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Green Crusader Goes Down in Flames; Record $18 Billion Lawsuit in Doubt

They called it the “rainforest Chernobyl.” When Texaco left Ecuador, in 1992, it allegedly left behind open pits overflowing with black sludge and rivers laced with chemicals. The damage was so bad that a number of indigenous tribes almost died out completely. Those that remained, according to a group of Ecuadoreans who waged a nearly hopeless battle against Texaco for reparations, were plagued by miscarriages, birth defects, and poisoned fish and livestock.

The lawsuit lasted 18 long years, and one judge in New York died before he could make a ruling. It even outlasted Texaco, which Chevron purchased in 2001. It wound its way through a dozen American federal courts to a lonely concrete courtroom in the Ecuadorean jungle, where Judge Nicolás Zambrano at last rewarded the Ecuadorean plaintiffs for their epic struggle—to the tune of $18 billion. It was the largest sum ever awarded in an environmental lawsuit.

But all is not what it seems.

The integrity of the plaintiff team, led by Steven Donziger, a tenacious American environmental crusader, has come under scrutiny. So has the notoriously corrupt Ecuadorean court system. A 2009 documentary, Crude, contained scenes where Donziger appeared to suggest bribing various people associated with the case in order to get a whopper settlement. He also implied that the scientific evidence used to condemn Texaco was “just a bunch of smoke and mirrors and bull[….].” Indeed, just a few days ago, an affidavit posted on Chevron’s website describes in great detail how one of the Ecuadorean judges essentially gave Donziger and his team the power to ghostwrite the court’s judgment in return for $500,000.

Meanwhile, Donziger recruited a group of hedge funds to provide the capital his team needed to pursue the case, in exchange for a cut of the final award if it succeeded. They call this “litigation finance.” “These arrangements are unregulated and controversial,” Patrick Radden Keefe wrote in the New Yorker. “But for Donziger they presented a crucial opportunity to keep the litigation alive. He offered investors a high-risk, high-reward proposition. The judgment could run to billions of dollars, he said, with attorneys’ fees making up roughly a third of that figure. In confidence, he noted that his personal fee alone could amount to two hundred million dollars.”

This messy case and the numerous lawsuits it begat continue to slog slowly onward. Chevron is suing Donziger, saying he and the plaintiff team were part of a racketeering conspiracy and were colluding with corrupt Ecuadorean officials.

By most accounts Texaco did leave behind an atrocious mess in Ecuador, and at first glance it’s easy to see a simple, familiar story: The Big Bad Oil Company is held accountable for its dirty business in the pristine jungle, where traditional tribal people who bore the brunt of the environmental destruction and now want compensation are supported by a tireless, crusading White Knight lawyer. But cases like this are not as clear-cut as that. There are billions of dollars at stake, and creative Wall Street firms can smell it. It’s worth remembering that not even the greens are above wheeling and dealing, bashing and bribing, to get their way.

Somehow, we suspect that in the wheeling and dealing, the financial razzle dazzle, the astronomical legal fees and the outright chicanery and fraud this modern version of Jarndyce v. Jarndyce has spawned, the last thing anybody is thinking about is the well being of the original victims. We suspect that at this point, thanks in part to all the publicity the case has generated over the years, that if the self-interested intermediaries would all go away, the Big Bad Oil company and the tribal peoples might be able to work something out. Life isn’t that simple, perhaps, but it’s hard to see the lawyers and the investment bankers adding much value at this late date.

H/T alert reader MM.

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