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Fossil Fuels on Trial: Exxon’s Fraud Case Moves Forward

by | published April 5th, 2018

Last week, a U.S. District Court judge dismissed ExxonMobil Corp.’s (XOM) lawsuit seeking to derail two states from probing into its conduct, ultimately allowing fraud investigations to continue.

In her ruling, Judge Valerie Caproni stated that Exxon was “running roughshod over the adage that the best defense is a good offense.”

In the process, some observers are suggesting devices normally reserved for hard-knuckle political barroom fights have leaked into the courtroom.

Exxon had filed the suit in both New York and Texas federal courts.

The suit claimed that Massachusetts Attorney General Maura Healy and her New York counterpart Eric Schneiderman, along with other unnamed officials in both states, had conspired with environmental groups in planning a securities-fraud probe and made up their minds and made up their minds about its outcome before it started.

Exxon claimed the evidence of political motivation includes meetings the Attorneys General had with environmental groups and Schneiderman’s claim at the press conference that former President Barack Obama’s environmental agenda was being opposed by “morally vacant” forces.

In contrast, Massachusetts and New York had contended that the company was employing federal courts as a device to impede their legal investigatory proceedings at the state level.

The judge said the company offered “extremely thin allegations and speculative inferences,” adding that “The factual allegations against the AGs boil down to statements made at a single press conference and a collection of meetings with climate-change activists,” she wrote. “Some statements made at the press conference were perhaps hyperbolic, but nothing that was said can fairly be read to constitute a declaration of a political vendetta against Exxon.”

The win provides headway for the Attorneys General to complete their investigations, which have been delayed by legal wrangling.

They’ll ultimately decide whether there’s enough evidence of Exxon wrongdoing to sue the energy giant and seek damages. Investigations in both states had begun in 2015.

But what makes the case so interesting is what the two states are claiming…

Exxon’s Climate Change Controversy

At issue are charges that Exxon had misled the public and investors about the reality of climate change, including the ways it could affect the company’s finances.

They’re also examining whether Exxon properly valued its reserves based on what its scientists projected.

Healey said in a statement that the ruling on March 29 is a turning point in an investigation that’s been hindered by Exxon’s refusal to cooperate.

“Massachusetts customers and investors deserve answers from Exxon about what it has known about the impact of burning fossil fuels on its business and the planet, and whether it hid this information from the public,” Healey said.

Schneiderman added that “As the court noted, Exxon’s claims in this lawsuit were ‘implausible’ and unsupported, while its strategy amounted to a type of ‘legal jiu-jitsu’ that resulted in nothing more than a ‘huge waste’ of time and money.”

Several legal moves are underway in the country contending that oil companies have intentionally made misleading claims about climate change.

But the cases in Massachusetts and New York are different.

These are using state fraud statutes, claiming that Exxon had provided to investors knowingly false information with the intention of artificially supporting the company’s share value.

Earlier, Exxon spokespeople had said the company has provided more than $8 billion in funding to develop alternative fuels.

However, as one of my legal contacts pointed out: “The fact that money may have been provided for biofuels research really does not address whether you misled about the effect of burning fossil fuels on the environment.”

The contact also noted, somewhat tongue in cheek, “Unless I am completely mistaken, oil not switchgrass is Exxon’s primary cash cow.” Switchgrass refers to an Exxon-funded pilot project to turn the scrub growth into biofuel.

This latest court ruling hardly “proves the case.”

It merely removes the latest filing roadblock set by the company.

But with an Environmental Protection Agency in Washington moving quickly to remove climate-based regulations and even going so far as to remove mention of climate change from the EPA Website, court actions take on added importance.

If the legal challenges are also based on a broader contention of investor fraud, they become more important than political charges alone.

Sincerely,


Kent

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