It was lost among the week's more dramatic news in Ukraine and Lois Lerner's continued refusal to tell America and a congressional committee what she knows about the IRS scandal, but U.S. District Judge Lewis Kaplan landed a devastating blow against greenmail. That's what can happen when Big Green environmental activists and class-action lawyers combine forces to use the federal court system to shake down corporate defendants for billions of dollars, usually via out-of-court settlements. Kaplan's ruling concerned Big Oil giant Chevron on one side and New York trial lawyer Steve Donziger on the other.
Here's the background: When Chevron bought Texaco in 2001, it inherited a class-action lawsuit filed in Ecuadorian courts by Donziger on behalf of residents of that country's Oriente region. The suit accused Texaco of causing extensive environmental damage with its drilling operations in the region, much of which had been done in conjunction with PetroEcuador, the state-owned petroleum exploration, drilling and refining operation. For years, Donziger pressured Texaco, then Chevron, to accept an out-of-court settlement that would have paid him and his cohorts hundreds of millions of dollars in legal fees.
|If ever there were a case warranting equitable relief with respect to a judgment procured by fraud, this is it.|
Chevron fought Donziger until an Ecuadorian judge ruled against the oil company. In the course of its appeals, Chevron discovered how far Donziger and his Big Green accomplices had gone to win. As a result, Chevron filed a separate suit accusing Donziger and others of fraud. Kaplan provided an amazing description in his 500-page ruling in Chevron’s favor:
They submitted fraudulent evidence. They coerced one judge, first to use a court-appointed, supposedly impartial, "global expert" to make an overall damages assessment and, then, to appoint to that important role a man whom Donziger hand-picked and paid to "totally play ball" ... They then paid a Colorado consulting firm secretly to write all or most of the global expert’s report, falsely presented the report as the work of the court-appointed and supposedly impartial expert, and told half-truths or worse to U.S. courts in attempts to prevent exposure of that and other wrongdoing. Ultimately, [Donziger's team] wrote the [Ecuadorian] court’s judgment themselves and promised $500,000 to the Ecuadorian judge to rule in their favor and sign their judgment. If ever there were a case warranting equitable relief with respect to a judgment procured by fraud, this is it.
The Colorado firm Kaplan mentioned is Stratus Consulting, which since 2009 has received more than $180 million via 1,308 federal contracts including 811 through the U.S. Environmental Protection Agency. According to Kaplan, Stratus wrote the testimony of one of the key supposed independent experts the Ecuadorian court cited in its $9.5 billion judgment against the oil companies.
Stratus also compiled “criticisms” of the expert’s testimony and his responses to those criticisms for the court record. The expert also received substantial secret payments, which began even before he completed the work that he told the court was his own, all at Donziger’s direction, according to Kaplan. It may take years to realize fully the damages this case will inflict on Big Green.