Chevron’s RICO trial against Donziger begins

FORTUNE—Chevron’s long-awaited racketeering suit against Steven Donziger, in which the oil giant accuses the environmental lawyer of having won a $19 billion judgment against it in Ecuador in 2011 through a pattern of bribery, extortion, witness tampering, and obstruction of justice, got off to a halting, glitch-marred start yesterday in federal court in Manhattan.

While the openings themselves—a half hour per side–went relatively smoothly, the testimony of Chevron’s first witness, in-house lawyer Ricardo Reis Veiga, was beset with housekeeping glitches that stemmed from the unpreparedness of the defense lawyers. (Donziger’s previous legal team, led by John Keker of Keker & Van Nest, abandoned the case in May, citing $1.4 million in unpaid legal fees.)

Donziger’s lead lawyer yesterday, accomplished Houston plaintiffs lawyer Richard Friedman, was hired only a few weeks ago, and was tentative and even apologetic about his understandable inability to achieve fluency with a factual record that extends back 20 years and encompasses dozens of legal proceedings in at least five countries. U.S. District Judge Lewis Kaplan, who is not known for his patience, was unusually forebearing yesterday, periodically reassuring Friedman and even praising him for his professionalism.

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Chevron’s suit, brought under the Racketeer Influenced and Corrupt Organizations Act (RICO) in February 2011, alleges that Donziger and the leaders of the Quito-based Amazon Defense Front won the $19 billion judgment in Lago Agrio, Ecuador through a pattern of criminal activity that was orchestrated and funded from the United States. (The Front and its leaders have defaulted by failing to appear to defend the RICO case.) The Lago Agrio judgment awarded damages for alleged contamination left behind by Texaco (acquired by Chevron in 2001) after it drilled in eastern Ecuador from 1964 to 1990. Chevron maintains, among other things, that the Republic of Ecuador released Texaco from all environmental liability in 1998, after it satisfactorily completed reparations designated in a 1995 settlement agreement.

Randy Mastro of Gibson Dunn & Crutcher, who has led Chevron’s case from its inception, gave the company’s opening. In a sign of the significance Chevron attaches to the case, its vice president and general counsel, R. Hewitt Pate, was present  through the entire first day, having arrived at the courtroom half an  hour before its doors even opened at 8:30 a.m.

Chevron’s suit grows out of two main alleged frauds. When Chevron first sued in 2011, the case focused on an elaborate multi-year scheme, which began in early 2007, in which Donziger and his Front colleagues allegedly ghostwrote a key damages report that was passed off as the work of an “independent” court-appointed expert named Richard Cabrera to the press, Ecuadorian and U.S. courts, and the U.S. Congress.

Subsequently, however, that so-called Cabrera fraud was overshadowed by a more spectacular one: based on evidence that has come to light since the RICO case was filed, Chevron now alleges that the entire 188-page, $19 billion judgment itself was ghostwritten by the Front. Mastro promised to call as a live witness at this trial a former Ecuadorian judge, Alberto Guerra, who will testify that he acted as an intermediary in a scheme whereby Donziger and two other Front leaders agreed to pay then-judge Nicolas Zambrano, the Ecuadorian  then presiding over the Lago Agrio suit, $500,000 from the eventual recovery in exchange for allowing the Front’s team to write the judgment themselves. (Zambrano has previously submitted an affidavit denying this allegation, and the RICO defendants have claimed they will call Zambrano at trial to deny the allegation in person.)

Mastro also promised to present testimony, either live or via deposition, from at least a dozen of Donziger’s former litigation team members to testify that he had lied to them at various stages in the process of perpetrating or covering up the alleged Cabrera fraud, or in committing various other criminal or unethical acts. These witnesses will include an Ecuadorian engineer Donziger allegedly paid to pose as an independent monitor in 2006; at least two lawyers Donziger briefly retained but who quit after discovering the truth about the alleged Cabrera fraud (including Jeff Shinder of New York’s Constantine Cannon); two of Donziger’s main former funders (including Joseph Kohn of the Philadelphia-based law firm Kohn Swift & Graf and Chris Bogart, the CEO of the Burford Group, a litigation finance company); at least five of Donziger’s former expert environmental consultants (including either Doug Beltman and Ann Maest from Boulder-based Stratus Consulting); an attorney for Stratus; and two former associates from Donziger’s own small law firm.

Mastro also praised his client for having fought the case as hard as it has. “Chevron didn’t give in,” he told Judge Kaplan. “It stood up and refused to be extorted and defrauded.” If Donziger’s “shakedown” of Chevron succeeds, he warned, “Who will be the next U.S. victim of his paradigm? It will be open season on U.S. corporations in corrupt foreign jurisdictions.”

