Ecuadoreans Can Take Chevron CEO to Hot Seat

MANHATTAN (CN) - Chevron CEO John Watson and its private detective agency must face questioning in their effort to upend a $19 billion environmental judgment, a federal magistrate ruled.

Texaco spent nearly four decades, between 1964 and 1992, exploring, drilling and exporting petroleum from the Ecuadorean rainforest, and another decade fighting a lawsuit in New York over the environmental toll of its work in the Amazon.

Chevron inherited that lawsuit by acquiring Texaco in 2001, but argued that Lago Agrio, Ecuador, was a better venue for the case.

When the Lago Agrio court prepared to enter the multibillion verdict against it in 2011, Chevron changed its tune and decried the system as a den of corruption.

Days before the Ecuadorean court ruled, Chevron painted itself in a Manhattan lawsuit as the victim of an extortionate "shakedown," orchestrated by a cadre of unethical lawyers and contractors who cooked data and bribed judges.

With discovery in that case set to end this month, a federal magistrate judge granted the Ecuadoreans the right to grill three "apex witnesses," as they are described in the 10-page order.

They include Watson, Chevron's CEO; Edward Scott III, the vice president and general counsel of Chevron's Global Upstream and Gas Group; and an unnamed investigator from Kroll Inc., which the Ecuadoreans describe as a "corporate spy" firm.

Chevron tried to quash their subpoenas by arguing that "apex witnesses" should not be harassed with depositions.

Addressing this argument, U.S. Magistrate Judge James Francis IV wrote: "To be sure, the rancorous history of this litigation lends credibility to Chevron's concern that the deposition has been noticed for purposes of harassment. On the other hand, there is little doubt that Mr. Watson has relevant knowledge. As chief executive officer, he has, of course, monitored litigation that creates potential liability for Chevron in the tens of billions of dollars."

Quoting from Watson's corporate biography, the magistrate added: "Furthermore, according to his corporate biography, Mr. Watson previously 'led the company's integration effort following the Chevron-Texaco merger,' experience likely to have given him personal knowledge of the environmental issues underlying the Ecuador litigation."

Chevron said the nature of the merger protected it from Texaco's liabilities, arguments it continues to raise in European international arbitration.

Judge Francis emphasized that "this is far from a trivial case."

"Enough is at stake to justify the deposition of an apex witness like Mr. Watson," he wrote.

Bill Hamilton, a spokesman for the Ecuadoreans, noted that Scott, the Chevron VP, had "assembled Chevron's army of 2,000 lawyers around the globe."

In refusing to save the unspecified Kroll employee from testifying, Francis said, "there is no private-investigator's privilege."

The shadowy employee is believed to be the third participant in a July 13, 2012, meeting in Ecuador's capital city of Quito, between a Chevron lawyer and Alberto Guerra, the first judge to hear the case in Lago Agrio.

During that meeting, which Chevron recently transcribed for the court, the Chevron lawyer and Kroll investigator appear to offer the former judge $20,000 cash in a suitcase, prompting Guerra to ask, "Couldn't you add a few zeroes?"

Guerra also, ironically, confided that he became sick for two months drinking well-water from Sacha, an oil field where Texaco drilled, the transcript shows.

Months later, Guerra entered into a $326,000 contract to sign up as Chevron's star witness, claiming that lawyers for the rainforest residents bribed him to ghostwrite the judgment that the final judge entered. He provided bank record and forensic evidence that supposedly corroborate his tale and prove Chevron's allegations.

Chevron has not denied, but defended, its "transparent" payments to Guerra, ostensibly made for his "protection."

Pablo Fajardo, the lead counsel for the Ecuadoreans, cast the transaction as part of a "bullying and bribery" campaign.

"Now CEO Watson and Kroll's investigator can confirm what we already know: that Chevron's bullying and bribery is part of a strategy hatched in Ecuador even before the ruling to avoid paying for remediation and the health and other needs of the affected people," Fajardo said in a statement.

Chevron spokesman Kent Robertson countered: "Chevron will of course comply with all orders of the Court as it participates in the discovery process that continues to expose the plaintiffs' lawyers' fraud."

Hamilton, the Ecuadoreans' spokesman, anticipated that depositions will take place before the end of the month, outside of public scrutiny.

"Typically they are taken in lawyers' offices and are under seal at least until all parties have reviewed the transcripts," he said.

Hamilton also quipped: "Hard to imagine where we will find an office big enough for Watson's herd of lawyers!"

Meanwhile, the two firms representing the Ecuadoreans in New York filed late last week to withdraw from the case, pending approval from a federal judge.

It is unclear whether that motion will be granted, or denied, before or after the depositions of the major witnesses.

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