On Tuesday, a federal judge in San Francisco sanctioned three human rights lawyers after three of their clients disavowed having ever suffered from the injuries the lawyers had alleged in complaints filed on their behalf thirteen months earlier. The ruling is here.

The suit seeks billions of dollars in damages and disgorgement from Chevron (CVX) on behalf of nine Ecuadorians who were alleged to have suffered injuries due to pollution stemming from Texaco’s drilling operations in the Ecuadorian rainforest from 1971 to 1992. (Chevron acquired Texaco in 2001.)

The sanction followed the August dismissals of the claims of three plaintiffs.

In the complaint, filed in April 2006, the attorneys claimed that two of those plaintiffs had “been diagnosed with cancer,” while the third feared contracting it. The attorneys filed interrogatory answers on these plaintiffs’ behalf in February and May 2007 that seemed to reiterate those assertions, but in late May 2007, in depositions conducted in Ecuador, the three plaintiffs disavowed the claims being made on their behalf, claimed not to have previously met the lawyers bringing the case, and not to have realized that lawyers would be suing on their behalf in the United States. (Two of the other nine original plaintiffs had their claims dismissed last January, after they stopped cooperating with the plaintiffs lawyers during the discovery process, and two more plaintiffs were voluntarily dismissed in August. The case now proceeds with the two remaining plaintiffs, whose medical records do corroborate cancer.)

Judge William Alsup, a Clinton appointee, imposed a $45,000 fine on lead counsel Cristóbal Bonifaz, an American lawyer who was born in Ecuador and who maintains an office in Conway, Massachusetts. If Bonifaz does not pay the fine by the end of the year, Judge Alsup ordered each of his co-counsel, Terry Collingsworth and Paul Hoffman, to pay half of Bonifaz’s debt at that point. Collingsworth is the general counsel of the International Rights Advocates in Washington, D.C., and Hoffman, who was legal director of the ACLU Foundation of Southern California for ten years, is now with Schonbrun DeSimone Seplow Harris & Hoffman in Venice, California.

Bonifaz launched two better known cases against Chevron/Texaco stemming from the same events, one in Manhattan in 1993, which was dismissed in 2002 on condition that Chevron agree to be sued in Ecuador, and a second in Ecuador in 2003, which is ongoing. The executive committee of the Amazon Defense Front, which controls the latter suit, known as the Lago Agrio case, attempted to fire Bonifaz in February 2006 — two months before Bonifaz filed the San Francisco case — in this resolution. The Front also issued a press release last week, after Judge Alsup’s sanctions ruling, reasserting that Bonifaz no longer has any connection to the Lago Agrio action. (See here.) As recently as last month, however, Bonifaz still claimed to be actively involved in the Lago Agrio case. (See here.)

Judge Alsup wrote that he believed the sanctioned lawyers’ claim that, prior to filing the complaint, two of the plaintiffs really had orally told a paralegal that they had cancer, but he found that, without any corroboration, to be an insufficient basis to sue.

“The warning flags were flying even before the suit was commenced,” Judge Alsup wrote. “Plaintiff [Gloria] Chamba left blank the date of first diagnosis on the intake form. She had no medical documentation to support the leukemia claim [made on behalf of her minor son].

“The warning flags were flying as well for [Plaintiff Luisa] Gonzalez. While her intake form claimed breast cancer, there was no medical support for the claim. As for Plaintiff [Nixon] Rodriguez, there was no intake form at all.

“When Plaintiff Chamba later provided [a paralegal] her son’s medical record, it contradicted any claim of leukemia. Plaintiff’s counsel continued the pretense — instead of doing right and dismissing the claim. Similarly, Plaintiff Gonzales received the results of a favorable biopsy in August 2006. She informed her lawyers that she did not have cancer in March 2007. Yet counsel continued the pretense through artfully worded interrogatory answers.”

Bonifaz did not respond to an email or telephone message. Here is the declaration he filed with the Court last month in his defense.

Collingsworth, who signed the amended complaints and was sometimes identified in papers as “lead counsel” in the case, said this in an email: “Roger, there is no question that Chevron knowingly dumped ‘produced water’ in the water table in the Ecuadorian rain forest that international standards had long recognized as cancer-causing. Chevron’s sole defense now is that the indigenous people should have known years ago that they could contract cancer because the pollution was so pervasive that they were on notice. If you are more interested in a temporary set back for us attributable to three of our clients convincing us that they had claims when they didn’t, then I join the chorus of folks who say that the mainstream media is in the pocket of major advertisers like Chevron. I saw a great movie last weekend — Michael Clayton. I’ll take our position anytime — we were duped by some of our clients, we will appeal and we will win, but we are not protecting corporate criminals who knowingly poisoned thousands of innocent people. Why don’t you blog about the plight of the people who had their lives destroyed by Chevron, and the lawyers at Jones Day who are getting rich defending corporate criminals.”

