News Article

Trillium Asks Securities and Exchange Commission to Investigate Chevron Corporation’s Disclosures Re Historic Ecuadorian Judgment

Shelley Alpern, Trillium   (617) 292-8026, x 248
Jonas Kron, Esq., Trillium   (503) 592-0864
Sanford Lewis, Esq.   (413) 549-7333
Boston, MA, May 23, 2011 – Trillium Asset Management (“Trillium”) has requested that the Securities and Exchange Commission (SEC) undertake a staff review to examine whether Chevron Corp. has appropriately disclosed to its shareholders the scope and magnitude of financial and operational risk from a recent adverse legal judgment in Ecuador. In its letter, Trillium states its belief that the issues raised may have “the potential to rise to the level of materiality under the securities laws.”
After nearly two decades of litigation, on February 14, 2011, the Ecuadorian Provincial Court issued its final judgment in which it found Chevron liable for just over $18 billion in compensatory and punitive damages for environmental pollution by Texaco in the 1970s and 1980s. (Chevron acquired Texaco in 2001.) The judgment, now under appeal, constitutes one of the largest court judgments for environmental damage in history, comparable in size only to BP’s promised $20 billion fund to compensate victims of the 2010 Gulf of Mexico oil spill.
Chevron has obtained a preliminary injunction from the U.S. Second District Court that purports to bar the plaintiffs and their lawyers from seeking enforcement of any judgment of the Ecuadorian court. However, the letter states, it not clear how this injunction court would protect Chevron from enforcement efforts by the plaintiffs aimed at Chevron’s assets outside the United States. Moreover, the injunction is subject to appeal.
The Trillium letter highlights the disparities between Chevron’s recent statements to shareholders those made in sworn testimony in connection with the company’s RICO suit against the plaintiffs. In its most recent annual reported, published 10 days following the judgment, the company states:

The ultimate outcome of the foregoing matters, including any financial effect on Chevron, remains uncertain. Management does not believe an estimate of a reasonably possible loss (or a range of loss) can be made in this case. …Moreover, the highly uncertain legal environment surrounding the case provides no basis for management to estimate a reasonably possible loss (or a range of loss).[1]

However, in the RICO testimony, Chevron Deputy Comptroller Rex Mitchell stated:

Defendants’ campaign to seek seizures anywhere around the world and generate maximum publicity for such acts would cause significant, irreparable damage to Chevron. Unless it is stopped, Defendants’ announced plan to cause disruption to Chevron’s supply chain is likely to cause irreparable injury to Chevron’s business reputation and business relationships that would not be remediable by money damages.” [2] (emphasis added)

The Trillium letter also questions whether certain statements made to shareholders have been misleading, concerning Chevron’s opinion that the Ecuadorian courts lack jurisdiction in the case, and whether Chevron was released from liability by virtue of certain releases granted by the government of Ecuador following remedial work completed in 1998. The Trillium letter states:

Chevron is entitled to disagreements with the plaintiffs about points of contention in the lawsuit; indeed, that is why a lawsuit exists. However, some of the preceding statements, taken in aggregate, could create the misleading perception that the Ecuadorian lawsuit is fraudulent and without legal merit. The reality is that these are disputed issues on which Chevron holds a position, which is not the same as the position held by the plaintiffs or the Ecuadorian court.

In the letter’s conclusion, Trillium urged the Commission to “analyze these omissions in light of the standards governing materiality, SEC rules and guidance, and any other applicable requirements, and to take any actions the Staff deems appropriate.”
The letter was signed by Jonas Kron, Deputy Director for ESG Research and Shareholder Advocacy, and Sanford Lewis, an attorney whose practices specializes on corporate accountability. Earlier this month, Mr. Lewis released the report (co-authored with corporate responsibility consultant Simon Billenness) An Analysis of the Financial and Operational Risks to Chevron Corporation from Aguinda v. ChevronTexaco.
Related Shareholder Proposal
Trillium is a co-proponent of a related shareholder proposal filed by the New York State Office of the Comptroller that will be voted on at Wednesday’s Chevron stockholder meeting in San Ramon, CA. The proposal requests that Chevron nominate for its Board of Directors at least one independent candidate who has a high level of expertise and experience in environmental matters relevant to hydrocarbon exploration and production and who is widely recognized in the business and environmental communities as an authority in such field. Last year, the resolution received approximately 27 percent of the vote.
Related Investor Statement
In a statement expected to be released separately this week by the New York State Office of the Comptroller, a number of institutional investors in Chevron will be calling upon the company to explore a negotiated settlement with the plaintiffs.

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About Trillium Asset Management
Trillium Asset Management manages equity, balanced and fixed income portfolios for high net worth individuals, foundations, endowments, religious institutions and other non-profits. Our investment approach emphasizes quality growth at a reasonable price, with integrated ESG (environmental, social, and governance) analysis. Trillium has offices in Boston, Durham and San Francisco.

[1] Chevron Corporation, 2010 Annual Report, p. 25
[2] Declaration of Chevron Deputy Comptroller Rex Mitchell in support of Chevron Corporation Motion for a Preliminary Injunction, Filed 2/5/11, p. 4.