MANHATTAN (CN) — New York dropped half of its fraud case against ExxonMobil Thursday during closing arguments of a trial where the energy titan is accused of misleading investors about how climate change regulation would shake up profits.
The two-week trial in Manhattan Supreme Court marks the long-awaited conclusion of an investigation launched in 2015 by former Attorney General Eric Schneiderman.
Two years after Schneiderman stood alongside former Vice President Al Gore to announce that Exxon had been subpoenaed for extensive financial records and emails, his replacement, Barbara Underwood, formalized the state’s allegations in a 97-page complaint. Yet another prosecutor, Attorney General Letitia James, was at helm Thursday, however, as prosecutors withdrew counts three and four of the complaint alleging common-law fraud and equitable fraud.
As the case proceeds to deliberations — Justice Barry Ostrager is presiding without a jury — New York will be pursuing only the first two counts of the lawsuit under the Martin Act, an expansive state law that had been used primarily to go pursue financial fraud cases.
Ostrager noted Thursday that the two fraud counts were dropped with prejudice, meaning New York cannot refiled or repackage them again.
In closing summations today, state attorney Jonathan Zweig said ExxonMobil used two separate sets of books to account for how potential climate regulations would impact its business.
“The question in this case is whether Exxon’s disclosures were accurate, and the evidence shows they were not,” he said.
New York contends that Exxon was using 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, 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.
“Exxon applied much lower costs or no costs at all,” Zweig said, claiming that Exxon had invested $850 million into a chemical facility in Beaumont, Texas, but did not apply the appropriate greenhouse gas costs in its projections.
“Exxon was making a business as usual assumption that existing law would be frozen in place forever,” Zweig said.
In evaluating an oil sands project in Alberta, Canada, Exxon predicted that costs would remain flat through 2030 and 2040, instead of applying escalating costs to account for increasingly stringent climate regulation of a low-carbon future, Zweig argued.
Exxon’s lead attorney Ted Wells said that the attorney general had broadly failed to bring enough evidence to sustain the burden at trial.
“I don’t know what the quantum is, but I know it’s not zero,” the mustachioed defense attorney from the firm Paul, Weiss, Rifkind, Wharton & Garrison LLP said Thursday.
Wells likened the meandering aims of three-year probe to Herman Melville’s literary masterpiece “Moby Dick,” saying the New York Attorney General’s Office had chased theory after theory but ultimately failed at trial to bring enough evidence.
“We are confident that you will conclude basted on your view of the evidence that the New York Attorney General has not sustained its burden of proof on each and every count,” Wells said to Ostrager at the conclusion of his hour-long summation.
Wells said the few expert witnesses that the state brought were “not credible” and more comparable to good entertainment like “Saturday Night Live.”
“The theory of the case has not been supported by the evidence,” Wells said.
“The reputations of a lot of good people have been hurt and disparaged” by the allegations of government’s case, initially referring to the engineers and scientists at Exxon, but later including company executives who allegedly have been subjected to odious emails and text messages because of the charges.
Just before the end of his closing summations, Wells quoted trial testimony from Rex Tillerson, the company’s former chief executive and a former secretary of state in the Trump administration. “I feel badly for the men and women at the ExxonMobil corporation, the ones who work hard to put all of this together to inform the management, because they’re being accused of fraud as well,” Wells recited from Tillerson’s day on the stand.
Tillerson, 67, testified that he had lobbied the previous administration for a carbon tax and pushed for the landmark Paris Climate Accords, a treaty that his future boss Trump would attempt to unravel.