Energy Week

A Green Scam

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From the October 6, 2014, issue of National Review.

In this corner, we have a human-rights lawyer representing the interests of indigenous people in the Amazon residing in a remote corner of Ecuador polluted by the by-products of oil exploration; in the opposite corner we have Chevron, a multinational petroleum behemoth with billions of dollars in cash on hand but refusing to part with a dollar in the cause of justice for the beleaguered Ecuadorian tribesmen. It is a testament to the vapidness, incuriosity, and corruption of the intellectual classes, from the editors of Vanity Fair to celebrity activists such as Mr. and Mrs. Sting, that this black-hats/white-hats version of events was sufficient reason for the luminaries of the Left to hitch themselves to what turns out to be almost certainly the largest attempt at extortion in recorded human history.

For those who have not been following the case, and for those who might be familiar with it from reporting in these pages and elsewhere, Bloomberg Businessweek writer Paul M. Barrett offers a thorough account of the episode in Law of the Jungle: The $19 Billion Legal Battle Over Oil in the Rain Forest and the Lawyer Who’d Stop at Nothing to Win (Crown, 304 pp., $26,00). But before digging into Mr. Barrett’s book, readers should treat themselves to the Miami Herald’s account of how Steven Donziger, the “lawyer who’d stop at nothing” of Barrett’s subtitle, corrupted Vanity Fair’s reporting on the case. The author of the Vanity Fair piece, William Langewiesche, was so thoroughly seduced by Mr. Donziger’s human-rights shtick that he literally had the plaintiffs’ attorney script the questions he was submitting to Chevron — and even went so far as to submit copy to Donziger for his approval. E-mails between the two released as part of the legal discovery process find the attorney apologizing to the allegedly independent journalist for being “a little aggressive in the editing.”

But using Vanity Fair as his sock puppet was hardly the greatest of Donziger’s achievements, as Barrett’s book dutifully reports. Scott Pelley and 60 Minutes swallowed his version of events without even chewing, as did any number of major media outfits. Crude, a film purporting to be an independent documentary about the episode, was edited to Donziger’s specs; it was, needless to say, praised to the heavens by the New York Times and others. The Huffington Post published the work of Donziger’s publicist without ever noting that she not only was being paid by the plaintiffs’ attorney but had attempted to maneuver herself into a percentage of what turned out to be a multibillion-dollar judgment.

And if the media were corrupted to an extent that would shock even a cynic, the legal institutions in Ecuador were corrupted far beyond even what one might expect from a poor, backward South American country. In one particularly entertaining passage, Barrett documents that Donziger et al. managed to corrupt a so-called independent court-appointed expert tasked with assessing the extent of environmental damage in Ecuador and the likely cost of mitigating that damage. The report submitted to the court was not the work of the independent expert but that of Donziger’s hired scientific consultant. But the Donziger team did not stop there: Fearful that the report would be too obviously their own work, they prepared a series of objections to it — and scripted the “independent” expert’s response to their objections, too. When in the early stages of litigation it became clear that they would not achieve victory in American courts, they wrote the Ecuadorian mass-litigation statute under which they would later sue Chevron in that country, tailoring the very law to the particular needs of their lawsuit.

There have got to be easier ways to make a few billion dollars.

Barrett dutifully reports these facts, but the aggregate impact of them fails to make the proper impression on him. In his telling, the story is one of hardball corporate lawyers vs. hardball human-rights lawyers, a rough kind of moral equivalency in a battle in which Donziger and his allies were finally tempted into acts that a U.S. judge would in the end rule to be racketeering. But the facts very strongly suggest that the well-being of the people of Amazonian Ecuador never seriously entered into Donziger’s calculations. As Barrett reports — a fact previously unknown to me — Donziger actively worked to undermine plans by the Ecuadorian government and its state oil company to clean up polluted drilling sites: The more damage there was to point to, the more suffering the Ecuadorian people endured, the stronger his case. Barrett is a reliable reporter, but he resists what seems to be the inevitable conclusion: There was never anything to this case other than attempted extortion from the beginning. Donziger and his allies did not get corrupted; they entered into the litigation that way.

The strange thing is this: Chevron has never drilled for oil in Ecuador.

For some years, Texaco was a minority partner in a joint venture with Petroecuador, the state oil company. When Texaco had concluded its business with Petroecuador, it entered into an agreement with the Ecuadorian government to remediate a number of drilling sites in the rain forest, proportionate to its ownership stake in the venture, about one-third. (Some 90 percent of the joint venture’s profits over the decades went to the Ecuadorian government and allied institutions.) Texaco did its work, the Ecuadorian government pronounced itself satisfied and signed off on the remediation, and it released Texaco from further liability in any related matters. This was critical, in that the remaining sites were the responsibility of Petroecuador and the Ecuadorian government, and pollution originating there would be easily mistaken for pollution coming from the Texaco sites — especially by those with a financial interest in making that mistake.

And that leads to the most damning piece of evidence presented in Barrett’s book. It almost certainly is true that the environmental standards to which the Ecuadorian government held Texaco were much laxer than would have been the case in an operation in the United States. And by all accounts Petroecuador failed to perform the remediation that it was obliged to undertake — but Donziger preemptively promised the Ecuadorian authorities that he would never seek damages from the national government or its oil company, and would refuse to collect or accept damages against them if they were awarded by a court. With that, the Ecuadorian government had license to back Donziger’s scheme to try to pry billions of dollars out of a foreign multinational while the so-called human-rights crusaders had granted the government and Petroecuador immunity.

Chevron’s role in this story is simply to have acquired Texaco during the oil industry’s period of energetic consolidation some years back. It grossly underestimated the likely impact of the Donziger litigation, perhaps owing in some part to the fecklessness of Texaco’s general counsel, Deval Patrick, who is today the governor of Massachusetts. Governor Patrick, who is black, was brought in as Texaco’s top lawyer in the wake of an ugly racial-discrimination scandal. As Barrett puts it, Patrick had no desire to play the corporate heavy against suffering Amazonian Indians.

There are some truly shocking moments in the book: Over a jovial dinner, Donziger’s allies affirm that no judge will rule against them, because any judge who did probably would be killed. The philosophical attorney says that the judge in the case probably thinks that, and that is good enough. Indeed, the threat of violence against judicial personnel and others opposing Donziger is a theme in the book. I myself had to cancel two separate trips to inspect the former Texaco sites in Ecuador when Chevron pulled its personnel out, fearful for their physical safety.

There are many characters and episodes to follow in Law of the Jungle, and Barrett is, if not a riveting storyteller, reasonably deft in helping the reader to keep it all straight and in moving the story along. And he is particularly valuable in his closing thoughts on the nature of state-run oil companies. “The company did not sneak into the Oriente,” he writes, and notes that China’s SINOPEC faces little to no prospect of being held to very high environmental standards by Beijing.

Texaco’s real sin, and Chevron’s, is willingly associating itself with such enterprises; oil executives are not such dewy-eyed naïfs as to fail to appreciate what Petroecuador is, and what the government of Ecuador was (it was, at the time of Texaco’s initial involvement, a military junta). As I told a Chevron executive some time ago: “You went to bed with the devil — you’re bound to experience a burning sensation afterward.” But “being in bed with the devil” is, unhappily, another way of saying “being in the global oil business.” In the world of crony capitalism, the U.S. Export-Import Bank is the Smurfs compared with state-run oil companies. I am open to imposing a punitive tax on anybody doing business with the government of Ecuador, or Nigeria, or China. But $19 billion seems a bit high.

– Kevin D. Williamson is roving correspondent at National Review. This article originally appeared in the October 6, 2014, issue of National Review.

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