As two books shine a spotlight on fraud allegations in the suit against Chevron in Ecuador, our legal analyst addresses the elephant in the room
As I note in a double book review being published today, two new books are shining a spotlight on the fraud allegations besmirching a celebrated environmental suit against Chevron CVX in Lago Agrio, Ecuador, which led to a multibillion-dollar judgment against the oil giant in 2011.
The suit stems from contamination allegedly left behind by Texaco (which Chevron acquired in 2001) after it drilled for oil in that country from 1964 to 1992. Many environmentalists and human-rights advocates regard the case as a historic victory for third-world peoples.
But a Manhattan federal judge concluded last March that the lead U.S. lawyer for the Ecuadorian plaintiffs, Steven Donziger, procured his historic judgment through bribery, fraud, obstruction of justice, witness tampering, and other crimes. (Donziger denies wrongdoing and has appealed.)
The appearance of the books—and of the inevitable, retaliatory attack campaign against one of the authors being launched by Donziger—has spurred me to, at long last, address the elephant in the room. Why has U.S. Attorney Preet Bharara so far manifested no interest in the case?
It’s a question that I’ve been contemplating for four years, going back to a cordial lunch I had with Donziger in September 2010. I had just published a web piece cautiously recounting the troubling evidence of fraud that Chevron had already mounted as of that time. The conduct was particularly disturbing because it cast doubt on whether we would ever get to the bottom of the merits of the underlying environmental dispute, in which the plaintiffs’ cause—very poor people claiming grave mistreatment at the hands of a giant American oil company—was intrinsically both sympathetic and plausible.
The case against Chevron is easy to understand for anyone who has seen video—on 60 Minutes, say—of open pits in the jungle floor still filled today with disgusting, viscous, waste products from oil drilling. At first glance those images seem like conclusive evidence of wrongdoing. Nevertheless, there are disputed issues worth having a legitimate trial over. Texaco was the operating partner of a joint venture that was 62.5% owned by Ecuador’s state-owned oil company, now known as Petroecuador, so the Ecuadorian government received the majority of the profits. (Indeed, when various taxes imposed on Texaco are taken into account, as Paul Barrett documents in his recent book, Law of the Jungle, the Republic received at least 93% of the venture’s profits during the time of the concession.) Under a remediation agreement struck in 1994—two years after Texaco left Ecuador—Texaco cleaned up its proportional share of the joint venture’s oil fields in a three-year process that Ecuadorian officials monitored and signed off on as having been properly completed in 1998. Petroecuador, however, never did fully clean up its share of the concession. The pits shown on 60 Minutes, for instance, are sites for which Ecuador was made responsible under the 1994 remediation agreement, not Texaco, though the program never explains that fact to viewers. Donziger insists that Texaco alone should have been required to clean up everything, notwithstanding the Republic’s majority stake, and he alleges that the remediation Texaco did perform was inadequate or even fraudulent—but these are sharply contested claims.
In any case, at the time of my lunch with Donziger, evidence had already emerged strongly suggesting that the following had happened. A mining engineer named Richard Cabrera, who was a supposed to be acting as a neutral, independent auxiliary to the Ecuadorian court—akin to a special master in the United States—had issued a crucial damages report on April 1, 2008. But evidence surfacing in court actions brought by Chevron in Denver and New York in 2010 had exhumed evidence showing that, in reality, the report had been secretly authored by Donziger’s retained experts at Stratus Consulting, in Boulder, Colo. They had written the report in first-person English, and had had the text then translated into Spanish by interpreters sworn to secrecy. The report was then sent to Ecuador for Cabrera’s signature a day or two before it was filed in court in Lago Agrio. (In 2012 the Stratus experts admitted having done this for Donziger, and they were then fired by their employer.) The so-called Cabrera report recommended that Donziger’s clients be awarded $16 billion.
To further deceive the public into believing that Cabrera was independent, the evidence was showing, Donziger then had his co-counsel in Ecuador file “objections” to the report his experts had just ghostwritten, purporting to find fault with it, and humbly beseeching Cabrera to increase his damages recommendation accordingly. Next, Donziger instructed his experts in Boulder to ghostwrite Cabrera’s purported response to Donziger’s purported objections. In it Cabrera purported to accept Donziger’s arguments, increasing his damages recommendation to $27 billion. Then, to cap it off, Donziger had his experts in Boulder, whom he touted in a press release as “independent,” issue a public endorsement of “Cabrera’s” findings, while failing to disclose that they had secretly written the findings for which they were vouching.
