MANHATTAN (CN) – After nearly three years of investigation, New York’s attorney general pulled the trigger Wednesday on a fraud complaint against Exxon that is seen as the climate-change equivalent to the lawsuit that tamed Big Tobacco.
Launched by her predecessor Eric Schneiderman, New York Attorney General Barbara Underwood put the finishing touches on an investigation prompted by a Pulitzer Prize-winning series of articles in November 2015.
Jointly published by the Los Angeles Times and Inside Climate News, the series accused Exxon Mobil of misleading investors on how climate change would hurt their bottom line – knowledge that the oil giant allegedly calculated internally since the 1970s. The groundbreaking reports electrified climate activists, who summarized the exhaustive findings with the hashtag #ExxonKnew.
These reports resulted in a 91-page lawsuit filed in Manhattan Supreme Court leveling four counts of fraud, including violation of New York State’s Martin Act.
“Investors put their money and their trust in Exxon – which assured them of the long-term value of their shares, as the company claimed to be factoring the risk of increasing climate change regulation into its business decisions. Yet as our investigation found, Exxon often did no such thing,” Underwood said in a statement.
She continued, “Instead, Exxon built a facade to deceive investors into believing that the company was managing the risks of climate change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations.”
Underwood is seeking unspecified damages, disgorgement and restitution, but the allegations in the complaint suggest the penalty could be quite hefty.
“Cash flow models for fourteen of Exxon’s Alberta oil sands projects show that the company’s deviations from its publicly represented proxy costs would have substantially impacted profits,” the lawsuit states. “By applying Alberta’s legislated cost, held flat into the future, rather than the escalating proxy cost, or by applying proxy cost figures that were significantly lower than those set out in Exxon’s public representations, Exxon underestimated total projected [greenhouse gas]-related costs at those fourteen projects by approximately $30 billion CAD (more than $25 billion USD), and overestimated cumulative undiscounted cash flows by similar figures.”
State prosecutors also say Exxon underestimated greenhouse gas-related costs by as much as 94 percent in an economic forecast for its Kearl oil sands asset in Alberta.
“By applying existing legislated costs instead of the publicly represented proxy cost to Kearl, Exxon reduced the projected undiscounted costs of GHG emissions for that asset by approximately 94%, or $14 billion CAD ($11 billion USD),” according to the complaint.
In court proceedings related to the investigation, attorneys for Exxon echoed President Donald Trump’s political rhetoric in accusing state prosecutors of launching a “witch hunt.” The company’s unsigned statement is no less scorching.
“These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing,” it states.
The longtime probe remained steady amid shifting political winds: Underwood picked up the case after a sexual misconduct scandal unseated Schneiderman, and the attorney general’s office acquired emails from former Exxon CEO Rex Tillerson, at the time that oil exec had been appointed secretary of state.
“Specifically, [the Office of the Attorney General] found that Exxon’s former chairman and CEO, Rex Wayne Tillerson, utilized an alias email address on the Exxon system under the pseudonym ‘Wayne Tracker’ from at least 2008 through 2015,” Assistant Attorney General John Oleske wrote in a bombshell letter in March 2017. “Mr. Tillerson used this secondary email address to send and receive materials regarding important matters, including those concerning to the risk-management issues related to climate change that are the focus of OAG’s investigation.”
Fired by Trump a year later with a tweet, Tillerson’s brief diplomatic tenure provoked outcry by environmentalists that it replaced statecraft with a pursuit of raw resources.