The largest funder of the $9.5 billion Ecuadorian environmental suit against Chevron threw in the towel today, pledging to give no more money and to turn over his entire stake in the judgment–7%–to Chevron (CVX).
The funder, James Russell DeLeon, did so to settle a suit the oil company had filed against him in Gibraltar, where he lives, alleging that he was knowingly funding a fraudulent suit. (The full settlement is here.)
The development is striking in that DeLeon is a Harvard Law School classmate and longtime personal friend of Steven Donziger, the New York lawyer who has acted as the key strategist and driving force behind the Ecuadorian suit. DeLeon had invested $23 million in the litigation, and had also provided 60% of the funding behind Joe Berlinger’s documentary film Crude, which presents the case in a heroic light.
“Commencing in March 2007,” DeLeon said in a statement, “I provided funding to support the litigation in Ecuador … in the good faith belief that I was supporting a worthy cause. However, I have since reviewed the March 4, 2014 opinion of Judge [Lewis] Kaplan of [Manhattan federal district court] and I have considered the evidence presented during trial. As a result, I have concluded that representatives of the Lago Agrio plaintiffs, including Steven Donziger, misled me about important facts. If I had known these facts, I would not have funded the litigation.”
Judge Kaplan found last March that the $9.5 billion judgment the Ecuadorians won against Chevron in a Lago Agrio, Ecuador, provincial court in February 2011 had been procured by Donziger and his co-counsel in Ecuador through fraud, extortion, bribery, and other crimes.
In a statement, Karen Hinton, a spokesperson for Donziger, said that DeLeon had provided no funds for two years, and that Donziger’s team welcomed the settlement, “because it will allow a significant stake in the winning judgment of the affected villagers to be used for clean-up of their ancestral lands rather than be paid to an outside investor.”
She also argued that “Chevron’s willingness to drop all of its claims against Mr. DeLeon for no financial consideration … reflects the company’s increasingly weak position in the overall litigation.”
In his own statement, Chevron vice president and general counsel R. Hewitt Pate said, “We are pleased that yet another long-time supporter has ended his association with this scheme. Chevron will continue to hold accountable those who associate themselves with this fraudulent litigation.”
The Ecuadorian suit sought damages for oil pollution allegedly left behind by Texaco—acquired by Chevron in 2001—after it drilled for oil in Ecuador from about 1964 to 1992.
Kaplan’s ruling, in a civil racketeering case Chevron filed against Donziger and his co-counsel, is now on appeal, and is scheduled to be heard by the U.S. Court of Appeals for the Second Circuit during the week of April 20.
An earlier funder in the case, the publicly traded, third-party litigation finance outfit Burford Group, renounced its involvement and stake in the case in 2011, less than a year after making the investment, alleging that it had been defrauded by Donziger and others about key facts in the case. Burford was being threatened with a lawsuit by Chevron at the time it renounced the suit.
Chevron also has a suit in Gibraltar pending against still another funder of the case, U.K.-based Woodsford Litigation Funding. Woodsford has denied wrongdoing.