Fraud Charges Dropped in ExxonMobil's Climate Change Trial
Exxon attorney Ted Wells, a partner at Paul, Weiss, Rifkind, Wharton & Garrison, was quick to criticize the late concession on fraud charges, and described the remaining contested issue under the Martin Act as trivial.
November 07, 2019 at 03:39 PM
3 minute read
The original version of this story was published on Texas Lawyer
New York County Supreme Court Justice Barry Ostrager interrupted a New York assistant attorney general's closing argument after just a few sentences Thursday, stopping him as he began to lay out the state's case that the Texas-based energy company ExxonMobil violated the Martin Act, a state law aimed at protecting shareholders from fraud.
Along with Martin Act violations, the state accused the energy giant of actual and equitable fraud in its complaint, which described a pattern of deception at the company related to how it estimated the effects of climate change and associated regulation on its business.
Ostrager asked assistant attorney general Jonathan Zweig if he intended to concede the actual and equitable fraud charges by discussing only the Martin Act in his closing argument.
Zweig confirmed that the attorney general's office is conceding the fraud charges and spent the next hour arguing that Exxon's shareholders cared how the company quantified the effects of climate change and that Exxon was inconsistent in its use of climate-related financial assumptions.
The company should pay $476 million to $1.6 billion in damages to a shareholder restitution fund, Zweig said.
Exxon attorney Ted Wells, a partner at Paul, Weiss, Rifkind, Wharton & Garrison, was quick to criticize the late concession on fraud charges when Zweig finished his argument.
"They get to say that they just dismissed these claims for strategic purposes," Wells said, asking Ostrager to issue a finding that the claims had to be dismissed due to insufficient evidence.
Ostrager pointed out that he's dismissing the claims with prejudice, but Wells said that won't help Exxon and its current and former leaders who have suffered severe damage to their reputations because of the attorney general's investigation.
He said he expects the attorney general's office to try to litigate the fraud claims in the press, which could lead to more hate mail for Exxon executives.
"The press is here," Ostrager told Wells in the full courtroom, which included rows of journalists. "They've heard what I said. They heard what you said. They understand these claims are no longer part of the case."
Wells said he wanted to do more research, so Ostrager agreed he could submit a posttrial motion.
In his own closing argument, Wells described the remaining contested issue under the Martin Act as trivial. Shareholders didn't care about how Exxon made its cost assumptions for 2030 and 2040, he said, and Exxon didn't release enough information for real economic analysis anyway.
Exxon told shareholders it would apply one type of cost assumption "where appropriate," a qualifier that means the statement cannot be materially misleading, Wells said. Zweig said that defense doesn't hold up for Exxon's Canadian projects in Alberta, where Exxon estimated costs differently even though the effects of climate change were likely to be extremely expensive.
Wells argued that the cost assumptions related only to unfunded projects or concepts, with no effect on the company's financial records.
"Nothing happened, and nobody cared," he said.
Posttrial motions and proposed findings of fact are due Nov. 18, Ostrager told the lawyers.
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