MANHATTAN (CN) – Four years in the making, a trial to determine whether Exxon must pay heavily for misleading shareholders about how the climate crisis would affect its bottom line began with a political splash Tuesday afternoon.
New York prosecutors and attorneys for Exxon both agreed that a crucial witness for their case would be Rex Tillerson, the oil giant’s former CEO who later served as President Donald Trump’s Secretary of State.
Kevin Wallace, the acting chief of the New York attorney general’s investor protection bureau, claimed Tillerson had been “deeply involved” in Exxon’s internal and external analyses about the impact of climate science on their business model.
For the attorney general’s office, Tillerson’s role showed the company viewed the question as material to investors.
“The idea that the CEO of one of the largest publicly traded companies in the world was taking time out of his schedule to personally review disclosures on immaterial issues is absurd,” Wallace said.
“What we are saying, and what the law demands, is that Exxon should not mislead its investors,” he added later. “That’s what this case is about.”
Exxon’s attorney Theodore Wells, from the firm Paul Weiss, insisted the company accepts that “climate change is real” and should be addressed internationally.
Despite the conciliatory introduction, Wells ended his remarks by addressing what he called the “elephant in the room” – a campaign by prosecutors and climate activists working together to “vilify” Exxon.
Wells said the campaign began with what he called an “extraordinary” press conference in 2015.
Standing alongside former vice president Al Gore, then-New York Attorney General Eric Schneiderman announced the opening of an investigation against Exxon on the heels of groundbreaking reporting that the company’s rosier predictions of how global heating would affect their bottom line conflicted with their internal studies.
That series, a collaboration by Inside Climate News and the Los Angeles Times, went on to win a Pulitzer Prize.
A three-year search through company documents ensued before Schneiderman’s replacement Barbara Underwood filed her lawsuit.
Her replacement Letitia James had inherited the case by the time of opening statements Tuesday afternoon, offering the public their first look at what their search has found.
According to Wallace, Exxon’s records showed a search for “alternative methodology” for calculating how climate considerations into the company’s drilling in the Alberta tar sands in 2015, hoping to avert “massive GHG [greenhouse gas] costs.”
Exxon claims to have disclosed the risks of climate change to the public in a sentence of a 2014 document.
“Perhaps most importantly, we require that all our business segments include, where appropriate, GHG costs in their economics when seeking funding for capital investments,” it stated.
Wallace told Manhattan Supreme Court Justice Barry Ostrager, who is hearing the case without a jury, that this disclaimer was not enough.
“We are not telling [Exxon] how to run its business,” Wallace said, adding the company must be straightforward with its shareholders.
“The costs of that failure are staggering,” he added. “Investors are entitled to the truth.”
Calling the fraud accusations “outrageous,” Wells denied Exxon’s disclosures on climate amounted to a “Potemkin Village.” The Exxon attorney argued Tillerson studied this issue from the beginning of his tenure as CEO in 2006.
Displaying portions of a deposition on a slide, Wells quoted Tillerson as saying: “I had taken the view and we had taken the view as a corporation that the risk of climate change and that… appropriate action was going to be needed.”
It is unclear what part of the quote was excised with the ellipses, but Wells promised the courtroom would hear from Tillerson himself.
“He’s going to be a live witness,” he revealed.
That state will call Tillerson before Exxon does, and it is unclear when the secretary will testify for either side. Witness testimony begins on Wednesday morning.
The long-awaited trial could prove to be a bellwether: The Supreme Court declined to hear a petition by energy companies including BP, Citgo, Consul, ConocoPhillips, ExxonMobil, Royal Dutch Shell and others seeking to stay a trial in a Baltimore lawsuit seeking to hold them liable for the climate crisis, setting the stage for an eventual trial.