The Law of the Jungle (2014)

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