Sludge Match: Inside Chevron’s $9 Billion Legal Battle With Ecuadorean Villagers

Chevron needed the win. For years, the company had struggled with a coherent and effective media strategy to counter the other side’s stark narrative ripped from the Old Testament: poor natives and a plucky American lawyer (David) demanding justice from Big Energy (Goliath). In a memo from 2008, a Chevron media consultant named Sam Singer blasted the company’s flat-footed media game and advised it to avoid discussing the environmental and legal complexities of the case. Instead, he suggested Chevron paint Ecuador and its newly elected leftist government red, and describe the country as “the next Cuban missile crisis in the making.” And since the evidence cut against the company, why not sow doubt over its ontological status? “Is the case against Chevron really a novel by John Grisham? What appears to be real is in fact a front for something else,” Singer advised Chevron to tell the public.  

The flap over the Stratus-Cabrera report didn’t just give Chevron a win. It illuminated a new strategy moving forward. By using its enormous resources to pressure Donziger’s allies and funders — as well as the allies and funders of his allies and funders — the company might destroy its challenger indirectly, by cutting off its oxygen supply. Chevron has since gone after Donziger’s allies by suing and naming them (or threatening to sue and name them) as “non-party co-conspirators” to a criminal enterprise.

“It’s an intimidation model,” says Deepak Gupta, Donziger’s lead appellate lawyer. “It’s a way for corporations to go after their critics and those who fund them.”

Chevron denies an interest in anything other than justice, for itself and for the parties behind what Chevron’s Morgan Crinklaw calls an “intricate, complex scheme to use Ecuador’s judiciary to try and hold Chevron’s reputation hostage.” To undermine this “scheme,” Chevron has gone after everyone on the other side, from Donziger down to his volunteers. “If someone is going to participate in fraud,” says Crinklaw, “they should be held accountable.” 

One entity Chevron never expected to be “held accountable” in Ecuador was Chevron. What happened?

In 2006, Rafael Correa was elected president of Ecuador. It was a development Chevron could only have viewed with alarm. A leftist aligned with Hugo Chavez, Correa came to power denouncing Washington’s historical role in the region. After visiting the affected regions in the northeast, he publically stated his support for the lawsuit against Chevron.

With one election, the political situation in Ecuador became a negative print of the one Texaco faced in 1993.

Without the ability to influence the government in Quito, Chevron turned to Washington. Documents acquired by the legal blogger Theodore Folkman show how the company lobbied the Bush administration to use trade-policy as a weapon on its behalf. Folkman reported in April 2007 that Chevron CEO David O’Reilly asked the State Department’s Undersecretary for Political Affairs if “there was a way for the USG to help Chevron and to level the playing field.” Other memos record Chevron inquiries about using trade policy “as a tool.” These efforts sparked three Congressional letters of protest, including one by then-Senator Barack Obama to Ambassador Rob Portman seeking his assurance “that the U.S. Trade Representative will not allow negotiations over the Andean Free Trade Agreement to interfere with a case involving Chevron.”

“The scale of what Chevron did to weaken support for trade policies designed to help poor people is outrageous,” says Ecuador’s ambassador in Washington. “They were trying to take hostage thousands of jobs in both countries, most of them done by poor women.”

As Chevron worked Washington, Donziger, a natural born publicist, continued to work the media. He brought journalists and celebrities to visit Texaco’s old drilling sites and waste pits, among them Sting, Roger Waters, Brad Pitt and Angelina Jolie. In 2007, CNN honored one of Donziger’s Ecuadorean colleagues, Pablo Fajardo, with an award and a nationally televised speech. As awareness of the case grew, Chevron was lucky not to drool on itself in public. One of its lobbyists told Newsweek in 2008, “We can’t let little countries screw around with big companies like this.”

Then came Crude, Joe Berlinger’s 2009 documentary about the case. The film told the story of Donziger and his local clients through a sympathetic lens against searing images of chemically trashed jungle and sick Indians. It was like a PR finishing move. How could Chevron hope to match it?

In retrospect, its importance to the case is rivaled by a less sexy piece of media that appeared in law offices around the country during Crude‘s festival run.

The October 2009 issue of American Lawyer magazine profiled the success of New York corporate law firm Gibson Dunn in defeating an environmental class-action suit filed by Nicaraguan fruit pickers against the Dole Food Company. It was a case with several parallels to Chevron’s situation in Ecuador, in which Dole sought to reverse a judgment reached by Nicaraguan courts through a court in Miami. Chevron had been following Gibson-Dunn’s work on the Dole case and had hired the firm the previous summer to take over its defense.

The firm’s first breakthrough on Chevron’s behalf came fast. One of its team noticed small discrepancy between two released versions of Crude. The lawyer successfully used this variance to launch a massive discovery search that spanned more than 20 federal courts and netted thousands of Donziger’s emails, his personal diary, and 600 hours of Berlinger’s outtakes.

‘the implications for the first amendment, for reporter’s privilege — it horrified everyone.’

