus. As a legal
professional and an environmentalist I was excited to read this book by Bloomberg Business Week journalist, Paul
Barrett, convinced that I was about to learn about a new hero. I could not have been more wrong.
Ecuadorian Background
In order to properly discuss the moral and legal catastrophe
that ensues, I think it’s best to start at the beginning.
Prior to the exploration of oil, the Ecuadorian economy was
quite limited, suffering from a series of boom and bust export markets (cacao in
the 1920s and bananas in the 1940s). The
country and its population were poor, endangered by drug wars in Columbia and
marred by near-constant political pandemonium.
In March 1964, Texaco heard about the discovery of oil reserves
underneath the Amazon rain forest and signed a contract with the military junta
that ruled Quito (a region of Ecuador), for the right to explore 4 million
acres (about the size of Kuwait). In
1970, the junta then forced Texaco to hand over one-quarter ownership of its
venture to the newly created state oil company, Petroecuador. By 1977, the government actually owned 62.5%
of the entire operation and by 1992, Texaco had reduced their ownership to 0%
and the Ecuadorian government had profited to the tune of $23.5 billion
(Texaco, $1.6 billion).
Despite this the country was still cash-strapped and in 1990
it had to abandon its membership in the OPEC oil cartel as it was unable to pay
its membership dues. Mismanagement of
the entire operation, from the existence and enforcement of safety standards to
the use of the oil revenue, had left the various farmers and tribes that lived
in the rain forest incredibly poor and sick.
When drilling for oil, fluids known as drilling muds are
used. Drilling muds contain acids,
corrosion inhibitors, biocides and fungicides.
Oil-related toxic compounds known as polycyclic aromatic hydrocarbons
(PAHs) were found in the area’s water used for drinking, bathing and fishing in
levels ten to one thousand times greater than U.S. Environmental Protection
Agency (“USEPA”) safety guidelines. The
most harmful chemicals, benzene and toluene, are serious carcinogenic agents. Exposed populations face an increased risk of
serious health effects such as cancers and neurological and reproductive
problems.
In 1976, the Ecuadorian government requested that Texaco
drain and cover its waste oil pits, however the company rejected the request on
the ground that it would too expensive at $4.2 million (despite the fact that they
were failing to use techniques that had become commonplace in American oil
operations). Internal documents at
Texaco later revealed that the company had a practice of not disclosing
accidents or company practices that may cause ecological damage and even went
further in discouraging employees from recording any of the impacts of
drilling.
At the time of Texaco’s exit from Ecuador in 1990, Texaco
and Petroecuador began to negotiate the cost of cleaning up. Texaco offered $3 million to clean the
waste-oil pits and surface spills at drill sites in the jungle and wipe their
hands of the whole mess. Petroecuador
found the offer insultingly low and after a few years of negotiation eventually
settled on a deal in which Texaco would remediate 37.5% of the oil sites (a
percentage reflecting Texaco’s average ownership stake from 1977 through to
their eventual exit). However,
Petroecuador’s lawyers wrote an appallingly bad agreement in which the explicit
terms only called for Texaco to “investgate” the 133 well sites and seven spill
areas. In a self-serving but ultimately short-sighted
decision, Texaco investigated the sites and in the vast majority took no action
(USEPA clean-up goals dictate that the total petrol hydrocarbons (“TPH”) should
be no higher than 100 parts-per-million – Texaco negotiated to remediate to a
level of 5,000 parts-per-million).
Petroecuador had secured no legal obligation from Texaco to clean up any
of the degraded waterways or provide medical treatment to anyone effected. Yet Ecuador accepted these terms and
Petroecuador then assumed responsibility for the sites disregarded by
Texaco. Ecuador had blatantly failed to
foresee the issues these oil pits and spill sites would cause. For a developing country, environmental protection
was just not a priority in the exploitation of natural resources or
negotiations with global corporations.
Donziger Background
Part two of the introduction is our leading man: Steven
Donziger. Born in Jacksonville, Florida,
in 1961 he was greatly influenced by his mother who was an active protestor in
support of Cesar Chavez. Donziger started
his career as a journalist and followed the contra militias in Nicaragua.
