Have you got a piece of this lawsuit?

May 31, 2011: 5:00 AM ET

The bitter environmental suit against Chevron in Ecuador opens a window on a troubling new business: speculating in court cases.

By Roger Parloff, senior editor

The FORTUNE -- Many readers will have already heard about the bitterly contested $18.2 billion environmental judgment handed down against Chevron in February by a judge in SucumbĂ­os province in northeastern Ecuador, an Amazon jungle region where Colombian narcoterrorists go for R&R. The judgment was entered in the rough-and-tumble oil outpost known as Lago Agrio on behalf of Ecuadorians who live in the area where Texaco, acquired by Chevron in 2001, drilled for oil from 1964 to 1990.

What few readers may yet appreciate is that, for much of the past six months, this controversial case has been financed by a great many investors who don't even realize they've been performing that service for the plaintiffs -- maybe even you. We'll explain how in a moment.

Some unsuspecting investors will doubtless be delighted to learn of their participation. They may see the suit as a noble, groundbreaking effort by impoverished Ecuadorians to redress environmental crimes committed by a callous multinational whose drilling practices are said to have contaminated ground water and caused unusually high instances of cancer in the region.

Others, though, will be chagrined to learn of their support for, and stake in, the case. They would include almost anyone who has read Manhattan federal judge Louis Kaplan's 131-page, 434-footnote opinion of March 7, handed down in a civil racketeering suit Chevron filed in February against the lead plaintiffs' lawyers bringing the Lago Agrio case. Judge Kaplan preliminarily enjoined those lawyers from enforcing the Lago Agrio judgment anywhere outside of Ecuador. Referring to e-mails, memos, depositions, and, most remarkably, video of the plaintiffs' lawyers' meetings -- filmed by a documentary moviemaker at the lawyers' own behest -- Kaplan found "ample evidence" that they had fabricated evidence, intimidated judges, colluded with Ecuadorian officials to bring trumped-up criminal charges against Chevron in-house lawyers, and perpetrated an elaborate multi-year fraud. Specifically, he found that they had planned, executed, and ghostwritten "all or much of" a key evidentiary report that was passed off as the work of an independent court-appointed expert to Ecuadorian and U.S. courts, government officials, and media.

Now, who are all these people we say have been investing in this malodorous case without even realizing it?

This article is from the June 13, 2011 issue of Fortune. To read the article in its entirety, visit your local newsstand or download the Fortune iPad app, which is available on iTunes. Print subscribers to the U.S. edition of Fortune can access the iPad edition FREE. To become a print subscriber, click here. You may also purchase this article for your Amazon Kindle reader or Kindle app for PC, Mac, iOS, Blackberry and Android devices. Click here to download from Amazon.

Also, available only on Fortune.com: New fraud allegations in the Chevron Lago Agrio case

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