Friday, September 4, 2009

The Chevron Witch Trial: The Changing Face of Resource Nationalism -- Part II

Agora Financial
Agora Financial's Outstanding Investments

September 3, 2009

The Chevron Witch Trial: The Changing Face of Resource Nationalism -- Part II

Dear Outstanding Investments Reader:

Yesterday, I introduced you to a $27 billion (yep, billion) lawsuit against Chevron. The plaintiff is a nonprofit group called the Amazon Defense Coalition (ADC). ADC has done an exceptional job of getting its message into the mass media, via a hardworking public relations company in Washington, D.C.

The legal issue of the ADC suit concerns alleged environmental damage in Ecuador, in an oil concession formerly operated by Texaco. Texaco got nationalized from 1977 through the 1980s.  Texaco stopped operating in Ecuador in 1990. Texaco left Ecuador entirely in the mid-1990s. The oil-producing area has been run by the Ecuadorean state oil company, Petroecuador, since the 1980s. And now the case has turned into a witch trial of Chevron. This is Part II of the special series.

Let's Look at the Evidence -- in a Witch Trial

Chevron merged with Texaco in 2001.  Chevron knew that Texaco was being sued by ADC in New York in federal court. But Texaco had a defense strategy. Texaco had already cleaned up certain areas under an agreement with the Ecuadorean authorities.  Texaco had a waiver from the government of Ecuador. The original New York lawsuit was dismissed in 2002. ADC refiled its claims in Ecuador against Chevron in 2003.

Chevron has spent six years defending against the ADC lawsuit. Patiently, professionally and on the merits, Chevron has presented numerous solid defenses in the Ecuador proceeding -- and demolished the ADC claims. But then again, this is a witch trial.

The Missing Dead Bodies

Plaintiffs claim that Texaco caused the deaths of over 1,400 people over many years in the oil concession region. Huh? That's almost half as many as died at the World Trade Center in the U.S. on Sept. 11. Where are the dead bodies? The autopsies? The toxicology reports? The medical records? Any physical evidence linking Texaco to 1,400 deaths? None at all. 

According to the Los Angeles Times, the expert witness for the plaintiffs "has not presented the medical records of any victims." That is, there's a claim for dead people, but there are no bodies, nor any records or other evidence as to cause of death of the (missing) dead bodies.

These undocumented dead people are the basis for billions of dollars of the $27 billion of ADC claims. It's like the "spectral evidence" from the witch trials of old Massachusetts -- testimony of an afflicted person who claimed to see apparitions or the shape of the witch that was afflicting them.

Desecrating the Garden of Eden

There are also claims against Texaco for "destroying the way of life" of the indigenous people of the Amazon jungle. The trial judge at one point explained that the indigenous peoples used to live lives in innocence, living in a pristine environment and wearing feathers and loincloths. Now their rainforest is wrecked and they wear clothes. They've lost their old ways due to the oil development. Here is the basis for more billions' worth of damages, apparently.

Really, is this what happens in a witch trial? The rainforest got developed because the government of Ecuador wanted it to happen that way. Yet in this case, Texaco has taken the role of the serpent handing the forbidden fruit to Eve. Texaco is, apparently, on trial in Ecuador for desecrating some sort of Amazonian Garden of Eden. How do you defend against that?

The Missing Cancer Victims

Then there are the so-called "cancer victims" in the ADC lawsuit who don't have cancer. It's not to say that people in Ecuador don't get cancer. There are lots of sick people in Ecuador. It's just that the ones who are making claims against Texaco (and not Petroecuador, of course) apparently never worked for Texaco or near any Texaco sites. Or they can't trace their ailments to Texaco in any way that's even remotely based on forensic medicine.

And there are people who were allegedly sterilized by toxic chemicals. Yet as Chevron conducted discovery, it came to light that certain of these sterile people have large families. Must be witchcraft.

Who Wants a New House?

One key witness for the plaintiffs claimed that he had to move from his old house because the water was contaminated. So he now lives in a brand-new house that's worth more than he'll ever earn in his entire life. Who paid for the house? Could this nice new house be in return for testifying to certain "facts" that support the ADC case?

Meanwhile, the man's daughter lives in his old house -- the one with the contaminated water. So the water is bad for the man, but not for his daughter? More of that witchcraft.

When Did the Water Get Contaminated?

