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Chevron Decision Touches Upon FCPA Issues

This [1] 2009 post flagged the “War of Words in Ecuador” between Chevron and plaintiff lawyers representing Ecuadorian villagers alleging environmental contamination at oil fields in the Amazon for its potential FCPA implications.

Earlier this week, as noted in this [2] Wall Street Journal article:

“A federal judge ruled in favor of Chevron … in a civil racketeering case [against New York lawyer Steven Donziger, the plaintiffs’ lawyer], saying a record $9.5 billion environmental judgment in Ecuador against the oil giant was “obtained by corrupt means.”  U.S. District Judge Lewis Kaplan [S.D.N.Y.] found that … Donziger and his litigation team engaged in coercion, bribery, money laundering and other criminal conduct in pursuit of the 2011 verdict.”

As stated by Judge Kaplan:

“This case is extraordinary. The facts are many and sometimes complex. They include things that normally come only out of Hollywood – coded emails among Donziger and his colleagues describing their private interactions with and machinations directed at judges and a court appointed expert, their payments to a supposedly neutral expert out of a secret account, a lawyer who invited a film crew to innumerable private strategy meetings and even to ex parte meetings with judges, an Ecuadorian judge who claims to have written the multibillion dollar decision but who was so inexperienced and uncomfortable with civil cases that he had someone else (a former judge who had been removed from the bench) draft some civil decisions for him, an 18-year old typist who supposedly did Internet research in American, English, and French law for the same judge, who knew only Spanish, and much more. The evidence is voluminous. The transnational elements of the case make it sensitive and challenging. Nevertheless, the Court has had the benefit of a lengthy trial. It has heard 31 witnesses in person and considered deposition and/or other sworn or, in one instance, stipulated testimony of 37 others. It has considered thousands of exhibits. It has made its findings, which of necessity are lengthy and detailed.”

As relevant to the Foreign Corrupt Practices Act and any potential FCPA liability of Donziger, Judge Kaplan, beginning at pg. 392 of his mammoth 485-page opinion [3], addressed Chevron’s assertion that “Donziger violated the Travel Act through the use of facilities of interstate or foreign commerce with the intent to facilitate violations of the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”).”

Judge Kaplan concluded that “[Donziger] did so by using email and by causing money to be wired to Ecuador to further the payment of money to Cabrera, a court appointee [of the Ecuadorian judicial system].”

Judge Kaplan’s decision most squarely addressed the FCPA’s “obtain or retain business” element.  Judge Kaplan stated as follows.

“The SEC and the Department of Justice interpret the FCPA to prohibit payments to court officials and regularly find that such payments satisfy the business purpose test.  [citing to DOJ FCPA enforcement actions against Pride International [4]and Jim Bob Brown [5]].   This court agrees.”

“Here, the payments increased the likelihood that Donziger’s business – that of contingency litigation – would benefit from a favorable judgment. Roughly 30 percent of the 20 percent contingency fee owed to the litigation team accrues to Donziger. He stood to benefit directly from any judgment and, accordingly, from any act that improved the likelihood that such a judgment would issue and its amount. The improper payments to Cabrera were intended to do, and did, exactly that.”

As to “foreign official,” Judge Kaplan stated: “as an expert appointed by the Lago Agrio court, Cabrera was an officer or official of the Ecuadorian court” (citing to an exhibit which stated:  “The Expert [Cabrera] is hereby reminded that he is an auxiliary to the Court for purposes of providing to the process and to the Court scientific elements for determining the truth.”).

As to the “knowledge” component of the FCPA’s third-party payment provisions, Judge Kaplan stated:  “The Court … finds that Donziger was “aware” that it was “substantially certain” that Cabrera would be paid from the funds he wired to the secret account.”

A judicial finding that Donziger engaged in conduct sufficient to establish an FCPA violation is – to state the obvious – a troubling event for him.

In response to Judge Kaplan’s decision, Donziger issued this [6] statement.  In the above-referenced Wall Street Journal article, Donziger is quoted as follows.  “I am a zealous advocate for my clients.  I woud never bribe a judge or perpetrate a fraud … Ultimately I think the Court of Appeals will reverse this decision and whatever damage caused to my reputation will be restored.”

In this [7] press release, Chevron stated, in pertinent part:

“[Judge Kaplan’s decision] finds that Steven Donziger, the lead American lawyer behind the Ecuadorian lawsuit against the company, violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), committing extortion, money laundering, wire fraud, Foreign Corrupt Practices Act violations, witness tampering and obstruction of justice in obtaining the Ecuadorian judgment and in trying to cover up his and his associates’ crimes.  […]  Chevron’s reputation was taken hostage and held for a multibillion-dollar ransom. Rather than give in and pay these criminals off, Chevron exposed the truth. Chevron is pleased with today’s judgment. We are confident that any court that respects the rule of law will likewise find the Ecuadorian judgment to be illegitimate and unenforceable.”

For additional coverage of Judge Kaplan’s decision, see here [8] from the New York Times and here [9] from Reuters.  In addition, this [10]2013 Wall Street Journal article goes in-depth as to Donziger and the case.