Sunday, April 30, 2006

Chevron and the Ecuadorian rainforest

In its annual meeting in Houston on Wednesday April 27th, Chevron's CEO David O'Reilly faced some tough questions.

The issue at stake is protest from environmental activists over the handling of a class-action lawsuit that alleges Texaco deliberately dumped more than 18 billion gallons of toxic "water of formation" into Ecuador's rainforest from 1964 to 1992. The lawsuit on trial in Ecuador claims that the contamination forced two indigenous groups to the brink of extinction and led to a surge in cancer rates.

How does this litigation in Ecuador affect the company's activities here in the US? Apparently Chevron failed to disclose this large potential liability to its shareholders in its SEC filings.
So representatives of Amazon Watch filed a complaint with the SEC over Chevron's failure to disclose the Ecuador liability to shareholders in their annual reports.
From their website:
The only comprehensive assessment of the environmental damage, submitted by the American firm Global Environmental Operations, estimated that a clean-up would cost at least $6.14 billion. The estimate did not include personal damages to the thousands of victims in the region, nor compensation for the decades that the local population has lived in a degraded habitat – both of which together could double or even triple the clean-up cost.
Should these cost estimates pan out, the judgment could be the largest in history against an oil company.
All told, the Amazon Watch letter asserts that the California-based oil giant faces potential losses in the Ecuador lawsuit greater than 10 percent of its total assets.... Chevron faces a “staggering potential liability” in Ecuador but has not once disclosed the potential liability in its SEC filings...SEC vigilance is essential to ensuring the sort of frank corporate disclosure that protects individual investors and the overall health of our financial markets.”

The SEC then instructed Chevron to address this shareholder resolution in the meeting.

It's not clear what actually happened at the meeting, but
this article says it did not go well.

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