Two weeks later, a judge in Ecuador handed down the verdict against Chevron, then doubled the damages to $19 billion after Chevron refused an order to apologize. It was later reduced back to $9.5 billion but otherwise upheld by the Ecuadorean courts.
With Chevron refusing to pay, and having no assets in Ecuador, the plaintiffs tried unsuccessfully to collect in places where the oil company operated, such as Argentina, Brazil and Canada. Chevron hired lawyers around the world to resist such efforts.
Its strategy was vindicated in March 2014 when, after a civil trial in New York, a federal judge issued a 485-page opinion concluding that Mr. Donziger and his team had submitted false evidence in Ecuador, paid off a court-appointed expert and ghost-written much of his opinion, and promised $500,000 to an Ecuadorean judge to rule in their favor. Even if they sought to help native people, Judge Lewis Kaplan wrote, "they were not entitled to corrupt the process to achieve their goal."
The ruling came with ramifications: Mr. Donziger couldn't try to enforce the Ecuadorean judgment in the U.S. and he couldn't profit from it; he had to relinquish his 6.3% interest in any payout.
Mr. Donziger appealed the ruling and lost. "I believe it is invalid, though I recognize courts have found otherwise," he said.
Chevron lawyers filed motions every time they thought Mr. Donziger might be violating the judge's orders. An example was when he asked a hedge-fund firm to finance efforts to collect the damages in return for a share of them.
A portfolio manager at Elliott Management Corp. said Mr. Donziger told him the plaintiffs had raised $33 million, and 15% to 20% of the damage award was committed to investors and others. Elliott turned him down, the portfolio manager said in a sworn affidavit. A spokesman for Elliott declined to comment.
Chevron also told the court Mr. Donziger had hired an executive coach and agreed to pay him 0.007% of whatever was collected from Chevron, out of Mr. Donziger's share. Chevron said that violated the ban on his profiting from the verdict.
He argued it didn't, but in May 2019, Judge Kaplan found Mr. Donziger in civil contempt of court. The judge said he violated orders by not turning over all of his electronic devices and email accounts for imaging, for failing to relinquish his stake in the damage award and for his deal with the executive coach.
Two months later, Judge Kaplan ordered a trial to determine whether Mr. Donziger should be held in criminal contempt of court for continuing to ignore the orders.
The Manhattan U.S. attorney's office, to which the judge referred the criminal matter, declined to pursue it. In an unusual procedure, Judge Kaplan then appointed a private lawyer to serve as prosecutor and assigned another U.S. district judge, Loretta Preska, to handle the case, which is set for trial starting May 10. It was Judge Preska who put Mr. Donziger under house arrest, deeming him a flight risk.
A state appellate court had already suspended Mr. Donziger's law license. He requested a public hearing on that. There, 15 witnesses testified about the honest human-rights lawyer they said they knew, among them Pink Floyd frontman Roger Waters, a co-founder of Greenpeace and an indigenous Ecuadorean leader. Chevron sent a team to observe.
A New York judicial official found Mr. Donziger posed no threat to the public and recommended letting him keep his license. Describing him as "often his own worst enemy," the official said: "The extent of his pursuit by Chevron is so extravagant, and at this point so unnecessary and punitive."
The opinion wasn't binding. New York state's appellate court said the official was too dismissive of the severity of the misconduct, and it disbarred Mr. Donziger last August. He is seeking an appeal of the decision.
For years, Chevron separately pursued an international arbitration case. It argued that Ecuador's government had violated an investment treaty with the U.S., both by not upholding the liability release granted in the 1990s and later by allowing a fraudulent court verdict to stand.
In 2018 the international arbitration panel sided with Chevron. It ordered Ecuador to wipe out all consequences of the court verdict and preclude anyone from enforcing it, on grounds it was obtained fraudulently.
Though Ecuador hasn't done this, Chevron officials point to instances where, they say, its representatives have admitted the verdict was fraudulent.
In one, Ecuador's ambassador told the U.S. Trade Representative in a letter last July that Ecuador had been in touch with authorities in countries where plaintiffs sought to enforce what she called "the fraudulent Lago Agrio judgment."
The letter from the ambassador, Ivonne Baki, added that Ecuador didn't know what steps it could take to satisfy the arbitration order, saying its laws and international law constrained it from intervening in the court system. Efforts to reach Ms. Baki for comment were unsuccessful.
Investors in Chevron appear to have largely ignored the judgment's potential financial impact. But its chief executive, Michael Wirth, continues to face questions about the case.
At a virtual shareholders' meeting in May 2020, the actor Alec Baldwin told the CEO Chevron was using shareholders' money to personally attack Mr. Donziger. Mr. Wirth called Mr. Baldwin's summary of the case false and offensive, saying: "Mr. Donziger is an adjudicated racketeer."
There have been no settlement discussions since 2012. At a meeting that year, held while the damage award was temporarily doubled to $19 billion, Mr. Pate walked out after the plaintiffs' side proposed a nearly $10 billion settlement, according to Mr. Donziger. Chevron didn't dispute that account.
Said Dylan Mefford, a California attorney who worked on the case as a Gibson Dunn associate: "Both sides genuinely felt the others were criminals."
--Ryan Dube and Silvina Frydlewsky contributed to this article.
Write to Sara Randazzo at email@example.com
(END) Dow Jones Newswires
May 02, 2021 13:26 ET (17:26 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.