There are claims of alleged "water contamination" at some sites. Yet by the plaintiffs' own records, it appears that the contamination occurred AFTER Texaco left the country. In fact, some of the toxic chemicals in the water are solvents that weren't even invented or marketed until the 1990s, after Texaco pulled out. Whoops.

Just for Good Measure, Toss the R-Card

Even worse, at numerous points during the course of the lawsuit, ADC has tossed the "race card" onto the table.

Both in court and out, ADC and its public relations juggernaut have accused unnamed Texaco personnel of committing rape and murder back in the 1970s. It's the "white" Texaco people exploiting the Indigenous people of color. 

There's ZERO evidence of any such heinous crimes, of course. That is, there are no witnesses, no police reports, no physical evidence, nothing. I hesitate even to call it hearsay evidence, because there can sometimes be exceptions for hearsay testimony. It's more like these accusations derive from folktale and mythology.  Just Blame Texaco.

However you want to label the vicious accusations, they are not being made with any specificity about any named person, with any dates or times, or any evidence. The legal principle at work appears to be just to toss the ugliest accusations against the wall and see what sticks. That's what happens at witch trials.

Now It's Worse

Could this Chevron witch trial get any worse? Yes. Now it's worse.

This week, Chevron released an astonishing set of videotapes and transcripts, in which the Ecuadorean trial judge admits that he's already made his decision in the case. He's on tape as saying that he'll slap Chevron with a $27 billion judgment. And then the trial judge states that any Chevron appeals will be denied by the higher-ups. In other words, the case is wired. Chevron is screwed.

The Chevron videotape shows an individual claiming to be a representative of Ecuador's ruling political party, Alianza PAIS. He needs a bribe in return for handing out environmental remediation contracts to two businessmen after the verdict comes down. (Nice work, if you can get it.) The political operative stated that "we have the political power" to direct remediation contracts. The politico stated that the judge "is generating the work through the ruling." I'll bet he is.

The trial judge apparently wants $1 million for his helpful efforts at adjudicating the case. There's a discussion about a total $3 million upfront bribe, with $2 million is going to "the presidency" (well, to the president's sister, if you want to be precise) and to other key players.

During one meeting, the trial judge (Judge Juan Núñez) answered questions about the case from the two businessmen. Why is the judge even meeting with the businessmen? Well, they wanted assurances the court proceedings would generate business. I guess they wanted to be sure that everyone would stay bribed. Wouldn't you?

The videotaped meetings occurred in May and June 2009. Two taped meetings took place at the Quito offices of Alianza PAIS. One meeting took place in the judge's chambers in the small town in Ecuador where he's hearing the case. Another meeting took place outside the judge's chambers.

The tapes were made by two independent players. One man performed contract work for Chevron in the past, but, according to Chevron, now has no connection with the oil company. The other man has no relationship with Chevron. The two men started out looking for cleanup contracts from Petroecuador. They recorded the sessions using small pen cameras and recorders. (Gotta love that new technology.) Then they provided the tapes to Chevron, for which Chevron did not pay them anything, and Chevron has certified this to the court.

As you can imagine, ADC has gone nuts about this. ADC is accusing Chevron of "Nixon-style dirty tricks." (That's so 1970s of ADC.) ADC is trying to portray Chevron as the bad guy, citing the "oil giant's misconduct." Sure. The judge is on tape discussing bribes and how he's going to nail Chevron, and somehow it must all be Chevron's fault. Isn't everything Chevron's fault? It's just more of that witch trial attitude.

Reality TV -- Who Wants to Be a Billionaire?

In this witch trial, it's like the script was written for a Woody Allen movie about some third-world, Santa Banana-style country run by a bunch of Yankee-hating Marxists. Except this isn't a movie script. It's reality TV. Who wants to be a billionaire?

Don't believe it? Here's an excerpt from one Chevron transcript where Judge Núñez explained how he was going to handle his ruling:

Núñez: Any other questions for me as a judge?

Hansen (businessman): Oh, no, I know clearly how it is, you say, Chevron is the guilty party?

Núñez: Yes, sir.

Hansen: And the act [decision] is October or November of this year?

Núñez: Yes, sir.

Hansen: And it's…?

Núñez: No later than January.

Hansen: January 2010. And the money is $27 [billion dollars]?

Núñez: It might be less, and it might be more.
At one point in one conversation someone says, to communal laughter: "Well, sell your shares in Chevron."

Yeah. Sell your shares. $27 billion judgment. Ha, ha.

If you want to learn more details from these recordings you can find the full transcripts and the complete video recordings here.

Where's Eliot Ness?

