Chevron Wins Major Civil RICO Trial Victory Against Purveyors of Corrupt $9.2 Billion Ecuadorian Judgment

March 5, 2014

On March 4, 2014, Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York entered judgment for plaintiff Chevron in Chevron Corp. v. Donziger et al., Case No. 11-cv-0691.  The court found that the U.S. lawyer who masterminded a $9.2 billion judgment against the company in Ecuador did so “by corrupt means,” and in the process violated U.S. federal laws prohibiting attempted extortion, wire fraud, money laundering, witness tampering, and obstruction of justice, as well as the Foreign Corrupt Practices Act.  The court entered judgment for Chevron and imposed equitable relief designed to ensure that “the defendants here may not be allowed to benefit from [the Ecuadorian judgment] in any way.”  Calling the case “extraordinary” and “includ[ing] things that normally come only out of Hollywood,” the court’s 485-page opinion, which is available here, detailed the evidence against U.S. plaintiff’s lawyer Steven Donziger and his team, finding that “[t]he wrongful actions of Donziger and his Ecuadorian legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador — and they knew it.  Indeed, one Ecuadorian legal team member, in a moment of panicky candor, admitted that if documents exposing just part of what they had done were to come to light, ‘apart from destroying the proceeding, all of us, your attorneys, might go to jail.'”  The court determined that Donziger and his team even “wrote the [Ecuadorian] court’s Judgment themselves and promised $500,000 to the Ecuadorian judge to rule in their favor and sign their judgment.”  “If ever there were a case warranting equitable relief with respect to a judgment procured by fraud,” the court concluded, “this is it.”

The decision follows a six-week trial and represents a major victory for Chevron in its multi-pronged response to the long-running purported environmental litigation emanating from Ecuador known as the Lago Agrio litigation.  Gibson Dunn represented Chevron in the closely watched case.  Chevron has long maintained that the proceedings in Ecuador were marred by fraud on the part of the plaintiffs’ lawyers, as well as corruption and collusion between the Lago Agrio plaintiffs (“LAPs”), the Ecuadorian court, and the Ecuadorian government.  As a consequence, Chevron sued the plaintiffs’ lawyers and other agents in the Southern District of New York under the federal RICO statute and other laws.  Yesterday’s decision vindicates Chevron’s claims of fraud and corruption and sends a powerful message to U.S. and other lawyers tempted to capitalize on the weaknesses of foreign judicial systems to attempt to extract payoffs from U.S. companies.  At the same time, it forcefully supports international efforts to promote the rule of law.

During the trial, Chevron presented overwhelming and virtually uncontested evidence that Donziger and his co-conspirators had procured the judgment through bribery and fraud, including forging expert reports, hiring Ecuadorian engineers to pose as “neutral” monitors to influence the Ecuadorian court, hiring consultants in the U.S. to ghostwrite the damages report of a purportedly neutral court-appointed “special master” (Richard Cabrera), and bribing the Ecuadorian judge who issued the decision (Nicolás Zambrano) to permit them to ghostwrite the decision in their favor.  Chevron’s evidence of the ghostwriting included verbatim quotations from the LAPs’ internal work product that appeared on dozens of pages of the judgment.  “These documents never were filed with the Lago Agrio court or made part of the official case record,” the court noted, and “Defendants utterly failed to explain how or why their internal work product — their ‘fingerprints’ — show up in the Judgment.”

Chevron also called as a witness former Ecuadorian judge Alberto Guerra, who testified that he had long served as Judge Zambrano’s paid ghostwriter, including in the case against Chevron.  Guerra produced bank deposit slips and other evidence of payments from the LAPs.  He also testified that he had served as a middle-man, conveying Judge Zambrano’s bribe solicitation to the LAPs, who accepted it, and then editing their draft of the judgment, which Judge Zambrano then issued as if it were his own.  Donziger called Judge Zambrano as a witness, who denied the bribery scheme but admitted that Judge Guerra had been his ghostwriter.  Chevron also presented evidence that when Chevron sought discovery from the LAPs’ attorneys and consultants in U.S. courts, Donziger and his co-conspirators engaged in a campaign of obstruction to prevent the truth from emerging, filing false affidavits in U.S. courts and tampering with witnesses.  Chevron also presented evidence that Donziger and his co-conspirators had engaged in an improper pressure campaign against Chevron, propagating numerous falsehoods based on their fabricated evidence in the press and to various state and federal agencies in an attempt to extort a settlement from Chevron.