Donziger always saw himself as a protagonist
and was quoted as saying, “Being a journalist is good preparation for being a
human rights lawyer. You’re looking for
truth that the corporate and political establishment wants to cover up.”
After a few years in Nicaragua, Donziger followed one of his
heroes, consumer-rights advocate Ralph Nader, in pursuing a law degree at Havard
Law School. The most esteemed of
Donziger’s law school friend’s was Barack Obama.
Donziger began work as a public defender, representing
teenagers accused of street crime, but always had his eye on something bigger.
Aguinda I (New York, USA)
In 1992, Judith Kimmerling (a Yale-trained litigator) wrote
a report for Oxfam on the damage done to the Amazon in Ecuador. Kimmerling had also written a book called Amazon Crude, which detailed the
exacerbation in wealth disparity within Ecuador since the drilling of oil began
via the contamination of water supplies which caused the destruction of local
fisheries, farmland and livestock. Cristobal
Bonifaz, an American lawyer of Ecuadorian descent, read the report and
contacted Kimmerling about the possibility of beginning a class-action lawsuit
against Texaco and Petroecuador (class-action being the American legal vehicle
through which someone can bring a claim on behalf of a large group of people).
When Bonifaz laid out his plan to pursue Texaco, Kimmerling
eventually refused to participate due to the difficulty she knew they would
face in finding epidemiological evidence linking the contamination of the water
supply to the local deaths from cancer.
Bonifaz was not put off, he had all Kimmerling’s research at his
disposal and his son, John Bonifaz who had just graduated from Harvard Law
School, was able to provide his father with the names of many young litigators
who would jump at the chance to join such a lawsuit.
Enter Steven Donziger. Compelled by the idea of a campaign that
combined litigation, promotional tactics and humanitarian issues, he signed up
to assist Bonifaz.
Bonifaz originally wanted to bring the case in the
Ecuadorian courts, however, he was discouraged by the country’s institutionally
weak judiciary and political turbulence.
Consequently, Bonifaz chose to bring the lawsuit in New York, the home
state of Texaco.
Aguinda, as the case became known due to the name of the
lead-claimant, listed seventy-six tribal Indians and migrant farmers suing on
behalf of thirty thousand similarly situated people living on the original
concession taken by Texaco.
One of the first hurdles to overcome was how to pay for the
case, as it would not generate income for many years. Without support, the behemoth of Texaco would
crush the claimants. Consequently, Bonifaz allied himself with the Philadelphia
law firm Kohn, Swift & Graf (“KSG”) who had a history of class action suits
in the United States. In return for 25%
of the eventual damages, KSG agreed to fund all the up-front expenses. Managing partner Kohn was no philanthropist,
publicly stating this “could be the largest fee-producing case the firm has
ever had.”
Even with KSG’s backing Texaco’s legal team did not
initially consider the lawsuit to be a significant threat. They compared the
claimant’s lawyers to ambulance chasers and responded matter-of-factly with a
defence of lack of causation (i.e. there was no evidence proving the causal
link between the oil spills/contamination and the deaths) and forum non conveniens (the jurisdictional
defence that New York was not the correct court within which to hear merits of
the case and as such should be dismissed by the New York courts and transferred
to Ecuador).
In November 1996, the New York courts granted Texaco’s
motion to dismiss the suit with the presiding judge stating that the claimant’s
needed to “face the reality that the authority of the U.S. judiciary does not
include a general writ to right the world’s wrongs.”
Ecuador’s political gymnastics (concerning the case – the
country has been politically turbulent almost since inception) sprang into
action upon realising that the case may now be transferred to home
jurisdiction. The then-president, Fabian
Alarcon, publically supported the case after Bonifaz provided a written promise
to the Ecuadorian government that were the claimants to secure a judgment
against Texaco (which provided for joint/contributory liability against
Petroecuador) then his clients would expressly waive their right to collect
such money from Petroecuador. As Barrett
rightly notes, “This constituted a monumental concession by Bonifaz. By pledging not to go after Ecuador or its
national oil company, he reassured the government that it could support the suit
against Texaco without risking any liability itself…Bonifaz effectively
absolved the Ecuadorian state of blame for ecological damage that the country’s
leaders, at a minimum, had tolerated…Bonifaz’s motive for letting Ecuador off
the hook could not have been more transparent: He sought a colossal pay-out
from Texaco, and wanted to focus judicial and public animus solely on the
wealthy American company. Indicting a
malevolent global oil giant had more sex appeal than trying to hold a
struggling national government responsible for letting down its people.”
