Exxon Prevails in Fraud Suit Over Climate Change

Former Exxon CEO and ex-Secretary of State Rex Tillerson, second from right, leaves a courthouse in New York on Oct. 30, 2019. In a securities fraud lawsuit brought by the New York attorney general’s office, Tillerson testified that the energy giant’s leaders sought a full understanding of how new climate regulations would affect the bottom line. (AP Photo/Seth Wenig)

MANHATTAN (CN) – Booting fraud claims against Exxon, a New York judge found no evidence Tuesday that that the oil colossus deceived investors about how climate change would affect its business.

The state of New York brought the suit but failed to establish Exxon violated an anti-fraud law called the Martin Act, Justice Barry Ostrager of the Manhattan Supreme Court ruled.

“Nothing in this opinion is intended to absolve ExxonMobil from responsibility for contributing to climate change through the emission of greenhouse gases in the production of its fossil fuel products,” the 55-page decision states. “ExxonMobil does not dispute either that its operations produce greenhouse gases or that greenhouse gases contribute to climate change. But ExxonMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case.”

Former Attorney General Eric Schneiderman first launched the Exxon investigation in 2015, after which the case dragged on for three and a half years, including a 12-day bench trial.

The state said ExxonMobil used two separate sets of books to account for how potential climate regulations would impact its business.

“Today’s ruling affirms the position ExxonMobil has held throughout the New York Attorney General’s baseless investigation,” said Exxon spokesman Casey Norton said in a statement Tuesday. 

“Lawsuits that waste millions of dollars of taxpayer money do nothing to advance meaningful actions that reduce the risks of climate change,” Norton added.

New York accused Exxon of having used two different metrics in shareholder meetings and reports to account for stricter climate regulations: greenhouse gas costs, which measure how local regulators may tax emissions, and proxy costs, which aim to predict how demand for oil and gas may change around the world due to regulations.

By conflating the two metrics, the state said, Exxon deceived investors into believing the company was applying a projected cost of $80 per ton for its emissions when it was not, and making fossil fuel development projects appear more attractive to investors.

Ostrager found it notable, however, that now-Attorney General Letitia James did not call any witnesses who claimed to have been misled by information in Exxon’s reports.

“Significantly, there is no allegation in this case, and there was no proof adduced at trial, that anything ExxonMobil is alleged to have done or failed to have done affected ExxonMobil’s balance sheet, income statement, or any other financial disclosure,” the judge added. 

Even more importantly, he added, the state’s case focuses on projections for 2030 and 2040. 

“No reasonable investor during the period from 2013 to 2016 would make investment decisions based on speculative assumptions of costs that may be incurred 20+ or 30+years in the future with respect to unidentified future projects,” Ostrager wrote. 

James’ office said Tuesday the American people had benefited from its suit regardless of the outcome. 

“For the first time in history, ExxonMobil was compelled to answer publicly for their internal decisions that misled investors,” James said in a statement.

“The oil giant never took seriously the severe economic impact that climate change regulations would have on the company, contrary to what they were telling the public.”

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