Finally, Donziger then passed this report off to the world—including to a U.S. Congressional commission on human rights, the U.S. Securities and Exchange Commission, the New York State Attorney General, the New York State Comptroller, and countless media outlets, including 60 Minutes (and me)—as the work of a neutral, independent expert. At various proceedings in Ecuador from 2007 to 2009, Cabrera swore at least 7 times that the report was entirely his own work, a claim solemnly seconded by Donziger’s co-counsel in Ecuador, Pablo Fajardo. Cabrera and Fajardo each expressed outrage at the time that Chevron would “insult” Cabrera’s integrity by suggesting otherwise.
Now let’s return to my lunch with Donziger in September 2010. Notwithstanding that when my then-recent article about these troubling allegations came out one of the web sites Donziger controlled had quickly retaliated with a search-optimized, blogpost entitled, “Fortune’s Roger Parloff Sucked In by Chevron’s Spin,” he was now on a goodwill mission, trying to bring me back into his fold. (Donziger’s a pro.) What struck me as bizarre at the time was that he seemed to care so much more about what I was going to write than about what Judge Kaplan was going to write. Instead of focusing, as any other lawyer would have, on submitting affidavits in court laying out an innocent version of what had happened, he was alternating between trying to intimidate me one day and romance me the next, all in an effort to keep me from conveying to readers what the evidence unambiguously showed.
Toward the end of our conversation, he asked me what I thought of a press statement he had issued the day before. At the time I sort of liked Steve, whom I had first met socially at the apartment of two friends. I also believed that his underlying environmental case was probably meritorious—a possibility I still entertain, though now with more skepticism. I told him that he needed, for his own good, to stop issuing any statements and that he should retain a criminal lawyer. My assumption was that any such lawyer would advise him to stop talking to the media altogether, on or off the record, lest he waive his Fifth Amendment right to remain silent. This right would be becoming crucial to him, I assumed, because it seemed so inevitable that U.S. Attorney Bharara would soon be commencing a criminal investigation.
Today, four years later, it appears that my instincts were right in one respect, but way off-base in another.
The part I was right about was that Donziger had engaged in conduct that at least raised questions about whether he had violated numerous American criminal statutes. On March 4 of this year, in a 485-page, 1842-footnote ruling handed down in the civil racketeering suit Chevron filed against Donziger in February 2011, U.S. District Judge Lewis Kaplan found by “clear and convincing evidence” that Donziger’s conduct in the Lago Agrio case violated U.S. federal laws against extortion, wire fraud, witness tampering, obstruction of justice, and money laundering, and that he was also responsible for acts of bribery in violation of the Foreign Corrupt Practices Act. This pattern of criminality, which took place over at least a five-year period from 2006 to 2011, also violated the Racketeer Influenced and Corrupt Organizations Act (RICO), he found.
Kaplan’s factual findings—which would likely be optioned for a movie if they weren’t a government document already in the public domain—are based on tens of thousands of pages of emails; personal diaries; sworn testimony; bank, telephone, and courier records; and many hours of videotape, drawn from outtakes from the documentary Crude, which Donziger coaxed a well-intentioned, but gullible, film director into making about the case as part of his public relations strategy.
Kaplan found that the Cabrera charade I outlined above did, in fact, occur. He also fleshed out some details that I hadn’t known about back then. “Cabrera was not even remotely independent,” he wrote. “He was recruited by Donziger. He was paid under the table out of a secret account above and beyond the legitimate court-approved payments. He was promised work on the remediation [i.e., contracts to cleanse oil-contaminated land] for life if the [Lago Agrio plaintiffs, or “LAPs”] won. The LAPs gave him an office and life insurance, as well as a secretary who was a girlfriend of one of the LAP team members.”
Still, as ghoulishly intricate as the Cabrera charade was, once it came to light, many journalists, sympathetic to the plaintiffs presumptively meritorious underlying cause, still tried to discount it as an irrelevant sideshow.
This was the perspective, for instance, of a 12,000-word article published in The New Yorker in January 2012. That correspondent, who noted that he had had “half a dozen long conversations with Steven Donziger” in the course of preparing his article (though he also consented, as Donziger demanded, not to ever quote him) stressed to his readers that Ecuadorian trial judge Nicolás Zambrano, when he finally ruled in the case, claimed not to have relied on the Cabrera report at all, precisely because of all the fuss Chevron was making over it. No harm no foul, the reporter seemed to conclude, crediting the Zambrano disclaimer.
