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Chevron’s Ecuadorean Foes|Hit With Double-Whammy

MANHATTAN (CN) - Ecuadoreans trying to collect billions from Chevron suffered two major setbacks as their lawyers' torrid emails became evidence in a New York court within hours of seeing their award sliced in half.

On Feb. 14, 2011, a provincial court in the rainforest region of Lago Agrio, Ecuador, slapped Chevron with a roughly $9 billion verdict for decades of drilling by its predecessor, Texaco. The amount was doubled with other fees after the oil giant refused to apologize.

Finding that the Lago Agrio judge had no authority to force a sorry out of Chevron, however, Ecuador's Supreme Court reduced the penalty back to its original amount Tuesday.

That ruling did not appear to affect Chevron's federal lawsuit in Manhattan to void the ruling in its entirety as a product of extortion.

For nearly a month, Chevron has piled on evidence that their Ecuadorean opponents ghostwrote the judgment bearing the name of Lago Agrio Judge Nicholas Zambrano, through a dizzyingly elaborate scheme involving two prior judges on the case.

Chevron contends that New York-based attorney Steven Donziger bribed the first judge who heard the case in Ecuador, Alberto Guerra, to collude on the fix with Zambrano. Guerra recently testified that, in exchange for a cut of the judgment, he stitched together the text from a fraudulent scientific report by court-appointed expert Richard Cabrera, who allegedly adopted findings by the firm that formerly represented Chevron's opponents: Stratus Consulting.

Cabrera came into the picture through an equally contorted conspiracy, Chevron alleges.

In 2006, Judge German Yanez was presiding over the case during judicial inspections of oil pits, and he had yet to appoint a court expert when he got embroiled in a sex scandal. Chevron asserts that Donziger's team blackmailed Yanez with the allegations to have him halt judicial inspections and to secure the appointment of Cabrera, who supposedly would be susceptible to corruption.

Donziger's attorney Christopher Gowan said the Ecuadorean Supreme Court mocked this allegation as "judicial absurdity" in its yet-to-be-released ruling.

Hours after the decision came down, Chevron laid out its evidence supporting the claim in a New York court, through internal emails of the Ecuadorean legal team.

The documents came into play during the testimony of Quito-based lawyer Alejandro Ponce-Villacis, who worked on the case between June 2005 and November 2008.

In a 10-page deposition, Ponce testified that he helped strategize the case and the judicial inspections of oil sites.

Reed Brodsky, who prosecuted the hedge fund tycoon Raj Rajaratnam in the largest insider-trading scheme in history, questioned Ponce about those inspections for Chevron.

To crack the Rajaratnam case, Brodsky and his colleagues had to decrypt code names that the hedge fund traders used for their illicit trades.

Brodsky suggested similar chatter occurred in email chains between Pablo Fajardo, the lead lawyer in Ecuador; Donziger, who spearheaded the case from New York; and Ponce, who assisted from Quito.

In a Jan. 9, 2007, email, Fajardo wrote bluntly: "I had a short meeting with the Big Boss (you know who I'm talking about); we discussed the start of the Global Assessment," the name for the final report of the inspections.

Ponce claimed he did not know who the "Big Boss" was, but Chevron believes it was Judge Yanez.

The "Big Boss" also went by other names, Chevron says.

A March 26, 2007, email from Pablo Fajardo to the Ecuadorean legal team - bearing the subject line "Orange Alert" - began: "Today the cook met with the waiter to coordinate the menu."

Chevron believes that the "cook" refers to Yanez, who allegedly met with Cabrera - "the waiter" - to hatch a plan for the global assessment "menu."

Ponce again insisted that he did not know what these terms meant, and he added that was not included on that email.

Brodsky undermined that denial by confronting Ponce with another Oct. 8, 2007, email from Fajardo listing the witness as the first of six recipients.


Chevron believes this refers to the Ecuadorean Judicial Council's handling of a complaint against Yanez.

U.S. District Judge Lewis Kaplan, who is hearing the case without a jury, quipped, "I don't imagine they have jurisdiction over restaurants."

Not all of the emails that Brodsky highlighted used code names for the men.

On July 1, 2007, Fajardo wrote an email to Donziger and others bearing the subject line "WORRIED." It stated, "Richard in Quito," an apparent reference to Cabrera, "called me this morning, about a little mistake in the contract, he seemed a bit upset."

At one point during his testimony, Ponce argued that Ecuadorean law did not require Cabrera to be a neutral arbiter.

Brodsky undermined that contention by showing Ponce that he made precisely the opposite argument five years ago.

"I think that the risk to [Chevron] is very high now, because an independent expert designated by the court and not by the parties has issued this report," Ponce wrote in an April 2, 2008 email to Donziger.

Meanwhile, Donziger is expected to testify in his own behalf, but he will not take the stand until next week because he has not yet prepared a witness statement.

Josh Lipton, the CEO of Stratus, is expected to testify on Thursday.

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