How Corporations Like Chevron Use The Law To Get Their Way

In 2008, I attended Chevron’s
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annual meeting in Richmond, California, alongside indigenous activists from Ecuador concerned about their ownership of Texaco and the legacy of environmental destruction in Ecuador. I will never forget an Ecuadorian woman who went up to the mic during the public comment period, in front of perhaps 300 audience members and opened her shirt to reveal a shocking red rash all over her chest. She asked the CEO directly, to the best of my recollection, “Why do I and my children all have this rash? When will your company clean up the environmental damage it has caused?”

I carpooled with a group of people in a minivan, and parked in a parking lot across the street. We piled in for the long ride back to San Francisco and were in the process of getting our seatbelts on. We hadn’t even left the parking lot when cops pulled us over and promptly cited us for seatbelt violations.

A few months later, I received a $500 fine and the news that my license had even been suspended. This wasn’t exactly life-threatening, but it was certainly annoying. I was a passenger, not the driver…why suspend my license? While I cannot prove that the local cops were in cahoots with Chevron, it certainly seemed fishy that cops would take such an interest in seatbelt safety inside a parking lot, if not motivated by the “safety” of one of its largest taxpayers.

My story, however, is nothing compared to that of Steven Donzinger, the lawyer who stood up to Chevron’s environmental abuses in Ecuador and lost his personal freedom as a result. (My story of being sued by CoreCivic for $55M for defamation is perhaps a bit more comparable, but at least I have not lost my personal freedom). Both stories should be a cautionary tale for shareholders who think that corporate money should be focused on fulfilling a company’s mission, not prosecuting those who may challenge it.

The Steven Donzinger Story

Steven Donziger has recently been released after more than two years under house arrest in Manhattan, following six months in jail. Collectively, it’s the longest sentence for a misdemeanor ever in the US. The detention was linked to his decades-long battle with oil titan Chevron in which he won a $9.5 billion settlement against the company for its destruction of the Amazon
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rainforest in Ecuador. That victory, nearly unparalleled in its scale and scope, prompted Chevron to shuffle assets out of Ecuador to avoid repaying the Indigenous Cofán people, whose lands had been poisoned by drilling and dumping. Chevron later brought its vast resources to bear, launching an extensive campaign against Donziger for his work.

The multi-billion dollar suit was the result of a class-action lawsuit brought against Texaco by 30,000 Indigenous people and local farmers. Donziger represented the plaintiffs for years. Texaco (purchased by Chevron in 2000), began operating the Lago Agrio oil fields in the 1960s, but by 1990, millions of gallons of crude oil had been spilled throughout the region. Toxic waste from drilling and refining was stored in unprotected pits, toxifying the soil and contaminating water supplies.

The case took almost 18 years to resolve, but in 2011 an Ecuadorian court ruled against Chevron, ordering it to pay $18 billion. While that figure was later reduced to $9.5 billion, it still represents one of the largest judgments in history. And Chevron wasn’t happy.

Their solution? Deny and demonize. Even before the ruling, Chevron internal emails showed that the company wanted to “demonize Donziger.” In 2012, the company brought a racketeering suit against Donziger, and Chevron’s manipulation of the case was swift.

Before the trial, Chevron dropped all monetary claims, depriving Doniger and two other defendants a right to a jury. In 2014, Chevron-linked US Judge Lewis A. Kaplan ruled that Donziger was guilty based on testimony from a witness who admitted their prior testimony was a lie. That witness, a keystone of the prosecution, had also accepted hundreds of thousands of dollars and met with Chevron’s lawyers many times before the trial. Chevron’s team consisted of hundreds of lawyers from several dozen firms. They froze Donziger’s bank accounts, put a lien on his apartment, and even created a special publication just to smear him.

Kaplan called Chevron “a company of considerable importance to our economy,” and barred Donziger and other defendants from mentioning Chevron’s poisoning of the Amazon during the trial. Kaplan also ordered Donziger to turn over his cell phone and other digital devices, but Donziger refused, citing attorney-client privilege.