Chevron’s request for access to the raw Crude footage led to an outcry by an alliance of media companies including the New York Times, the Washington Post, and the Associated Press, who together signed an amicus brief submitted to the court in New York. Judge Kaplan dismissed these concerns in a statement released during a national conference of documentary filmmakers. Among those in attendance was Gasland director Josh Fox, himself a veteran of battling the oil and gas industry.

“When we heard about Kaplan’s order, a chill shot through the room,” says Fox. “The implications for the First Amendment, for reporter’s privilege — it horrified everyone.”

On Valentine’s Day, 2011, Judge Nicolás Zambrano of the Lago Agrio court found Chevron liable for $19 billion in damages. (The Ecuadorean Supreme Court upheld the decision, but reduced the amount by half). Zambrano did not cite the controversial Cabrera-Stratus report. He didn’t have to. In eight years of litigation, both sides had submitted more than 215,000 pages of evidence and more than 100 technical reports to the court. 

On the day the decision was issued, Chevron had moved beyond concern over the Cabrera report to more serious allegations. Specifically, it accused Donziger in federal court of promising Zambrano $500,000 to ghostwrite the decision. After first arguing the case should not be tried in New York, Chevron now turned to asking the same Southern District of New York court to overrule the Ecuadorean decision.

In the RICO decision delivered in March, Kaplan obliged. He accepted Chevron’s argument that Zambrano, a provincial judge who mostly handled criminal cases, could not have written the complex judgment he issued against Chevron. Kaplan cited the fact that Zambrano’s only assistant was an 18-year old typist who spoke no English. Moreover, Zambrano had admitted in the past to paying other judges to write his decisions. Kaplan also cited “fingerprints” (typos, idiosyncratic numeralization, etc.) that led back to documents on the plaintiffs’ computers he believed had never been introduced to the court record.

Chevron’s central piece of evidence was the testimony of Alberto Guerra, a former judge who has admitted to corrupt dealings over the course of his own career on the bench. Guerra first approached Chevron about helping the company in 2009. As noted above, Guerra now lives with his family in California on Chevron’s payroll. Company documents show that Chevron pays Guerra a generous monthly stipend on top of living costs in a gated community near Chevron’s headquarters.

Chevron maintains that it has no choice but to protect Guerra, since his testimony puts him in danger in Ecuador. “Guerra had to be relocated,” says Chevron’s Morgan Crinklaw. “He is not being paid for his testimony [and saying otherwise] is a desperate attempt to try and diminish him.”  

Donziger believes the appellate court in New York will disagree and overturn Kaplan’s decision. Guerra lacks credibility as a witness, he says, and the “fingerprints” on Zambrano’s decision resulted not from “ghostwriting,” but from actions in accordance with accepted legal practice.

“Zambrano’s decision wasn’t ‘ghostwritten’ any more than Kaplan cribbed his facts and arguments from Chevron’s RICO briefs,” says Donziger. “[Zambrano] took materials and pleadings submitted to the court and adopted them in his decision, sometimes by copying them, which is entirely proper in both Ecuador and the U.S. Some of the documents we submitted to the court never made it into the official trial record because of clerical errors. We have an explanation for every specific Chevron allegation.”

The views of a New York Appeals Court for the Second Circuit may be of less moment than those of judges in foreign courts. In Canada, where Chevron holds billions in tar sands assets, the first stage of an enforcement trial (establishing jurisdiction) has already reached the Supreme Court. Wheels are also turning in the court systems of Brazil and Argentina.

Chevron meanwhile is enjoying boom times. The company’s earnings have grown by nearly 40 percent since 2010, the year BP’s value nosedived in the wake of the Gulf oil and a subsequent $26 billion cleanup. “Chevron made $4.9 billion in the fourth quarter of 2013 alone,” says Daniel Graeber, an analyst at OilPrice.com. “It can afford to wage a very long legal fight.”

As it wages that long fight, everyone involved — Chevron’s lawyers, Donziger, the people in the Amazon — get older. Among this large cast, it’s the farmers and the Indians, not the lawyers, who continue to struggle daily with the 50-year legacy of oil production in the region. It’s possible they will all go to their graves before the case is settled and the contamination remediated.

Donziger knows this. But he sounds like he believes himself when he says he’ll live to see justice for his clients, even as Chevron takes advantage of what he admits were his own mistakes, and picks off his allies and funders, one by one. Part of his strategy is to keep the world’s attention on the merits of the original suit. A business journalist is writing a book about the case from Chevron’s perspective, and he’s fishing for someone to write its opposite. He also thinks there’s another documentary to be filmed that brings the story up to date. If it never gets produced, it won’t be because Donziger lacked an elevator-pitch.

“This battle has all the intensity and grind of a high-stakes litigation combined with the daily give and take of a hotly contested political campaign,” Donziger told me in April, as if speaking to a studio head.

“Except there is no election day,” he continued, deflating a little. “It just goes on and on and on. I’m waiting for that one judge in an enforcement court to force Chevron to comply with the law. I think that day will come. I think it will come far sooner than Chevron believes.”