Tall, handsome, and fit, Donziger looked characteristically poker-faced and unfazed as these allegations were leveled against him, with only slight bags under his eyes marring his customary in-court splendor.

Friedman’s opening on his behalf, however, was markedly understated, qualified, and even defensive in points—a jarring approach for such a truculent, defiant client. Friedman admitted, perhaps more openly than Donziger ever has previously, that the guts of the Cabrera report were, indeed, ghostwritten by Donziger’s environmental consultants at Boulder-based Stratus Consulting, and that Donziger had gone to considerable lengths to keep that fact secret. Nevertheless, he suggested that the data contained in the appendices of the report were still valid.

“Aspects of the way Ecuador’s legal system works are different from the ways our works, and may seem odd and maybe even suspicious,” he said by way of mitigation. He said that the people Donziger was representing in Ecuador were “disfavored minorities,” and likened Donziger’s task to that of Thurgood Marshall or Ralph Nader. “Mr. Donziger understood that to get justice for his clients, there would need to be both legal change and social change, and he couldn’t have one without the other.

“Yes, judges needed to be pressured,” he continued. “There needed to be a spotlight on their activities. “Both sides went to politicians and the public to create atmospherics in which their side would win. It was much like the atmospherics in the South in the 1960s. It wasn’t pretty, and there a lot of moments nobody can be proud of.

“But,” he said, “there was no bribery—at least by the people represented at this table.”
Friedman argued that former judge Guerra’s testimony about the bribery should not be believed because Chevron paid him, as it has disclosed, $38,000 for the physical evidence he turned over to the company (computers, phones, hard drives, bank, courier, and phone records), because it has compensated him for the expenses of moving his and his son’s families to America, which Chevron says was done to avoid physical and legal reprisals in Ecuador. (President

Rafael Correa has denounced Chevron’s Ecuadorian witnesses and attorneys as “traitors,” “criminals,” and “collaborators,” and the country has commenced a criminal investigation against Guerra.)

After the opening, Chevron’s first witness at trial was Ricardo Reis Veiga, a Brazilian-born inhouse attorney who oversaw the winding up of Texaco’s operations in Ecuador in the early 1990s—including the settlement and reparations agreements of the mid-1990s—and then oversaw Chevron’s day-to-day defense of the Lago Agrio case from 2003 to 2009.

Had this been a jury trial, his direct testimony might have been quite dramatic for spectators and journalists, especially because Donziger has long viewed Reis Veiga as his arch-nemesis.

“Some days I fantasize about putting my strong hands around Reis Veiga’s neck and squeezing for mercy,” Donziger wrote in a book proposal about the Lago Agrio case that he shopped to a literary agent in 2006.

Reis Veiga was also one of two Ecuador inhouse lawyers that, Chevron alleges, Donziger and his Amazon Defense Front colleagues managed to get arraigned on criminal charges in Ecuador in 2009—accusing them of having fraudulently obtained Texaco’s release from environmental liability in 1998—in an effort to gain tactical advantage in litigation. (The charges were dropped without explanation in 2011.)

According to his testimony, Reis Veiga was also the target of some of Front’s intimidating rallies outside the Lago Agrio courthouse. At one, Reis Veiga and four other Chevron officials were depicted as cardboard effigies wearing prison fatigues. A man dressed as the personification of “Death” then cut their throats and laid them in coffins, and then stabbed them again with his sickle.

But Chevron’s RICO case is not a jury trial, because the company dropped its damages claims against Donziger last month. It is now, instead, a bench trial, meaning that Judge Kaplan will make the factual findings as well as the legal conclusions. And Judge Kaplan, like most of the judges of the Manhattan federal district court, follows the practice of ordering parties in bench trials to submit their witnesses’ direct testimony in writing, in the form of a sworn narrative.

Only the cross-examination actually takes place live in the courtroom.

In theory these procedures maximize efficiency and they work well when both sides are represented by well-resourced, well prepared teams of lawyers. (The recent United States v. Apple antitrust case, for instance, was tried before Judge Denise Cote under such procedures.)

But in a case like this one, where one side’s lawyers are not prepared—and have not been able to work out in advance, with the opposing parties and the judge, their objections to written testimony and exhibits, the process can be both excruciatingly slow and mystifying for the journalists and spectators present, who have no idea what the witness is being cross-examined about. Reis Veiga’s written direct testimony was not made public until about 6 p.m. yesterday, after more than a half day of cross-examination.

On top of that, for much of the morning, Judge Kaplan’s technical assistant—the one who understood how to display exhibits over the computer monitors throughout the courtroom—was unavoidably absent. He was preparing, as it happened, for the arraignment before Judge Kaplan of Al Qaeda operative Abu Anas al Libi.

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