Ecuador's Bogus $8 Billion Chevron Ruling

The Law: An Ecuador court's finding of Chevron liable for $8.64 billion over jungle drilling is a bogus case showing how easy it is for lawyers to manipulate banana republic systems.

Hailing the ruling as a strike for "environmental justice," plaintiffs known as the Amazon Defense Front and their lawyers successfully convinced a judge in Lago Agrio, an Ecuadorean jungle town locally known as a supplying station for Colombia's FARC terrorists, that mighty Chevron, whose Texaco subsidiary drilled the rain forest from 1964 to 1990, irreparably polluted the rain forest with its drilling operations. That entitled the activists to $8.64 billion.

The verdict has been hailed as the biggest environmental court payout of all time, nearly tripling that for the Exxon-Valdez cleanup, and a ruling that will change the callous way in which Big Oil does business.

In reality, it's a fraud. Texaco spent $40 million to clean up its rain forest operations in the 1990s, before it was bought by Chevron, and in 1998 Chevron was released by the government from all future liability.

That should have ended it. But with a weak legal system in which players were easily manipulated by Ecuador's leftist government, and a raft of white-shoe lawyers and hipster consultants from the U.S. looking for a big payday, it didn't.

Chevron has had to spend millions defending itself while the plaintiffs have been repeatedly caught in embarrassing acts of fraud and collusion with the Ecuadorean government and its courts.

It's been so bad - an Ecuadorean judge was caught on candid camera telling plaintiffs the fix was in on his future ruling, and an "independent assessor" was caught on film outtakes colluding with plaintiffs - that the entire court system is clearly compromised.

After yet another instance of collusion, Chevron has managed to secure a restraining order from a U.S. judge on payouts and another from an international arbiter in The Hague. But it isn't out of the woods yet. Both orders are temporary, and the first appeals court Chevron will face in Sucumbios is likely to feature the same Ecuadorean judge caught on camera dealing with plaintiffs.

Even if Chevron wins as it should at the international arbitration level in The Hague, the case sets a disturbing precedent for frivolous and expensive litigation by activists that is sure to be repeated and advanced.

In essence, activists took advantage of Ecuador's comically corrupt court system to link its rulings to the internationally recognized standard that law-abiding companies such as Chevron follow.

The creative use of Ecuador to advance fantasy rulings and make political statements threatens not just Chevron but the concept of foreign investment and the benefits it transfers to Third World countries.

It also gives Ecuador a free pass, which explains why its president has openly supported the plaintiffs. By falsely blaming Chevron, Ecuadoreans deflect scrutiny of their own state oil company and the role it has played in polluting the rain forest.

To them, it's as good as dipping into Chevron's coffers. To the rest of us, it oozes banana republic corruption.