Ten Years Later: A Defining Moment for Chevron | Amazon Watch
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Ten Years Later: A Defining Moment for Chevron

May 26, 2011 | Atossa Soltani | Eye on the Amazon

Atossa Soltani outside yesterday's annual shareholder meeting at the Chevron headquarters in San Ramon, CA

Chevron’s 2011 annual meeting yesterday marked the 10-year anniversary of the oil giant’s acquisition of Texaco, when the company assumed legal liability for Texaco’s toxic legacy in Ecuador. It also marks the 10th year in a row that Amazon Watch and our partners from the Ecuadorian Amazon have confronted the company’s CEO and Board of Directors for their failure to take responsibility for the ongoing human and environmental catastrophe in Ecuador.

Chevron’s approach to this crisis over the past decade is a case study in mismanagement and shortsightedness, and I’d like to share some lessons for the business world about preventing such an ethical dilemma from festering into a massive financial and reputational liability.

In April, 2001, on the eve of Chevron’s acquisition of Texaco, my Ecuador-based colleague Kevin and I attended Chevron’s shareholders meeting in Los Angeles to put the ensure the company knew what it was getting itself into.

At the meeting, I spoke for a couple of minutes, delivering a polite but firm warning to then-CEO David O’Reilly and the Board of Directors that by buying Texaco, Chevron was assuming a serious multi-billion dollar liability for Texaco’s toxic legacy in Ecuador. As evidence, I delivered an 800-page report which detailed more than 350 toxic waste sites that Texaco abandoned around its former oil wells throughout the rainforest, including longitude and latitude information, and photos of each site.

My message was simple: By purchasing Texaco, you will assume its assets as well as its massive environmental liability in Ecuador. I added that the Securities and Exchange Commission was asked to investigate both companies’ failure to disclose the liability in the acquisition filings. I concluded by urging CEO O’Reilly to personally make time to visit the Ecuadorian Amazon and carry out his own due diligence prior to finalizing the acquisition of Texaco.

The CEO responded by asking Chevron’s General Counsel to review the painstaking report. Naively, I had hoped that Chevron — seemingly a larger and more disciplined oil company than the Texas company it was absorbing — would take a different path than Texaco’s devious and deceitful approach to date.

Unfortunately, ten years later, instead of the 1.3 billion dollar liability estimated at the time of the merger, Chevron’s mismanagement of the Ecuador issue has lead to a guilty verdict from an Ecuadorian court, which ordered the company to pay $18 billion in compensatory and punitive damages.

The company has suffered a huge public relations nightmare.


Architect of the Texaco acquisition John Watson took over for David O’Reilly last year, and the new CEO has continued a dead-end approach, which has piled enormous reputational damage on top of the financial risk.

Yesterday we walked into Chevron’s Annual Meeting with Ecuadorian plaintiffs once again calling on the company to resolve this case.

The company has been engaged in an all-out campaign of deception and double-speak. To its shareholders, Chevron has been downplaying the verdict from the Ecuadorian court claiming that it is not of material risk to shareholders. In the courts, Chevron lawyers have been claiming that the company faces a significant risk to its global business operations from potential enforcement actions from the Ecuadorian court judgment that attempt to seize the company’s assets in countries where it operates. A chorus of powerful forces, ranging from major institutional investors, analysts, and the media are calling on Chevron to resolve the Ecuador issue and end further damage to the company’s reputation. The noise is deafening and Chevron is increasingly losing control. Recently, a group of Chevron shareholders with over $150 billion in assets under management including some of the biggest players like New York State Common Retirement Fund issued a statement calling on Chevron to “fully disclose to shareholders the risks to its operations and business from the potential enforcement of the Aguinda verdict.” The statement Chevron to “reevaluate whether endless litigation is the best strategy for the company and its shareholders, or whether a more productive approach, such as reaching a settlement, could be employed to begin to provide for a proper remediation for past environmental damages.”

Trillium Asset Management and other company shareholders are calling on SEC to probe Chevron over its failure to accurately disclose the risks from the Ecuador verdict in its filings to shareholders. Sooner or later Chevron will have to reconcile with its Ecuador past. Chevron’s executives have mismanaged this issue long enough. It is time for the board of Chevron to recognize that its promise “to litigate until hell freezes over” will only lead to ballooning financial liabilities, risks to operations and brand, blows to employee morale, and erosion of Chevron’s social license to operate. While the company spends hundreds of millions of dollars on its legal defense and greenwashing ad campaigns, in Ecuador, more people continue to suffer and die from cancer and oil related ailments. Chevron’s board should recognize that the Ecuador controversy has spiraled out of control and question the wisdom of endless litigation strategy in the long term. Ignoring our warning ten years ago has cost the company dearly. It is time that Chevron adopted a new approach to put this nightmare behind it.

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