Google “The Godfather: Part II,” and “quotes” and you’ll find one of the thugs touting the great advantages of a “partnership with a friendly government.” In Ecuador, certain members of the American plaintiffs’ bar have found their partner.
In a shakedown worthy of Mario Puzo’s epic, a host of American lawyers led by Philadelphia attorney Joseph Kohn have effectively “partnered” with the Ecuadoran government in an attempt to wrest up to $16 billion from the Chevron corporation – without proof of either harm or culpability, and in the face of a ten-year old contract by the Ecuadoran government itself that completely contradicts its current claims.
Neither Congress nor the Bush administration should let them get away with it.
As early as this week, the lawyers are expected to trot around Capitol Hill the leaders of some “indigenous peoples” to plead the anti-Chevron case. Congress should not fall for their ruse. Here’s why:
• From 1972 to 1992, Texaco (later bought by Chevron) was a minority partner with Petroecuador, a government-owned company, on lands that produced 1.7 billion barrels of oil. Between taxes and its ownership rights, the Ecuadoran government took some 95 percent of the profits. Texaco earned $490 million in net profits during those 20 years.
• After Ecuador took full ownership of the leases in 1992, Texaco spent $40 million under government supervision to clean up oil pits. On Sept. 30, 1998, the Ecuadoran government certified that the environmental remediation was “fully performed and concluded,” and “released” the company and its heirs “forever, for any liability.”
• In 1999, Ecuador implemented a new environmental law; in 2003, plaintiffs recruited by American lawyers sued to make the 1999 law retroactive to Chevron – which, through its now-ownership of Texaco, had been indemnified in 1998 and had forfeited any lease rights in 1992. Various iterations of these suits were dismissed as merit-less by U.S. courts.
• In the meantime, a leftist regime came to power in Ecuador, and the American lawyers made their move. Now they worked through Ecuadoran courts, with the Ecuadoran president cheering them. A government agent wrote the lawyers that his team was “searching for a way to nullify or undermine the value” of the 1998 contract.
• Lawyers identified oil “pits” that had been constructed and run by Petroecuador for 16 years – with no Texaco/Chevron involvement – and argued that Chevron should be responsible for cleaning them up. A court-appointed “expert” visited only 49 of 335 sites, took aerial photos of the rest and (by Chevron’s account) backdated the photos to the 1970s.
Then, he assigned a remediation cost of $2.2 million per pit, compared to $85,000 per pit that Petroecuador had been spending on remediation. He then added $2.9 billion for “excess cancer deaths,” without (Chevron says) “identify[ing] a single individual [or] offer[ing] a single medical report.” Finally, he included similarly absurd claims for “potable water costs,” “indigenous population impacts,” costs of “infrastructure,” and the like – and tacked on another $8.3 billion for “unjust enrichment.”
How Texaco could have been enriched by $8.3 billion when it made profits of only $490 million is anybody’s guess. Likewise a mystery is how it could be responsible for pits it doesn’t own, after Ecuador’s own government said it had “fully…concluded” all necessary clean-ups years before the suit was filed.
Last Friday, The American Lawyer magazine reported that matters got “deeper and dirtier” with “the announcement that two longtime lawyers for the company have been indicted by the Ecuadoran government” specifically for their work on this case.
If past is prologue, then those charges too are likely to be bogus. One of those lawyers, Ricardo Reis Veig, holds U.S. citizenship. American officials should not take kindly to seeing him railroaded.
American lawmakers hold a trump card in the form of trade preferences for Ecuador that are up for renewal this year. Congress could remove Ecuador from the renewal of the Andean Trade Promotion and Drug Eradication Act, which expires at year’s end unless renewed; and the U.S. Trade Representative could “decertify” Ecuador at any time if that country fails to honor contracts with American entities.
Ecuador has said that loss of the trade preference could cost its country 350,000 jobs.
Quin Hillyer is associate editorial page editor of The Washington Examiner.
