Chevron v. Donziger: The Money Man
(Editor's Note: The American Lawyer's Michael Goldhaber is filing regular dispatches from the Manhattan federal district court bench trial in Chevron Corp. v. Donziger et al. For background on the case, the parties, and what it's all about, see the Litigation Daily's preview here.)
Day Two of the Chevron v. Donziger trial centered on the testimony of Chevron Corporation witness Christopher Bogart, founder and CEO of the prominent U.S.–based litigation financier Burford Capital. Bogart, a onetime funder of the Ecuadorian environmental case that culminated in a $19 billion judgment against Chevron in 2011, formally shifted alliances in April. He now claims he was duped by the Ecuadorian plaintiffs and their U.S. lawyer, Steven Donziger, into investing in a fraudulent shakedown of the oil giant.
Neither side let the other take full advantage of Bogart's appearance on Wednesday. Chevron failed if its goal was to cleanly establish its fraud and racketeering claims against Donziger and the Ecuadorians through a respected figure in finance, because Bogart's motives came under repeated attack. Chevron's foes failed if their goal was to undercut the oil company's narrative, because Bogart's motives have no bearing on the truth. But together, the parties succeeded grandly in exposing some of the hidden workings of litigation finance, while previewing the potential battle between Chevron and another of its foes in the Ecuador case: Patton Boggs.
In 2010 Chevron was telling anyone who'd listen that Donziger had ghostwritten a global damages report on the devastating oil pollution allegedly unleashed by Chevron's predecessor in the Lago Agrio region of the Ecuadorian Amazon. According to Bogart's written direct testimony, Donziger and his newly hired enforcement counsel, Patton Boggs, were then engaging in a fraudulent cover-up of the ghostwriting. When Burford considered funding the litigation, Bogart claims, Donziger and Patton Boggs vouched that Chevron was blowing smoke. As a result, Bogart says that Burford committed up to $15 million to the Lago Agrio litigation in late October 2010. It funded the first tranche of $4 million on Nov. 2 through a payment to the Patton Boggs trust account from a Cayman Islands entity called Treca Financial Solutions, in return for an interest of about 5.5 percent in any recovery.
Burford sold its $4 million tranche in December 2010—and it emerged at trial that the buyer was Arena Consulting LLC, a Chicago-area investment advisory firm operated by Herbert Lichtman. Bogart testified on redirect that Burford planned to off-lay part of its risk from the start, and was in talks with Lichtman even before funding. In January, Bogart said that he offered to repurchase the stake for the sake of maintaining a good relationship with Arena, making it clear that this would be the last opportunity. Lichtman said no thanks after the Ecuadorians won a $19 billion judgment in February 2011, Bogart testified. But Lichtman again sought to reverse the deal the next month (as would any "sensible commercial player"), after U.S. District Judge Lewis Kaplan gave a damning account of the case. At this point Bogart said, "Sorry."
Meanwhile, the Ecuadorians asked for more money the day after the Lago judgment. Burford refused, according to Bogart, because it thought Kaplan's ruling barred them from demanding funds. In September 2011 Burford pulled the plug on its funding agreement and accused the Ecuadorians of fraud.
Bogart said that after following the RICO case and viewing exclusive outtakes of the film "Crude" that The American Lawyer posted in October 2010, he came to believe that Donziger and Patton Boggs had deceived him. As evidence that the Ecuadorians' attorneys had material knowledge that they failed to disclose during investment negotiations, Bogart points to a March 2010 email from the Ecuadorian attorney Julio Prieto to Donziger and Ecuadorian colleagues expressing the fear that all the legal team "might go to jail" if the ghostwriting came to light. He also points to an email chain from June 2010, including Patton Boggs, where several U.S. discovery lawyers debate whether "to acknowledge that we authored portions of the report."
"When debating how much to conceal," Bogart testified, Donziger "wrote his colleagues (including Patton Boggs) ... that they 'need to probe' what admitting the truth would mean 'at a time we are trying to raise money' because there would be 'negative fallout.' " Bogart continues: "There would indeed have been 'negative fallout' if Burford had been told the complete truth.... Burford would have walked away immediately."
In a lively cross-examination, the Ecuadorians' defense attorney, Julio Gomez of Gomez LLC, argued that Burford's cooperation with Chevron is motivated less by ethical strictures than commercial pressures.
Citing emails from Bogart (see here and here), Gomez asked if Burford contemplated increasing its investment as late as January 2011 and was willing to sell its investment in June 2011, even after it suspected fraud. Bogart replied in both instances that he was examining logical solutions to intercreditor tensions, and that he believed a colleague shared Burford's suspicions with the potential buyer. According to notes taken in mid-February 2011, Gomez asked if Bogart was willing to "ride out Kaplan and [the] Second Circuit," and increase funding if Kaplan's restraining order was lifted. Bogart replied that he was listing a wide range of options for discussion with Burford's board.
Bogart acknowledged that his core clientele—which consists mainly of law firms— expressed concern about Burford's investment in Ecuador. Gomez cited a June 2011 email from a PR consultant to Bogart, observing that "Burford's decision to invest has created some painful fallout." Bogart said he was not aware of any efforts by Chevron to specifically pressure Burford through Latham & Watkins, which has close ties to the funder.
Bogart acknowledged that Chevron threatened to sue Burford. He admitted coaching a colleague for a January 2011 lunch with Chevron's general counsel, and agreed that, in Gomez's words, it was not "customary to meet with the general counsel of your litigation adversary mid-case."
Finally, Bogart confirmed an extraordinary interaction with Chevron lead counsel Randy Mastro of Gibson, Dunn & Crutcher—the very man who was now calling Bogart as a witness. Bogart sent Mastro a congratulatory note for a "superbly executed campaign" after the Am Law Litigation Daily named Mastro "Litigator of the Week" for winning the restraining order that tied the litigation funder's hands. Bogart testified that he was writing "sardonically," in view of the fact that Mastro had just named Burford as an unindicted coconspirator in the RICO complaint that would culminate in this trial. "There was an underlying message," Bogart said. Trial observers were left to wonder what that message might be.
Of related interest:
Chevron v. Donziger: Day One
Chevron in Ecuador: The Tapes the Plaintiffs Don't Want You to See
Chevron v. Donziger: A Dickensian Cheat Sheet
Chevron Wins Arbitration Ruling in Endless Ecuador Fight
The Global Lawyer: Closing in on Truth and Justice in the Chevron Ecuador Case
The Global Lawyer: Kindergarten Lessons from Chevron in Ecuador
Forum Shopper's Remorse