Aguinda II (Lago Agrio, Ecuador)
Class-action suits were completely alien to Ecuadorian
jurisprudence and Ecuador was still an extremely dangerous place to be. The town of Lago Agrio, in the district of
Quito, was marred by the violent cocaine trade.
Lago in particular was patrolled by Ecuadorian soldiers in jeeps due to
the narco-gangsta guerrillas of the Columbian group, FARC (Fuerzas Armadas
Revolucionarias de Colombia or The Revolutionary Armed Forces of Colombia), who
regularly terrorised the area.
“No had ever attempted to sort out such a complicated
dispute involving money, politics and science” in Ecuadorian courts. Consequently,
it was even more alarming when the judge declared that the trial would only
last six days, during which witnesses would be interrogated, there would be no
jury and after which the judge would preside over 122 in-person visits to well
sites and separation stations before court-appointed experts would compile
reports from which the judge would then form his decision. This was an amazingly lax procedure compared
to the scrutiny the sites and witnesses would have faced in the U.S., but it
suited Bonifaz and Donziger down to the ground.
Donziger, who had begun to take over from Bonifaz after
showing a greater appetite for spending time in Ecuador, finally had the
setting he wanted and began a fight for the hearts and minds of the public. Buying space in both Ecuadorian and US
publications, he advertised the case as a no-holds-barred courtroom brawl to be
heard in Ecuador, a “Billion-dollar lawsuit between rainforest Indians and
Texaco heading for trial: A real-life ‘David vs. Goliath’ story”. He also began couching the terms of the
argument in very grand language, stating the case was a way to “re-allocate
some of the costs of globalization…to the most vulnerable rain forest dwellers
from the most powerful energy companies on the planet.”
I should note at this point that in October 2001 (as the
inspections of well-sites were ongoing), Chevron purchased Texaco (along with
its legal liabilities). The combined
company of ChevronTexaco (which was later renamed to just Chevron) was the
world’s fourth largest non-state-owned oil company with global revenue of $66.5
billion via production of 2.7 million barrels of oil a day. As part of the buyout, Chevron approached
Bonifaz in 2000 about settling the claim, to which Bonifaz proposed a $140
million figure. Chevron summarily
rejected the offer and did not even bother with a counter offer.
This willingness to settle so soon, enraged Donziger. Donziger’s strategy was clear from the
outset. The courtroom was just a
sideshow; he wanted to paint Texaco as a cold, corporate bully unwilling to pay
for the mess they made (which was true to a certain extent), and then use the
negative publicity and pressure to force Texaco (now Chevron) into a huge pay-out.
He knew that he media would be more
curious about costumed Indians than the less exotic migrant farmers who were
the majority of the claimants in the case.
To that end, on the first day of the trial, 21 October 2003, Donziger
arranged for hundreds of Cofan and Huaorani tribesmen and women to march on the
courthouse holding placards demanding “No Mas Muerte” (no more death) and
“Texaco, Basta!” (Texaco, Enough!). He
also arranged for the court proceedings to be aired on national radio and
informed television stations of every opportunity to film court exits and the
filing of documents, etc.
He and his small team began regularly scripting releases portraying Texaco as “having pumped nearly all the oil this small Andean country produced until 1990, maximising profits, ecologists here say, by using inexpensive and environmentally unsound methods” and blatantly disregarding the role of the Ecuadorian government and the fact that the majority of the profits remained with the state owned Petroecuador.
He formed an alliance with the Amazon Watch (an anti-corporate,
San Francisco-based advocacy group) and Frente de Defensa de la Amazonia (the
Front for the Defence of the Amazon) and recruited celebrities (such as Bianca
Jagger and Trudie Styler (Sting’s wife)) to raise awareness. However, Donziger’s approach was quickly becoming viewed as inviting of too much circus and controversy as larger environmental
groups (such as the Natural Resources Defence Council and the Sierra Club)
declined invitations to involve themselves.
