1) Background and Issues
Is Chevron guilty? This memo outlines the issues Chevron is facing through the Amazon lawsuit in Ecuador and identifies how the management can handle this squint situation. The Amazon lawsuit is a very big threat to the company’s profit, since the penalty payments will cover over 50% of the company’s current profit. To understand the situation of Chevron today we need to take a closer look at the background story.
The Story goes back to the 1960’ies when Texaco, an acquisition of Chevron, was involved in the oil drilling in Ecuador. Back then Texaco had a Joint venture with Petro Ecuador which was mainly owned by the Ecuadorian government and had a share of 62.5 percent. This Joint venture named Texpet drilled 1.7 billion barrel oil from government properties until the end of contract in 1984. After finishing the work Texpet was suit by the Ecuadorian government, because of violation of environmental laws. These violations included the ...view middle of the document...
Just to name a few impacts of the contamination, 18 billion gallon toxic water in rain forest caused many different types of cancer, miscarriages, child developmental errors and many more health issues for the population especially around the Amazonas.
After the release of the indicative studies it took a while until the affected Ecuadorian population could build a big enough group of plaintiffs to elevate a lawsuit against Texaco. In 2001 Chevron acquired Texaco initiated by John S. Watson the present Chief Executive officer and former Head of the Mergers and Acquisitions department by the time of 2000 Chevron-Texaco merger. In 2008 the plaintiffs indicted Chevron and demand 27 billion Dollars. The Ecuadorian court found Chevron guilty and imposes a compensation penalty of 8 billion Dollars. Chevron admits historical failings but finds the penalty as too high since it also represents the highest in history.
Ever since the lawsuit is in process and came up to 18 billion Dollar compensation penalty costs for Chevron. Chevron’s defending strategy is denying their contribution to the Amazon area pollution as shown in the following statement:
“The company maintains that the $18 billion judgment is illegitimate because of documented evidence of fraud and unethical action by the plaintiffs' lawyers and the Ecuadorian government and judiciary.”
As a counterattack Chevron now tries to sue the plaintiffs and their supporter in a civil lawsuit. This doesn’t change the ongoing lawsuit where 30,000 victims wait for an apology and the payment. If Chevron doesn’t accept the requirements the penalty will rise even higher.
Evaded taxes because of petroleum pricing scheme
Indonesia – Fine of 5 Billion USD in Federal and State Taxes
Destruction of Natural Park in Bangladesh
Govt not informed about the cracks, which creates explosion.
Brazilian Regulations reported OilLeak
10.6 Billion for Oil Spill
Activities in Brazil Suspended
Rig Explosion- 2012
Govt Sued- 275 Million, should be used for clearing the air pollution
Pollution in Richmond, California.
11 million Pounds of Toxic Material
No Treatment to toxic
95 Acres polluted in USA are attribute to Chevron