But there was something Donziger apparently hadn’t mentioned to the correspondent. Donziger’s team ghostwrote the entire 188-page Zambrano opinion, too, Judge Kaplan has now held. It obtained that opportunity by promising to pay Zambrano $500,000 from the eventual recovery—a scheme that had “Donziger’s express authorization,” Kaplan found.
Evidence of the second ghostwriting scandal began coming to light almost as soon as Zambrano’s judgment came out in February 2011. Here’s why. Citing Donziger’s repeated failure to comply with Chevron’s discovery demands in 2010, together with evidence that he “may have erased or [was] withholding other responsive documents,” Kaplan had allowed Chevron to mirror Donziger’s and his staffers’ hard drives in January 2011. So when Zambrano’s opinion came out the following month, Chevron’s attorneys were able to use plagiarism software to search for matches between Zambrano’s opinion and the documents on those hard drives. Lo and behold, lengthy passages of the opinion—150-word stretches, in some instance—appeared to have been lifted verbatim from seven internal plaintiffs memos found on those drives, while many of the erroneous contamination figures used in Zambrano’s opinion appeared to be drawn from an Excel database file present there, too. None of these files had ever been entered into the official court record of the Lago Agrio court, so Zambrano had no apparent lawful means of accessing them.
In early 2012, a former Ecuadorian judge named Alberto Guerra reached out to Chevron with detailed and, later, partially corroborated testimony about the mechanics of how the bribe and ghostwriting went down. According to Guerra, he and Zambrano had engaged in corrupt deals for three decades, and for the last several years, since Guerra was thrown off the bench and Zambrano elevated to it, Zambrano had been secretly paying Guerra to write his rulings in civil cases. (Guerra had more than 100 drafts of Zambrano’s rulings on his hard drives, including at least nine from the Chevron case.)
Guerra described the key bribe solicitation as having occurred at a Quito restaurant, called the Honey & Honey, in 2010, at a meeting between him and Donziger, Fajardo, and a third leader of the plaintiffs team.
Remarkably, Donziger eventually admitted being present at the meeting Guerra describes. Yes, he acknowledged, Guerra solicited a $500,000 payment to Zambrano in exchange for giving the LAPs the opportunity to ghostwrite the opinion. Donziger testified, however, that he rejected the offer. He never reported the approach, he maintained, because he doubted its authenticity and didn’t want to hand Chevron a basis for attacking the legitimacy of the Ecuadorian judiciary.
Donziger also argued that Guerra was lying in exchange for a series of lavish payments Chevron promised him, including $48,000 for his computer, thumb drives, and other physical evidence; resettlement of his family in the United States; legal help in seeking political asylum in this country; and, generally, what Kaplan characterized in his ruling as “a private witness protection program.” But after hearing both Guerra’s live testimony and that of Zambrano—whom Kaplan found to have shockingly little knowledge of his own purported opinion—Kaplan largely credited Guerra’s account. (I was in the courtroom and, for what it’s worth, so did I.)
Though I won’t belabor the point, Donziger committed additional crimes, Kaplan found, including fabricating evidence; urging witnesses to provide false testimony; helping craft a deeply misleading affidavit, signed by Fajardo, that was submitted in sixteen different U.S. courts; and testifying falsely before Kaplan himself. Kaplan also found that Donziger’s team had engineered the criminal prosecution of two of Chevron’s in-house lawyers in Ecuador as a means of exerting pressure on Chevron to settle.
Now let’s go back to that lunch in fall 2010 one last time. I said earlier that my instincts then had been correct in one respect and wrong in another. I was obviously right about Donziger’s conduct raising questions about his compliance with certain federal criminal statutes. What was I wrong about?
Well, I was apparently wrong in thinking that U.S. Attorney Bharara might try to prosecute Donziger for these crimes. Of course, criminal investigations are secret, so it’s theoretically conceivable that an inquiry is pending, but I have seen no evidence to that effect. (A spokesperson for Bharara’s office declines to comment.)
I seem to have also been wrong, then, in thinking that Donziger needed to worry about preserving his Fifth Amendment right to silence. Donziger has now given tomes of testimony, which Judge Kaplan has called “evasive,” “misleading,” and “deliberately false.”