(I’m not sure which mainstream media accounts — presumably taking the side of the oil companies and short-shrifting the plight of the indigent Indians of the Ecuadorian rainforest — Collingsworth is referring to. For a 13,000-word article by Bill Langewiesche in Vanity Fair, which barely hints at what Chevron’s position might be in the matter, see the May 2007 issue (no link available). For a more balanced, but still hardly pro-oil company take, see this 6000-word article by Peter Maass in Outside magazine, available here.)

Paul Hoffman’s comment, in an email, was this: “First, it is clear that Chevron and its counsel are using this proceeding for media relations purposes primarily to try to cast doubt on all plaintiffs and other cases. This situation involves the unfortunate and highly unusual situation where two plaintiffs were not honest about what happened to them and there was not reason for counsel to know this before it came out in the course of discovery.

“Second, in my case specifically, I am only local counsel for out of state counsel in this case. I still cannot understand what possible basis there would be for any sanction ruling against me. Terry and Cristobal assured me that this case rested on a solid factual basis and I had every reason to believe their assurances based on their past records and my long association with Terry. I played no role in the investigation of the case and I am playing an extremely limited role in the litigation of the case. It cannot be the case that a local counsel is required to engage in independent investigation to play such a role on the pains of sanctions if the assurances received turn out not to be true in certain respects. Such a ruling would have a truly destructive impact on the ability to bring a wide range of human rights cases involving foreign plaintiffs — this, of course, is exactly what Chevron is trying to accomplish in bringing its motion.

“I certainly intend to appeal this order because it does not rest on a sound legal or factual basis.”

UPDATE (October 23, at 10:50 am ET): In an email, Paul Hoffman added some additional remarks: “I am planning to file a motion for reconsideration on my own behalf in response to the order because from a factual standpoint the order is completely unsupported.   My role was the quintessential local counsel.  I basically did nothing in the case other than sign the original complaint and assist other counsel in transmitting information relating to a discovery issue when Terry was out of the country on vacation.  I was assured that the case was well documented and a very solid case at every step of the way.   I believe this is what the other counsel genuinely believed.   . . .  [T]he  Judge’s order . . .  is just as wrong factually as it could be with respect to my role.  . . .  I have had an unblemished record for 31 years of practice and the Court’s ruling has already done a lot of unwarranted damage to me and I intend to ask the Court to reconsider its ruling based on the actual facts in this situation.”

I have an article in the current issue of Fortune (the full text is here) about the $15.2-billion deal to take private Kinder Morgan Inc., (KMI) a natural-gas pipeline company in Houston. We put it online today. This story has lots of big names on Wall Street: Goldman Sachs (GS), which is the deal’s investment banker, lead investor and debt-syndicate leader; Carlyle Group, another major investor; Blackstone Group and Morgan Stanley (MS), who advised the company’s board of directors; and CEO Richard Kinder himself, a former president of Enron and one of the most brilliant operators and financial engineers in the energy business.

It’s a complex  story because it’s a complex deal. But through this one company you can understand all the cross-currents at play in the world of private equity today. Here’s a snippet:

It’s not just the war chests that are bigger this time; the potential conflicts of interest are too. Wall Street investment banks have plunged full force into the private-equity business, further clouding their already compromised judgment as corporate advisors. “Hostile” takeover bids by buyout firms have become far less common, as corporate managers have learned to share in the lucrative paydays that PE firms promise.

And the temptations have only become greater with the proliferation of so-called club deals, in which multiple private-equity firms team up to make bigger and bigger offers, which typically go unchallenged, for companies previously considered too large to devour. In October the Justice Department said it was beginning a preliminary investigation into potentially anticompetitive behavior by private-equity firms in club deals.

Since we went to press there’s been another interesting development in the story, one that Kinder Morgan hasn’t bothered disclosing yet to shareholders. In late April the California Public Utility Commission issued a preliminary ruling that would allow the deal to move forward by late May. The California regulator is involved because a group of oil companies  –Valero (VLO), Ultramar, BP (BP), ExxonMobil (XOM) and Chevron (CVX) – opposed the merger as part of a longstanding business dispute having to do with rates Kinder Morgan charges to transport oil on its pipelines. This week the oil companies asked the commission to delay its final ruling pending Kinder Morgan’s adherence to certain conditions requested by the oil companies. If the CPUC rules against Kinder Morgan, this deal could get delayed as late as September. If the commission rejects the request, Rich Kinder could get his company by Memorial Day.