Big Oil Goes James Bond on Ecuador

It's almost James Bond, Latin American style.

Regarding a lawsuit that could possibly cost Chevron (NYSE: CVX  ) $27 billion, video tapes have been placed on the company's website (here). Chevron claims they indicate that Ecuadorean judge Juan Nunez, who has been presiding over the civil trial in that country, has determined Chevron's guilt and plans to rule in favor of the plaintiffs.

The tapes were made secretly and without Chevron's knowledge by Diego Borja, a contractor for Chevron, and Wayne Hansen, an American businessman. The pair, who used cameras hidden in a pen and a watch during meetings in Ecuador, were apparently seeking clean-up contracts that might stem from the suit. The suit relates to claims that Texaco severely polluted the Amazon basin before that company was bought by Chevron.

Borja and Hansen apparently met on several occasions with the judge, or with a political party official, Patricio Garcia, or both. Garcia allegedly was seeking $3 million in bribes for delivering the contracts. During one meeting not attended by the judge, Garcia reportedly informed Borja that the money would be divided equally among the judge, the "presidency," and plaintiffs in the lawsuit.

In response, the Ecuadorian government will investigate the matter. They are requesting the unedited version of the tapes from Chevron, while at the same time referring to the translated Spanish as "misleading." At the same time, the plaintiffs' attorney suing Chevron on behalf of the indigenous Ecuadorians said the video "certainly looks like a dirty trick."

I've watched the tapes, and they're well worth the time spent. One meeting was summed up with the confirmation that a decision would likely be rendered by the judge in October or November and that the punitive amount "might be less, and it might be more" than $27 billion. At that point, one of the attendees chimed in, "Well, sell your shares in Chevron."

Doing business in Latin America is becoming more difficult for Western oil companies. You are, of course, aware of Hugo Chavez's nationalization of the industry in Venezuela, which affected the likes of ConocoPhillips (NYSE: COP  ) , BP (NYSE: BP  ) , and Total (NYSE: TOT  ) .

And Brazil's president has now proposed a series of measures that would increase Petrobras' (NYSE: PBR  ) influence over activities in the country's deepwater pre-salt area. Those proposals stopped Royal Dutch Shell (NYSE: RDS-A  ) in its tracks vis-a-vis new investments in the area.

So how should we treat Chevron now? The company stated on Tuesday that it had no intention of paying $27 billion in damages and has sent the tapes to the U.S. Justice Department. My take, then, is that Chevron has benefited dramatically by the release of these tapes and therefore, it may not be wise to "sell your shares in Chevron" yet.

Chevron has been rated a four-star company (out of five stars) by Motley Fool CAPS players. Is your vote included in that assessment?

Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned. He does welcome your comments. Petroleo Brasileiro and Total SA are Motley Fool Income Investor selections. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool doesn't have cameras or microphones hidden in its disclosure policy.


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  • Report this Comment On September 03, 2009, at 3:57 PM, catoismymotor wrote:

    Good for Chevron! Corruption needs to be exposed to the light of day.

  • Report this Comment On September 05, 2009, at 10:13 AM, tunes22 wrote:

    Full disclosure, I represent the plaintiffs in the lawsuit. Before making up your mind, you should know a few things about the main charges in Chevron's tapes: nowhere on the tapes does the judge discuss or accept a bribe; when the judge "appears" to agree with Chevron's spies that Chevron is guilty, his comments are off camera. My 14-year-old can seamlessly splice together video and audio on her Mac. Chevron says in its translation that the judge said the appeal was only a formality; the correct translation means there are formalities related to the appeal. The bribe offers to an alleged Ecuadorian party official were made after Chevron admits that it knew the two men were taping the officials. There are many other inconsistencies that will become known in days to come. Chevron's production of Oil, Lies & Videotapes was sloppy and clumsy. I'm surprised that the third largest corporation in the US and an oil company -- for goodness sake -- can't do a better at black ops. To his credit, the judge has recused himself, clearing the way for the case to continue uninterrupted. All the evidence is in, and it is overwhelmingly in our favor -- 64,000 test samples with illegal levels of contamination, 80% of them submitted to the court by Chevron itself. For more info, see www.chevrontoxico.com

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