NY State Fraud Trial Against Exxon Mobil Begins;Heart Of Case Rests On Fraud, Double Sets Of Books
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The case is only the second climate change lawsuit to reach trial in the United States, but it could be a bellwether for the long line of other suits awaiting trial that are intended to hold fossil fuel companies responsible for the costs of climate change. The lawsuit was filed last year by the New York Attorney General’s office and claims that the oil industry giant engaged in a yearslong “fraudulent scheme” that “in effect erected a Potemkin village to create the illusion that it had fully considered the risks of future climate change regulation and had factored those risks into its business operations.” The deception “exposed the company to greater risk from climate change regulation than investors were led to believe,” according to the lawsuit.
Exxon has vigorously fought the charges, and maintains that the government’s theory of its financial tools is flawed at best and, at worst, disingenuous. “The evidence will show Exxon Mobil did not commit securities fraud, did not make any misleading statements,” Mr. Wells said. “Exxon Mobil did nothing wrong.”
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In recent filings, New York said that for years, the company “repeatedly represented that it expected governments to adopt more costly and stringent climate change regulations over the coming decades” for projects like those that would extract oil from Canadian tar sands. “Exxon Mobil’s statements would have led a reasonable investor to believe that it used this cost of carbon in projecting the costs associated with the company’s emissions from its investments and operations,” the state said. “But Exxon Mobil did no such thing.” The suit claims the company used a lower cost of carbon in its internal estimates — and when employees did try to apply the publicly disclosed higher costs, the resulting price tags were so high that the company “instructed its employees not to apply those costs.” The result was that “Exxon Mobil made its assets appear significantly more secure than they really were, which had a material impact on its share price.” The emphasis on shareholder value is crucial to the state’s legal authority under the Martin Act, New York’s sweeping shareholder protection law.
Justice Barry R. Ostrager of New York State Supreme Court who is presiding over the case, has thrown out most of the claims of selective political prosecution as potential defenses in the case. Exxon has pursued those claims in a separate federal court case that is now before the Court of Appeals for the Second Circuit, after a federal district judge ruled forcefully against the company’s arguments.
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https://www.nytimes.com/2019/10/22/climate/new-york-lawsuit-exxon.html?rref=collection%2Fsectioncollection%2Fclimate&action=click&contentCollection=climate®ion=rank&module=package&version=highlights&contentPlacement=1&pgtype=sectionfront
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