New fraud allegations in the Chevron Lago Agrio caseMay 31, 2011: 5:00 AM ET
By Roger Parloff, senior editor
How did extensive language from the plaintiffs' internal files end up in the judge's ruling?
Editor's note: The following is a web-only companion story to "Have you got a piece of this lawsuit?" from Fortune's June 13th, 2011 issue.
FORTUNE -- Ordinarily, an allegation that plaintiffs lawyers may have been clandestinely involved in the writing of a judge's $18.2 billion ruling in favor of their clients would be getting a lot of attention. But in the environmental case against Chevron taking place in Lago Agrio, Ecuador, it's hard to raise eyebrows anymore.
That is the latest disturbing allegation that's been leveled in this monumentally troubled lawsuit.
This is the case that seeks to hold the oil giant liable for damage to the Ecuadorian Amazon rainforest and its inhabitants from Texaco's oil drilling there between 1964 to 1990. Chevron (CVX), which acquired Texaco in 2001, maintains that, among other things, Texaco settled its Ecuadorian environmental issues in 1998.
Many readers are probably thinking that they read about this scandal last year. But that was actually a different scandal. That was the one in which the Lago Agrio plaintiffs lawyers allegedly ghostwrote a key evidentiary report that was then passed off as the work of Richard Cabrera, a purportedly independent court-appointed expert, to Ecuadorian and U.S. courts, government officials, and media. That alleged scheme stretched from early 2007 until mid-2010, when Chevron finally went to federal court in Denver and pried English-language drafts of key portions of the so-called Cabrera report out of the files of the plaintiffs' U.S. consulting firm. This March U.S. District Judge Lewis Kaplan found "ample evidence" that certain Lago Agrio plaintiffs lawyers, including lead U.S. counsel Steven Donziger, had, in fact, perpetrated a scheme to ghostwrite "all or much of" the Cabrera report. For that and other reasons Kaplan entered a preliminary injunction barring the Lago Agrio lawyers from enforcing the judgment outside Ecuador. That ruling is now on appeal.
The new scandal is different—or at least a variation on a theme. This one revolves around the Lago Agrio court's 188-page judicial opinion itself, the one that imposed the $18.2 billion award in February. The plaintiffs lawyers have heralded this opinion, signed by Ecuadorian judge Nicolas Zambrano, as untainted by any conceivable earlier fraud since, by its terms, it purports to disregard the Cabrera report in reaching its conclusions. (Judge Kaplan found that, despite Zambrano's protestations, the ruling actually still relies on the Cabrera report.)
Chevron has now submitted declarations from two forensic analysts that assert, with examples, that Zambrano's ruling cribs both anomalous data and lengthy passages of text verbatim from sources that Chevron claims aren't to be found anywhere in the official court record, but which can be found in the plaintiffs team's internal files.
How would Chevron know that? Well, in the course of investigating the Cabrera scandal, U.S. judges permitted Chevron lawyers to subpoena files from the plaintiffs that would ordinarily have been protected by various privileges. Lo and behold, Chevron's experts say, those files appear to be the source for both the anomalous data and the plagiarized text—indeed, the only apparent source for them. That, in turn, seems to suggest some sort of clandestine interaction between someone close to the plaintiffs lawyers and someone close to the judge. (Judge Zambrano did not respond to two detailed phone messages seeking comment.)
Here's an example. There is a passage on page 24 of Zambrano's ruling that reads in Spanish as follows:
Es cierto que por norma general una empresa puede tener subsidiarias con personalidad juridica completamente distinta. Sin embargo, cuando las subsidiarias comparten el mismo nombre informal, el mismo personal, y están directamente vinculadas con la empresa madre en una cadena ininterrumpida de toma de decisiones operativas, la separación entre personas y patrimonios se difumina bastante, o incluso llega desaparecer. En esto caso, se ha probado que en la realidad Texpet y Texaco Inc. funcionaron en el Ecuador como una operación única e inseparable. Tanto las decisiones importantes como las triviales pasaban por diversos niveles de ejecutivos y órganos de decisión de Texaco Inc. ...
Of this 103-word passage, 98 words (the ones shown in bold) track verbatim an internal legal memo authored in 2007 by one of the plaintiffs team's Ecuadorian attorneys—a memo whose content, Chevron says, was never introduced into the court record. In all, Chevron's forensic expert finds 15 such passages in the Zambrano ruling that appear to be lifted virtually verbatim from that same memo.
Similarly, according to Chevron's forensic analysts, Zambrano's ruling incorporates data that contain a variety of telltale errors that were not present in tables that were part of the court record, but which were present in data contained in the plaintiffs' internal database. For instance, in multiple instances the ruling cites levels of contamination measured in "milligrams per kilogram" rather than "micrograms per kilogram"—overstating the contamination a thousand times—repeating an error that allegedly existed in the plaintiffs internal database but not in the test results submitted in the court record.
Chevron brought the apparent data irregularities in the Zambrano ruling to light on April 5—eight weeks ago—in a filing in a federal court proceeding in Vermont, in which both Chevron and the Lago Agrio plaintiffs are involved. The Lago Agrio plaintiffs' lawyers filed a response—of sorts. It did not deny that the alleged anomalies existed, nor did it postulate any innocent explanation for them. Instead, it sniped that Chevron's forensic analyst didn't speak Spanish and suggested that his conclusions might have been "fed to him" by Chevron.
On May 2, Chevron filed in a Manhattan federal court proceeding the forensic report concerning the 15 passages of text in the Zambrano ruling that appear to have been cribbed from a plaintiffs attorney's internal memo. (This time the Chevron analyst did speak Spanish.) The Lago Agrio plaintiffs' lawyers have so far made no reply at all to those accusations.
The Lago Agrio plaintiffs spokeswoman does squarely deny Chevron's allegations. "The plaintiffs submitted evidence to experts who adopted our language in reports filed with the court," Karen Hinton said in a statement in mid-April. "It's not surprising that the judgment would include similar language. This happens all the time in court rulings in the United States."
Nevertheless, Hinton did not provide any examples of documents filed with the Lago Agrio court that could have served as legitimate sources for any of the data or textual irregularities that Chevron has highlighted. In mid-May, a month later, I checked back in with her to see if the plaintiffs team had located any yet.
"Honestly, we've not had the time or resources to go through everything and pull out sources," she said, emphasizing that the Ecuadorian court record was 200,000 pages long and undigitized. She suggested that the burden of proof should be on Chevron to prove that the anomalous data and text isn't in the vast record somewhere, and not on the plaintiffs to show where legitimate sources do exist in it.