Chevron has reported all of this to legal authorities in Ecuador. We'll see what good it does. I'm not exactly holding my breath to learn that some Ecuadorean Eliot Ness is on the case. In fact, there are indications that the prosecutors will now open a corruption case against Chevron -- for reporting on the crooked judge. Why not, right?

Chevron has reported the matter to authorities in the U.S., as well. We'll see what happens here, too. Maybe the U.S. Justice Department will get involved, if it can spare any manpower from the critical job of investigating CIA officers who roughed up a few al-Qaida terrorists a few years back.

"Justice," Lawfare and 4th-Generation Warfare

The ADC plaintiffs are using the Ecuadorean proceedings to pursue what they characterize as "environmental justice."  What's that?  Well, it's a wide-open term.  Everybody likes the environment, right?  And we all seek justice, correct?  So you can market and sell a lot of snake oil in bottles with the environmental justice label.

In the ADC case, the environmental justice claims include a long list of grievances of the indigenous Amazon people of Ecuador.  Indeed, the long list does everything but go back 500 years to the arrival of the Spaniards.  Now the forum is a $27 billion lawsuit against a big oil company.  But it's more like the Ecuadoreans ought to be holding a national debate over the policies and politics of their own self-governance over the past 50 years and more.  Right?  Nah.  It's easier just to sue Chevron for environmental justice.  And $27 billion.

The ADC lawsuit is also a prototype example of what's called "lawfare" at the Naval War College. Lawfare is a species of fourth-generation warfare. It's asymmetric warfare. It is a method of manipulating information and perceptions.  Lawfare uses traditional forums to bring legal proceedings that Westerners understand.  And it helps most Westerners feel good about themselves.  Y'know – abiding by that "rule of law"-thing, old chap.  Meanwhile the other guys are cutting the heads off of their opponents (well, figuratively).

The intent of lawfare is to take down large, world-class players using the judicial system. You encumber the opponent.  You tie him up with legal constraints.  You wage a media campaign against him.  You drive up his costs, if not drive him out of business. It's like planting IEDs on the road, except it's happening in a courthouse.  And the ADC lawsuit is just one action in one courthouse against one oil company.  (Wait until the Law of the Sea Treaty comes into effect.)

From a Marxist perspective, the ADC lawsuit in Ecuador is another way to attack wicked capitalism. This kind of drama plays well in certain quarters of the West. Some people love to know that Big Oil is taking big hits.  It goes over nicely in university faculty clubs and big city newspaper editorial salons. (You know who you are.)

Chevron's Problem

Yeah, I know. Chevron is a big company that can afford good lawyers. But even the best lawyers on Earth can't get a fair deal in a case as stacked with judicial misconduct and political interference as we're seeing here. There's a witch trial result coming out of a judicial-based criminal conspiracy, to the tune of $27 billion.

Why worry? Chevron has no significant assets in Ecuador. If there's a $27 billion judgment from this crooked judge in his crooked court in this crooked witch trial, it's not like the Ecuadoreans or ADC plaintiffs can attach any Chevron property in country. They can all kiss off, right?

Then again, suppose ADC and the Ecuadorean crooks eventually move to attach foreign assets of Chevron. They'll find friendly jurisdictions, in the U.S. or elsewhere, and transfer the judgment. Next thing you know, Chevron will be fighting for its bank accounts, its property, oil cargoes in chartered ships at sea, etc. It'll be a mess. Thus, Chevron has to fight like hell.

The bottom line is that Chevron has bet the company on the outcome of this case, and it has turned into a witch trial. And it's not even like Chevron (the old Standard Oil of California) did anything wrong -- other than buy Texaco when oil prices were cheap in 2001.

Texaco operated in Ecuador and did what the government wanted. Under the guise of resource nationalism, Texaco got taken out. Then Texaco made a cleanup deal and got a clean certification back in the 1990s. Meanwhile, the government of Ecuador siphoned money from Petroecuador, which never cleaned up its own mess. But hey, why bother? They were always going to run up the damages and stick Texaco or Chevron with the bill.  Environmental justice, right?

Resource nationalism now has a new tool in the box. It's lawfare, using the "witch trial rules of procedure." We're at a point where the ADC lawsuit has turned into a dressed-up form of looting and sacking, wrapped in the noble flag of environmental justice. But it's a false flag of corrupt legalism. At root, this case is as crooked as a barrel of snakes.

Thanks for reading…

Best wishes…

Byron W. King

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