Corporate America is an easy punching bag in tough economic times, but it often doesn't deserve the demonization it receives. That's the case with Chevron, which was attacked by "60 Minutes" on Sunday for an ongoing lawsuit over old oil fields in Ecuador. The CBS show wrongly took the side of the leftist, tinpot government of Ecuador against the 206,000 stockholders (and, indirectly, millions of American pensioners) who own shares of the American oil company.
In its inimitable hit-piece style, the "news magazine" portrayed Texaco, now part of Chevron, as a horrendous despoiler of Ecuador's Amazonian eco-system and of the health of its native peoples. The story revolves around a lawsuit pursued for more than a decade by a group of U.S. plaintiffs' attorneys who allege that Texaco caused an ecological disaster over 20 years of pumping oil from Ecuadoran territory. CBS severely played down, or ignored entirely, a host of key facts and important arguments by Chevron. A straightforward look at the timeline tells the real tale.
Texaco was a 37.5 percent partner in an exploration venture with PetroEcuador, a company owned by the Ecuadoran government. In 1992, Texaco's part of the deal expired, with Petro-Ecuador assuming full ownership. On Sept. 30, 1998, Ecuador's government signed "final release" papers certifying that Texaco had successfully completed environmental remediation at every one of its oil fields and waste pits.
Over the next eight years, Ecuador became politically unstable with a series of administrations reluctant to honor old contracts. In 2006, Ecuador elected anti-American leftist Rafael Correa as president. That's when the fortunes of Chevron, which merged with Texaco in 2001, drastically changed. Retroactively applying a law passed in 1999 to Texaco's activities before 1992, and ignoring the 1998 final-release agreement, Mr. Correa openly began backing the long-running lawsuit against the deep-pocketed oil giant.
President Correa is putting pressure on the lone, small-town judge who will decide the case, a man named Juan Nunez who operates from the third floor of a dilapidated shopping mall in Lago Agrio, which in 2001 had a population of 34,000. The original claim of $1.5 billion against Texaco has grown into a request for $27 billion in damages against Chevron. This is all for oil drilling that Chevron says netted just $490 million in profit over 20 years. It concerns oil fields that Texaco relinquished after 1992, but that PetroEcuador - a notorious polluter - has operated since then.
If there now is significant environmental damage, which is a less-than-sure conclusion, the likelihood is that it was caused not by Texaco, which got a clean bill of health in 1998, but by Ecuador's state-owned corporation that solely has managed the drilling for more than 16 years. The trial will take place in a court system denounced as unreliable or corrupt by the United Nations, the International Bar Association and the U.S. State Department.
Forget the "60 Minutes" angle against an alleged big, bad American polluter. This looks like an Ecuadoran shakedown of millions of American small investors who have a stake in Chevron. Now that is a story worth investigating.