In rendering its decision in favor of Chevron, the court noted that “[t]he transnational elements of the case make it sensitive and challenging,” but concluded based on the extensive evidentiary record that Donziger was liable under RICO for operating a racketeering enterprise that committed numerous federal crimes, including:

• Extortion.  The court found that Donziger engaged in two categories of conduct to pressure Chevron to settle the Ecuadorian lawsuit:  corrupt conduct in the Ecuadorian lawsuit itself, and the mounting of a public pressure campaign against the company based on false statements to the media, to U.S. regulatory and prosecutorial agencies, and criminal prosecutions of Chevron lawyers in Ecuador.
• Obstruction of Justice and Witness Tampering.  The court found that Donziger committed various acts of obstruction of justice and witness tampering to prevent disclosure of the fraud in U.S. discovery proceedings, including filing a false declaration in the name of Donziger’s co-conspirator and Ecuadorian counsel for the LAPs, Pablo Fajardo, in at least 17 U.S. district courts:  “Donziger’s conduct with respect to the Fajardo Declaration was obstruction of justice, plain and simple.”  The court also held that Donziger had engaged in witness tampering by attempting to influence the testimony of Mark Quarles, a former environmental consultant for the LAPs, in related litigation between Chevron and the Republic of Ecuador in the U.S.  The court found that “[a]lthough Donziger knew that the statements he sought to have Quarles make were false, he urged Quarles to adopt them to prevent exposure of the truth regarding Cabrera and to mislead the court.  Donziger’s effort to influence Quarles’s testimony constitutes witness tampering.”
• The Travel Act and Foreign Corrupt Practices Act (“FCPA”).  The court held that Donziger and his co-conspirators’ scheme to bribe Cabrera violated the Travel Act because Donziger used a facility of interstate or foreign commerce in furtherance of violations of the FCPA by payment of bribes to Cabrera.  The court found that “[a]ll of the circumstances — including the fact that a court-approved payment process existed but that the LAP team secretly paid Cabrera outside of that process, used a secret account to do so, worried in emails about whether any of the money should go through Yanza’s personal account even temporarily, and used code names as they did it — indicate that the secret payments were illegal or at least improper, that the LAP team knew that, and that they attempted to conceal their payments.”
• Wire Fraud and Money Laundering.  The court found that Donziger engaged “in a number of deceitful schemes” in order to extract payment from Chevron, “each of which was furthered by use of the wires.”  The court also held that the record “contains persuasive evidence” of a number of money laundering offenses, including the solicitation of funding for use in making secret payments to Cabrera.

The court also held that the evidence showing that Donziger’s team had written the Ecuadorian judgment, not Judge Zambrano, was “overwhelming and unrefuted.”  In support of this finding, the court noted that with respect to the overlap between the LAPs’ internal work product and the judgment, “[t]here is no plausible explanation for their presence in the Judgment except that whoever wrote the Judgment copied parts of them.”  The court found that Judge Zambrano, who was unable to remember even the most significant aspects of the 188-page judgment that he claimed to have authored, was “a remarkably unpersuasive witness.”  In addition, the court held that former judge Guerra’s testimony was credible, determining that Guerra “told the truth regarding the bribe and the essential fact as to who wrote the Judgment. The court is convinced that the LAPs bribed Zambrano and wrote the Judgment in their favor.”

The court rejected defendants’ argument that an adverse judgment in the RICO case was barred by collateral estoppel because the Ecuadorian court had purportedly examined the conduct and not found it to constitute fraud.  Defendants had previously sought to withdraw that defense in order to avoid adverse findings, but the court rejected this, finding it “disingenuous” given their reliance on the decisions of the Ecuadorian courts throughout the RICO litigation and at trial.  The court also rejected Defendants’ arguments that the ensuing Ecuadorian appellate decisions somehow “broke the chain of causation” between the fraud in the Lago Agrio court and Chevron’s injuries, noting that those courts had expressly declined to reach the RICO claims.  The court found that although it was “far from eager to pass judgment as to the fairness of the judicial system of another country . . . of course [it] is obliged to do so,” and that “[t]here [was] abundant evidence that, at the time the Ecuadorian courts’ decisions in the Lago Agrio case were rendered, the judicial system was not fair or impartial and did not comport with the requirements of due process,” an independent basis for its ruling the Ecuadorian judgment and the appellate decisions could not be recognized or enforced in the United States or be used to whitewash defendants’ fraudulent conduct.

The court thus entered injunctive relief barring defendants from profiting in any way from the Ecuadorian judgment, ordering them to transfer any assets obtained thus far based on the judgment to Chevron, and prohibiting them from “monetizing” the judgment–such as by selling portions of it to investors–or seeking to enforce it in the United States.  In response to defendants’ claims that such relief is precluded by considerations of international comity, the court noted that “[c]omity and respect for other nations are important.  But comity does not command blind acquiescence in injustice, least of all acquiescence within the bounds of our own nation.  Courts of equity long have granted relief against fraudulent judgments entered in other states and, though less frequently, other countries. Moreover, the United States has important interests here.  The misconduct at issue was planned, supervised, financed and executed in important (but not all) respects by Americans in the United States in order to extract money from a U.S. victim. . . .”

The defendants say they will appeal the court’s ruling.

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The decision in Chevron Corp. v. Donziger represents a major victory for Chevron.  It is also a significant victory for the rule of law.  As the court aptly stated, “Justice is not served by inflicting injustice.  The ends do not justify the means.  There is no ‘Robin Hood’ defense to illegal and wrongful conduct.  And the defendants’ ‘this-is-the-way-it-is-done-in-Ecuador’ excuses — actually a remarkable insult to the people of Ecuador — do not help them.”

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