In 2003, Donziger commissioned a report from an American
engineer, Dave Russell (picked due to his lack of expertise and openness to
suggestion), in which the cost of remediation was bullishly stated at $6.14
billion and that deployed purposefully incendiary language (“you’re looking at
something, size-wise, larger than the Chernobyl disaster”). Donziger loved the comparison to Chernobyl
and in 2004 authored an academic article entitled “Rainforest Chernobyl” and
instructed his staff, allied groups and celebrity support to use the analogy as
often as possible.
Undeterred by the controversy, Donziger made an astute move
to keep the Ecuadorian public onside. He
understood that being white, he was not ideally placed to be the face of the
suit, “he did not want a gringo”, so instead he groomed a young activist lawyer
from the Frente, Pablo Fajardo, to be his public puppet. Now
growing in power and influence, especially after he forced Bonifaz out in 2006,
Donziger cultivated the nickname el
Commandante.
As Donziger’s power increased, so did his grip on
morality. Up to now he had simply
engaged in publicity stunts that bent the truth for his clients. Now Donziger believed with increasing
conviction that opponents of power had to use irregular tactics if they
expected to prevail and he began brazenly throwing the rule book out.
Donziger attempted to befriend the judge and deployed
attractive female interns on his staff to flirt with the judge in an attempt
gain leverage by way of sexual harassment blackmail. Donziger became increasingly involved in Ecuadorian
politics and supported a young, obscure, leftist candidate by the name of
Rafael Correa who in 2006 became president.
Donziger, in his private notes which later became public, noted, “Think
of what has happened in ten years; how we have gone from fighting on the
outside of power to being on the inside.”
The first public use Donziger had for Correa was to orchestrate an
announcement that all the Ecuadorian lawyers working for Chevron were traitors
to their country. Later, Correa took a
highly publicised tour of the pits with camera and news crews in which Donziger
scripted memorable media moments as Correa asked leading questions of the
local, sick inhabitants.
In February 2006, after a sudden attack of conscience, Russell
wrote to Donziger stating that he no longer stood by his previous report’s
remediation estimate (having conducted further research he believed a truer
estimate was $600 million). Despite
repeated requests, Donziger continued to publicise the $6 billion figure and
Russell applied for a cease and desist order.
Things took another turn for the worse, as Donziger began to feel funding pressure from KSG (by 2007 KSG had funded Donziger and his staff to the tune of $5 million and the firm was now starting to experience cash-flow problems of its own). Consequently, he developed a strategy to speed up proceedings:
- Convince the Lago court to end judicial inspections of the wells and to appoint a sole expert;
- Increase Ecuadorian political pressure on the judge; and
- Increase media attention in the US in order to prime the fund-raising pump and increase public relations pain for Chevron.
In June 2007, Donziger pressured the court into appointing
as the sole independent expert an engineer by the name of Richard Cabrera
(picked by Donziger because he would have no problem writing the report the
claimants wanted), behind the back of Chevron.
The claimants immediately began prepping Cabrera and doing his research
for him. Donziger’s notes boasted, “This
is a huge victory!!!!”
To help Cabrera write the report Donziger enlisted the
Colorado-based law firm, Stratus (whose role was to remain absolutely secret). The pollution specialists at Stratus were
unimpressed by Cabrera’s scientific grip of the scenario, lacking the necessary
qualifications and experience to properly evaluate the environmental
damage. Nonetheless, Donziger and
Stratus practically co-authored the report which Cabrera submitted to the
Ecuadorian courts on 1 April 2008, now somehow managing to value the cost of
remediation at $16 billion.
Naturally Chevron’s lawyers contested every assumption and
statistic used in the report, but even more audaciously, Donziger protested the
report, stating that it was not generous enough. In response, Cabrera filed a second version
of the report in November 2008. This
time, the estimate was $27.3 billion. In
all, Chevron made over thirty court filings objecting to Cabrera’s
methods. Cabrera swore his neutrality in
front of the judge and Donziger stood idly by.
Not content to be falsifying evidence, Donziger wanted
further public pressure so he recruited the acclaimed documentary film-maker
Joe Berlinger to develop a documentary-come-publicity vehicle about the
Ecuadorian case. Donziger persuaded his
wealthy Harvard law School friend, Russell DeLeon (who had made his fortune by
starting the online gambling site PartyGaming) to invest $900,000, while
Netflix invested a further $300,000 in return for distribution rights. The documentary, entitled Crude (which is still available on
Netflix), debuted at the Sundance Film festival in January 2009. Donziger and Fajardo attended in person and
gladly received the adulation of the crowd.
