The New York state attorney general Wednesday filed a lawsuit against ExxonMobil alleging the energy company misled investors about the risk posed to its business by more stringent regulations promulgated to mitigate the effects of climate change.

Lawyers with the office of Attorney General Barbara Underwood claimed in a complaint filed in Manhattan Supreme Court that Exxon falsely told investors it was preparing to adjust its business for future climate change regulations, when in reality it was doing much less than it claimed.

The lawsuit, brought partly under the Martin Act, is the result of a multiyear investigation led by Underwood's office into the company's business practices, which New York state has a particular stake in. The New York State Common Retirement Fund, the state pension fund for public employees, holds shares in Exxon with a combined value of about $1.5 billion.

“Investors put their money and their trust in Exxon—which assured them of the long-term value of their shares, as the company claimed to be factoring the risk of increasing climate change regulation into its business decisions,” Underwood said. “Yet as our investigation found, Exxon often did no such thing.

“Instead, Exxon built a facade to deceive investors into believing that the company was managing the risks of climate change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations,” she continued.

A spokesman for Exxon said in an emailed statement on Wednesday that Underwood's lawsuit is “meritless” and a product of “closed-door lobbying” and “political opportunism.” Underwood is not seeking the office in November, and multiple courts have previously ruled against attempts to dismiss the investigation as “political.”

“The New York Attorney General's Office doubled down on its tainted, meritless investigation by filing a complaint against ExxonMobil,” the Exxon spokesman said. “These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general's inability to admit that a three-year investigation has uncovered no wrongdoing.”

The spokesman said Exxon looks forward to refuting the claims, which he said Underwood has no evidence to support.

The complaint filed on Wednesday alleges, instead, that the “longstanding fraudulent scheme” reached to the top of the company, even involving former Exxon CEO Rex Tillerson, who also served as U.S. secretary of state for about a year under President Donald Trump. Underwood's office claimed Tillerson knew the company was misrepresenting certain costs to investors.

Those costs, called proxy costs, are numbers that serve as a placeholder when considering future business expenses. The complaint alleged that Exxon presented one proxy cost to investors while using another for internal matters, like investment decisions, corporate planning and evaluating the long-term viability of assets. Investors were told Exxon was using a proxy cost that accounted for future climate change regulations when they actually were not, according to the complaint. Underwood's office claimed Tillerson knew about the practice.

“Yet despite this knowledge, and despite the recognition that the publicly disclosed proxy costs more accurately reflected the risk of future climate change regulation, Mr. Tillerson allowed the significant deviation between the higher proxy cost figures in Exxon's public representations and the lower proxy cost figures in Exxon's undisclosed internal guidance to continue uncorrected for years,” the complaint said.

When the company considered aligning the public and private proxy costs, a former manager at Exxon pushed back on the idea, saying Tillerson preferred to keep the two separate.

“Rex seemed happy with the difference previously—appeared to feel it provides a 'conservative' basis,”  the manager wrote in an email in 2011.

Tillerson seemed to contradict that claim in an interview in 2015, according to the complaint, in which he said the company does not downplay investments.

“We don't do write-downs. I mean, if you look at our history, we do not write investments down,” Tillerson said, according to the complaint. “But a lot of other people are very quick to want to write investments down because then it kind of improves things going forward.”

The practice had been modified a year earlier in 2014 when a manager suggested to Exxon's management Committee that they align the public and private proxy costs, according to the complaint. But even then, the state argued, Exxon did not accurately represent its future costs to investors.

The company instead used what an employee called an “alternate methodology.” Instead of using the publicly represented proxy costs in planning, the complaint said, the company only considered the costs imposed by current government regulations on greenhouse gas emissions. The company planned as if those governments would not impose increasingly stringent regulations in the future, according to the complaint.

“By applying this 'alternate methodology,' Exxon avoided the 'large write-downs' it would have incurred had it abided by its stated risk management practices, and failed to take into account 'massive GHG costs' resulting from expected climate change regulation,” the complaint said.

In one example, the state said, Exxon's decision not to use the greater proxy costs in connection with 14 oil sands projects in the Canadian province of Alberta resulted in an understatement of those costs by more than $25 billion.

The complaint was written by Assistant Attorneys General Jonathan Zweig and Mandy DeRoche, respectively of the Investor Protection and Environmental Protection bureaus.

Massachusetts Attorney General Maura Healey is also investigating Exxon over similar concerns but has not brought litigation against the company. Instead, Exxon has sued Healey's office over the investigation after the top court in Massachusetts allowed the probe to continue. Exxon has appealed that decision to the U.S. Supreme Court.

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