The apparent flagrance with which Donziger flouted U.S. court processes would be comical if it weren’t so sickening to those of us who still care about such things. Donziger appears to have actually rehearsed giving evasive answers. One of the documents Chevron’s lawyers found on Donziger’s hard drives had been created in November 2011, just before the first of a series of depositions Donziger gave. It’s a memory aide he drew up to help himself prepare. Near the top of the first page, and in response to no specific question, he wrote: “ ‘It’s possible but I don’t think so’; ‘I guess it’s possible, but to best of my recollection I didn’t.’”
In a January 2011 letter to Judge Kaplan, the special master who presided over Donziger’s depositions characterized his answers as “evasive,” “unresponsive,” and “self-serving.” At an additional set of depositions convened in June 2013, Donziger answered “I don’t know” or “I don’t recall” 180 times, according to Kaplan’s March ruling. During cross-examination at trial in November 2013 he gave those answers 100 times more.
The conventional wisdom is that prosecutors consider obstruction of justice one of the most serious crimes on the books, since its strikes at the heart of what they do. All their investigative work will come to nought if people give false or evasive testimony, fail to produce documents as required, fabricate evidence, tamper with witnesses, bribe fact-finders—basically, all the crimes Kaplan has found Donziger to have committed.
If Judge Kaplan’s findings are sound, Donziger’s conduct vis-à-vis Chevron has constituted a marathon obstruction spree the likes of which the American court system has seldom known. Worse, if Kaplan’s ruling is right, Donziger’s crimes are ongoing. He and his colleagues are still trying to enforce the judgment that Kaplan has found to be crooked, ghostwritten, and the product of bribery, and a coterie of financiers around the world–having been promised stakes in that judgment–are continuing to help him. If Kaplan’s right, this is a crime in progress.
Yet, so far, we’ve heard nothing from Preet Bharara. Why?
One possibility might be that portions of these alleged crimes occurred in Ecuador, so maybe he doesn’t feel he has jurisdiction. But that was an issue that Kaplan faced, too. Kaplan found jurisdiction because, among other things, “Donziger, a New York lawyer and resident, here formulated and conducted a scheme to victimize a U.S. company through a pattern of racketeering” which included “substantial conduct in the United States,” including, among other things, “the bulk of [his] overall supervision of the entire operation,” “much of [his] fund-raising activity”; “the ghostwriting of the Cabrera report”; and the “improper efforts to ward off discovery through U.S. courts of what really had taken place with Cabrera.” (Jurisdiction is one of the issues being raised in Donziger’s appeal.)
Another reason for Bharara’s reticence might be that the civil standard of proof, “preponderance of the evidence,” is much easier to meet than the criminal standard, “beyond a reasonable doubt.” But Judge Kaplan actually found that most of the crimes in Donziger’s case had been proven by “clear and convincing evidence,” an exacting standard that is quite close in practice to “beyond a reasonable doubt.”
A third possibility is that Bharara credits Donziger’s claim that Judge Kaplan is “biased.” Donziger and his allies have at various times accused Kaplan of running a “show trial,” of being “corrupt” and “racist,” of being “open for Chevron’s business,” of being Chevron’s “lackey,” and so on. But Donziger’s claims on this score are just rank defamation—the appeals court has rejected his bias claims three times now—and it’s inconceivable that Bharara would credit them.
What does that leave? It leaves batting average. The truth is, a prosecutor who brings a case against Donziger runs a realistic risk of losing before a jury. Donziger is at his most skillful when politicizing a cause, throwing mud at his accusers, setting up smokescreens, and arguing that anyone who questions his methods has joined forces with the oil giant to crush the indigent and the indigenous. So long as the merits of the underlying environmental case against Texaco remain an open question—and, unfortunately, they do remain so—jury nullification is a realistic possibility. Donziger would see to it that the prosecutor would be publicly vilified as a modern-day Inspector Javert.
On the other hand, if no prosecutor is willing to take on that admittedly unappealing assignment, Donziger will remain—as he seems to sense that he is—immune to our laws.
Donziger’s stated causes—environmentalism and human rights—are worthy. But so are truth-seeking and the rule of law. In our society, sophisticated, relentless, cynical, and mendacious public relations campaigns continually imperil the ability of Americans to discern the truth. Our federal court system is the institution that offers the best hope of vindicating the truth even in the face of such assaults. Fraud, bribery, perjury, witness tampering, and obstruction of justice lay waste to that institution.
Donziger believes he can outsmart the American court system, subvert it, manipulate it, intimidate it, and shout it down. Our judicial system—the one you’ve devoted your life to and served so well, Mr. Bharara—is being mocked and demeaned. Fight for it now.