Perhaps worst of all, Donziger persistently attempted to
impede Petroecuador’s remediation efforts, desiring that the pits be left as
they are in order to display the atrocity of the damage while the case remained
unresolved. By this point I’m completely
against Donziger, no matter how noble his ambition is. He has been absolutely absorbed by the case
and it is obvious that he has completely lost sight of his desire to help the
people of Ecuadorian Amazon live healthier and better lives. As Barrett notes, “Donziger’s deal with the
devil was becoming increasingly perverse.”
However, I don’t mean to paint this as a thoroughly
one-sided affair. The defendant’s legal
team committed similarly illegal and immoral acts in the hope of gaining
advantage. In October 2005, prior to the
inspection of a site called Guanta, the Lago court anonymously received a
military report stating that the Cofan were planning an ambush and kidnapping
(despite having no history of violent or illegal behaviour). Chevron lawyers immediately filed a request
for the inspection to be called off. It
later became apparent that the Chevron’s legal team and the Ministry of Defence
had been working together and that the report was based on intelligence traced
back to an unnamed Chevron employee and a former Ecuadorian army captain who
now did security work for the oil company.
The Ecuadorian media had a field day and Donziger was able to propel his
narrative about a “military-corporate conspiracy against justice”.
In early 2009, Chevron hired young journalists to go
into Ecuador under the guise of reporting an article in order to get close to
the claimants and attempt to uncover some of the secret tactics they had been
using/statistics they had been manufacturing.
In August 2009, the company declared that it had uncovered
video evidence of a bribery scheme involving the case’s judge from a local man
named Diego Borja. After investigation,
it became apparent that Chevron had been involved in the sting operation in an
attempt to disqualify the presiding judge.
In the face of an opponent quite clearly willing to fight
dirty, you can understand how Donziger managed to convince himself that his own
tactics were justified. However, little
did Donziger know that of all the shady tactics he used in the case, it would
be his ego that ultimately caused his downfall.
In his desire to elevate his own standing and publicise the case by
filming all variety of meetings, protests and court appearances he would
unwittingly provide his opponent with a lethal weapon.
As a tactic of last resort, Chevron had hired the LA-based
law firm, Gibson, Dunn & Crutcher (“GDC”) in order to destroy Donziger’s
credibility. In reviewing all the
evidence they could get their hands on, GDC realised that the Netflix movie contained
a scene of Dr. Carlos Beristain, a Spanish doctor who had helped Cabrera with
some of the medical aspects of his report, meeting with the claimant’s legal
team. Donziger’s manufacturing of
evidence had been caught on camera and distributed to the world.
Beginning in January 2010, GDC used an obscure piece of US
legislation to lodge 1,782 petitions to seek practically every communication
exchanged among anyone who had worked for or with Donziger. One of the most damning pieces of evidence to
come from the discovery process was that of another early expert in the case,
Calmbacher, who categorically stated that the reports were fraudulent. Furthermore, there were emails in which
Fajardo pleaded with Berlinger to remove the scenes including Beristain from Crude.
This culminated in a New York court hearing in December 2010
in which Donziger reluctantly confessed to having prepared the bulk of the
Cabrera report under the weight of overwhelming evidence. However, Donziger continued to insist that he
sought to achieve legitimate ends through unconventional means. The New York judge ultimately ruled that
Donziger and his clients were forbade from enforcing any judgment that they may
obtain in Ecuador.
Decision
In September 2010, judge Nicolas Zambrano took over the
Ecuadorian case. In under three months
he claimed to have read over 20 years’ worth of documents relating to the case
with no assistance except from his 18 year old secretary.
On 14 February 2011, judge Zambrano delivered his 188-page
judgment. Chevron lost to the tune of $9 billion. Furthermore, should the company not deliver a
public apology to the nation of Ecuador, the judge ruled that the damages award
would be doubled. Chevron duly refused
and, after incidentals, the final damages totalled $18.2 billion (at the time
the company had $17.1 billion in cash reserves).
