Thursday, May 12, 2011

Amazon Region: Report Finds Chevron Downplaying Shareholder Risk from $18 Billion Ecuador Judgment

SOURCE Rainforest Action Network

Two weeks before Chevron's Annual General Shareholder meeting, a report released today, An Analysis of the Financial and Operational Risks to Chevron Corporation from Aguinda v. ChevronTexaco, finds that Chevron's multi-billion dollar liability in Ecuador poses serious financial and operational risk to the company and its shareholders. The case could reduce the company's stock price and raise costs for oil companies. The report is being released today at the CERES business conference in Oakland, CA.

In February, Chevron was found guilty of massive environmental contamination by an Ecuadorian provincial court and ordered to pay more than $18 billion in compensatory and punitive damages for widespread oil contamination. This is a historically high judgment that is comparable in size only to BP's promised $20 billion fund to compensate victims of the 2010 Gulf of Mexico oil spill.

"In sworn legal statements, Chevron has admitted that the company faces 'irreparable injury to [its] business reputation and business relationships' from potential enforcement of the Ecuadorian court judgment. However, Chevron has consistently failed to fully characterize these risks to its shareholders," said Simon Billenness of Strategy for Corporate Responsibility and Social Investment who co-authored the report.

Key Findings of the report include:

  • The multi-billion liability in Ecuador poses serious risk to Chevron's worldwide operations, with the possibility of asset seizures and loss of social license to operate.
  • Chevron's principal legal defense against enforcement of the $18 billion liability is to obtain a preliminary injunction from U.S. District Court. It is not clear that such an injunction will protect Chevron from worldwide enforcement efforts.
  • Chevron's legal liability could impact its stock. Stock research company Trefis predicted a decline in its estimate of Chevron's stock valuation of approximately 5 percent based on the company paying only the $9.5 billion compensatory damages ordered by the Ecuadorian court.

The report is based upon public filings with the Securities and Exchange Commission, public domain legal filings in the United States and Ecuador, and interviews with legal experts.

The report was written by Simon Billenness of Strategy for Corporate Responsibility and Social Investment and Sanford Lewis of Strategic Counsel on Corporate Accountability, and commissioned by Amazon Watch and Rainforest Action Network.

The full report can be found at: