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September 28, 2016

“Legal Fraud of the Century” Returns to Canada

By Lisa A. Rickard
President, Institute for Legal Reform

Recently, a group of Ecuadorian citizens asked an Ontario court to enforce a $9.5 billion judgment issued in Ecuador against Chevron Corporation, despite overwhelming evidence that the judgment was procured by bribery, coercion, and fraud. Courts in the United States, Argentina, Brazil, and Gibraltar have so far refused to endorse the corrupt judgment. Canada should not be the first judicial system to be complicit in this global fraud.

In 2003, Chevron was sued in Ecuador for environmental damage allegedly caused by oil operations a decade earlier involving Texaco, which Chevron acquired in 2000. An Ecuadorian judge ordered Chevron to pay $18 billion in damages – the largest award ever by a foreign court against a U.S. company. The Supreme Court of Ecuador subsequently reduced the award to $9.5 billion. 

Chevron has no assets in Ecuador, so the plaintiffs’ lawyers devised a plan to collect the judgment by filing new lawsuits in countries with liberal enforcement laws, including Brazil, Argentina, and Canada. The Ontario Superior Court of Justice dismissed the case in 2013 because Chevron has no assets or business operations in Ontario, but the Supreme Court of Canada later reversed the dismissal and permitted the Ecuadorian villagers to try to enforce their judgment in Canada against Chevron’s subsidiaries.

Since the Supreme Court’s decision in September 2015, however, the shadow over the Ecuadorian judgment has grown even longer.

Last month, the U.S. Court of Appeals for the Second Circuit in New York unanimously affirmed a 500-page verdict issued in 2014 finding that Steven Donziger, the attorney representing the Ecuadorian villagers, secured the judgment through “a parade of corrupt actions.” Those tactics included bribing the presiding judge with $500,000 to rule in favor of the Ecuadorian villagers, ghostwriting the judgment, and submitting fraudulent evidence. Tellingly, Donziger and his team did not dispute any of this evidence after a seven-week trial in New York.

These facts led the Wall Street Journal to label the Ecuadorian judgment the “legal fraud of the century.”

The New York federal courts are the only tribunals to have considered all the evidence of fraud in the Ecuadorian proceedings. All four U.S. judges that heard the evidence determined that Donziger was guilty of criminal activity. According to last month’s ruling, “Donziger’s acts of wire fraud, bribery, obstruction of justice, and money laundering were committed as part of an at-least five-year effort to extort and defraud Chevron into paying a huge sum of money; and it is likely that the demonstrated criminal activity would continue into the future, especially in view of [Donziger’s] failure thus far to achieve [his] goal.”

To be clear, these decisions detailing Donziger’s fraudulent behavior have no political bent. The U.S. judges that reviewed the Ecuador case are esteemed jurists appointed by both Democratic and Republican presidents. None is considered partisan. This is not a right-wing or left-wing issue. This is a right and wrong issue.

And the U.S. courts are not alone. In December 2015, the Supreme Court of Gibraltar ruled against the Ecuadorian plaintiffs and awarded Chevron $28 million for having to defend against enforcement of the Ecuadorian judgment. In May 2015, a top Brazilian prosecutor recommended that the Brazilian courts deny enforcement, concluding that the Ecuadorian award “was issued in an irregular way, particularly amid unfortunate acts of corruption,” and that to enforce the judgments would breach “international public order.” In 2013, the Supreme Court of Argentina held that the assets of Chevron’s subsidiary in Argentina could not be used to pay part of the Ecuadorian judgment.

In the years since Donziger’s fraud was revealed in 2014, numerous allies have abandoned his cause. The Ecuadorians’ U.S. counsel, environmental consultants, funders, and investors have surrendered their stake in the judgment and settled with Chevron. Donziger and his team are hemorrhaging support and running out of options. The case in Ontario is a last-ditch effort to legitimize their illegitimate judgment.

But Canada should have no interest in supporting a corrupt judgment, and the Ontario court should not allow the Ecuadorian plaintiffs to retry the case a second time. Donziger and his clients had their day in court and failed to rebut the vast evidence of fraud. Despite its understandable sympathy for the Ecuadorian villagers, the U.S. court held last month that “even innocent clients may not benefit from the fraud of their attorney.” In the eyes of the law, the ends cannot justify the means. No one—whether crusader or charlatan—is above the law.

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