Faced with the difficult ruling in New York, Zambrano
summarily swept all the issues of expert impartiality under the rug when
stating the reports of Cabrera and Calmbacher had been disregarded in reaching
his verdict. Furthermore, the
culpability of Petroecuador was also swiftly dealt with when concluding that
“After 1990, Petroecuador may have added to the contamination, but the national
oil company’s negligence did not exonerate Texaco.” And in one last leap of
jurisprudential faith, judge Zambrano iterated that despite the epidemiological
studies presented being inconclusive on causal connection between oil and
illness, they “suggest a connection between the risk of having cancer and
living in an area having petroleum exploitation."
As Barrett summarises, “an American judge would not
recognise the decision as one based on conventional legal reasoning or rigorous
scientific evidence.”
As it turned out, Donziger had managed to ghost-write the
majority of the judgment (in fact, it’s embarrassing how poorly Donziger
covered his tracks with an entire third of the judgment containing verbatim
portions of memos drafted by the claimant’s legal team) by offering Zambrano a
bribe of $500,000. By February 2012
judge Zambrano had been ousted from the Ecuadorian judicial council and in
2013, Zambrano was summoned to a New York courtroom to be cross-examined about
his ruling. In yet another embarrassing
turn, the judge did not know what TPH stood for (total petroleum hydrocarbons),
despite referring to it thirty-five times in the judgment, nor could he name
the most carcinogenic agent found in oil (benzene).
The judgment could not be enforced in Ecuador as Chevron had
no assets in the country. Failed attempts in Canada, Brazil and Argentina were
made. A twenty year legal battle ended
in an empty victory for the claimants.
Conclusion
What started out for me as a grand story, marking the
beginning of a new era of corporate environmental accountability quickly became
a false dawn when the rules were so flagrantly disregarded. In the end, no one comes out of this looking
good, and it is the Ecuadorian people who continue to suffer.
The Ecuadorian judiciary is blatantly weak and corrupt. The Ecuadorian
government and Petroecuador were negligent and never held to account. The government should have negotiated a
proper remediation agreement and legislated for vastly better environmental
standards rather than rolling out the red carpet in order to turbo-charge their
economy in the short term. But these
were all decisions taken in the 1970s and 80s when the environmental agenda was
simply nowhere near as well recognised, understood or appreciated. Their decisions are somewhat understandable
in my opinion.
However, Petroecuador drilled an additional 700 new wells after
Texaco’s exit (at which point there were 322 wells). Their own records indicated that from 1995 to
2011 more than 1,900 spills occurred in the area (about one every three days,
totalling almost 130,000 barrels). Ecuador
still generate significant oil revenue every year (primarily via Chinese oil
companies that have taken up the concession), and their populist president
Rafael Correa, has still to deploy such revenue into a meaningful clean-up of
the Amazon’s spill sites. Water remains
polluted, stalling the local economy, and local inhabitants continue to
contract cancer at alarmingly high rates.
In June 2013, 10,000 barrels of oil were spilt in the area.
Texaco, of course, are not without blame. They should have conducted their business more
ethically and sustainably by properly lining pits, injecting contaminated water
into deep underground wells, cleaning spills and contributing to a legacy fund
for clean-up.
But for me the real villain of the story is Donziger.
Donziger not only displays a complete lack of
professionalism, he has set the environmental movement back by decades. By discrediting class action lawsuits and
environmental claims/lawyers, calls for environmental remediation will be
tarnished with the same brush and unfairly dismissed (see the much more
realistic and sustainable class-action suit law firm, Leigh Day, recently secured
against Royal Dutch Shell for the residents of the Niger Delta - £55m).
Donziger sought to do (extremely) well, while doing good for others, but
ultimately achieved neither.
Rather than being the overtly environmental book that I
expected, this is a book about the reality of large-scale litigation and the
inherent politics and morality involved.
Rather than being about the clean-up of a devastated area, this was a
book about a giant ego that masqueraded behind the pretence of selflessness. Ultimately, this is a frustrating story about
the opportunity to advance environmental law and improve standards and
accountability within oil companies, that was completely corrupted by a man with
a maniacal pursuit to win at all costs.
Score: 55/100