In 2019, Kaplan asked federal prosecutors to bring contempt charges against Donziger for refusing to hand over devices. When the government declined to prosecute, Kaplan appointed a private team of prosecutors to pursue Donziger — a first in US history. Kaplan also bypassed random prosecutor assignment to hand-pick someone, who later sentenced Donziger to several times the maximum allowable six months of detention for contempt. Even after all this, Donziger still might be required by Judge Kaplan to pay millions to Chevron to compensate the company for its mercenary army of lawyers.

For now, though, Donziger has some peace.”It’s over. Just left with release papers in hand,” Donziger posted to Twitter on April 25, the day of his release. “Completely unjust that I spent even one day in this Kafkaesque situation. Not looking back. Onward.”

Where We Go From Here

So what can we do about this unprecedented use of corporate power? First off, we can remember that corporations are owned by shareholders (i.e. all of us!) and that means we can influence their behavior. We can encourage the companies we are invested in to be responsible corporate citizens, including, not burdening their critics with ridiculous lawsuits.

As I noted in a previous article, a report found that over 355 frivolous lawsuits have been filed by corporations over the past 5 years. Most of these take the form of strategic lawsuits against public participation (SLAPPs), which are typically designed to suppress speech. Not all companies find suing activists to be a prudent use of shareholder money, however. Some view particular human rights activists as critical eyes and ears on the ground to help identify risk and seek to maintain open lines of communication. The Business and Human Rights Resource Center (BHRC), which wrote the report, notes that “a cluster of progressive companies have adopted a zero-tolerance approach to violence against defenders and understand defenders’ critiques as important early warnings of abuse or risks in their operations and supply chains. Adidas, for instance, has a human rights defenders’ policy that states that both the company and its business partners should not ‘inhibit the lawful actions of a human rights defender or restrict their freedom of expression, freedom of association, or right to peaceful assembly.’”

In general, BHRC provides the following recommendations; initially intended regarding SLAPP suits, but relevant to various forms of corporate intimidation:

1. Investors and companies should commit to a clear public policy of non-retaliation against defenders and organizations that raise concerns about their practices, and adopt a zero-tolerance approach on reprisals and attacks on defenders in their operations, value chains, and business relationships.

2. As part of this, investors should review potential investees for their history of SLAPPs and avoid investing in companies with a track record of SLAPPs. They should also urge portfolio companies to drop lawsuits that might be SLAPPs and provide an appropriate remedy in consultation with the defenders affected.

3. Governments should reform any laws that criminalize freedom of expression, assembly, and association, and facilitate an environment where criticism is part of the healthy debate on any issue of public concern. They should also hold businesses accountable for any acts of retaliation against defenders.

4. Law firms and lawyers should refrain from representing companies in SLAPP suits. Bar Associations should develop and update ethics codes to ensure that SLAPPs are a sanctionable offense for members.

As SLAPPs become more consistently and publicly recognized as a tool and trend of intimidation, they will hopefully become less easily tolerated by investors, entrepreneurs and legal professionals who seek to align their business practices and public reputations with their values. And whether it’s SLAPP suits, racketeering charges, or other excuses to harass activists, hopefully, legal and investor ethics will kick in to help the truth rule the day as that is ultimately what best protects corporations, activists and shareholders alike.

Thanks to Starkey Baker for their contributions to this piece. Full disclosures related to my work available here. This post does not constitute investment, tax, or legal advice, and the author is not responsible for any actions taken based on the information provided herein. Certain information referenced in this article is provided via third-party sources and while such information is believed to be reliable, the author and Candide Group assume no responsibility for such information.

CoreCivic
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filed a lawsuit in March of 2020 against author Morgan Simon and her firm Candide Group, claiming that certain of her prior statements on Forbes.com regarding their involvement in family detention and lobbying activities are “defamatory.” While we won dismissal of the case in November of 2020, CoreCivic has appealed such that the lawsuit is still active. This is a classic SLAPP suit, as referenced in the article.

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