Patton Boggs pays Chevron $15 million to settle fraud charges


FORTUNE — Patton Boggs has agreed to pay Chevron $15 million to settle a fraud charge the oil giant leveled against it, which stemmed from the law firm’s role in an environmental suit against the oil giant in Lago Agrio, Ecuador, which culminated in a $9.5 billion judgment against Chevron (CVX) in 2011.

Last March a Manhattan federal judge ruled that that judgment had been procured by fraud, bribery, and extortion, but he withheld judgment on whether Patton Boggs itself had engaged in any wrongdoing.

Under the terms of today’s remarkable agreement, Patton Boggs also agreed to withdraw from any further representation of the plaintiffs, expressed “regret” for ever having gotten involved in the case, agreed to turn over its remaining stake and fee interests in the case to Chevron, and agreed to allow two of its partners to be deposed by Chevron regarding the plaintiffs’ efforts to fund their litigation and to enforce the judgment in other countries. (The firm had originally taken the case on a partial contingency basis, and the agreement reveals that its stake in the judgment had grown to 5% — or more than half a billion dollars.)

MORE: Chevron seeks $32 million in fees from environmental lawyer

Under the terms of the deal, Patton Boggs agreed to make only the following statement: “Today’s resolution of our firm’s disputes with Chevron ends our involvement in the Lago Agrio matter. The recent opinion of the United States District Court for the Southern District of New York in Chevron v. Donziger includes a number of factual findings about matters which would have materially affected our firm’s decision to become involved and stay involved as counsel here. Based on the Court’s findings, Patton Boggs regrets its involvement in this matter.”

The case referred to was Chevron’s civil racketeering suit against the Ecuadorian plaintiffs’ lead strategist, New York lawyer Steven Donziger. Judge Lewis Kaplan ruled in March that Donziger had committed extortion, mail fraud, wire fraud, bribery, obstruction of justice, witness tampering, money laundering, and Foreign Corrupt Practices Act violations in the course of winning the $9.5 billion judgment, and that the entire 188-page Ecuadorian judgment had been secretly ghostwritten by the plaintiffs team — an accommodation achieved by its having promised the presiding judge $500,000 from any eventual recovery. Kaplan issued an order barring Donziger and his associates from attempting to profit from the case in any way. Donziger and his co-defendants have appealed that ruling.

“We are pleased that Patton Boggs is ending its association with the fraudulent and extortionate Ecuador litigation scheme,” Chevron’s vice president and general counsel Hewitt Pate said in a press release. “Chevron encourages others to disassociate themselves from this fraud.”

MORE: Judge: $9.5 billion Ecuadorian verdict against Chevron was product of bribery

Patton Boggs is the most recent in a line of companies and individuals who have renounced and washed their hands of their previous work for the Ecuadorian plaintiffs after, according to their accounts, having become disenchanted with Donziger’s methods. Others have included David Russell (the plaintiffs’ first chief environmental expert), Charles Calmbacher (a top member of Russell’s environmental expert team), the Kohn Swift & Graf law firm of Philadelphia (the funder of the case from 2003 to 2009), the New York law firm of Constantine Cannon (which dropped the case within just weeks of entering it in early 2010), the Denver law firm of Brownstein Hyatt Farber Schreck (same circumstances as Constantine Cannon), the Stratus Consulting firm of Boulder, Colo. (Donziger’s chief environmental experts from about 2007 to 2012), and Burford Capital (a litigation funder that invested $4 million in the case in late 2010, but soon froze its investment and then withdrew, alleging that Donziger and Patton Boggs had defrauded it into the case).

It has been widely reported that Patton Boggs, which has had to downsize and has suffered from partner defections, has been searching for a merger partner for more than a year.

The two Patton Boggs partners who will be deposed are James E. Tyrrell, Jr., who was the lead partner on the engagement, and Eric Westenberger.

Patton Boggs became involved in the case in early 2010, at a time when Chevron was attempting to bring to light evidence that Donziger’s team had secretly ghostwritten a key report by a purportedly neutral expert. In its fraud claim, Chevron had alleged that the firm submitted misleading affidavits in an attempt to stall discovery of the truth and to conceal and minimize the extent of the wrongdoing, and that it made false statements to Burford in order to convince it to fund the plaintiffs case in late 2010.

In response to a request for comment, Donziger spokesperson Karen Hinton emailed a press release stating that he and the Ecuadorian plaintiffs were “exploring legal action” to “nullify” the settlement which, the release alleges, betrays the firm’s former clients and threatens to violate attorney client privileges. The release alleges that Patton Boggs is “now the latest victim of Chevron’s campaign of intimidation.”

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