By Corinne Ramey
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 22, 2019).
Exxon Mobil Corp. and New York's attorney general are headed for
a showdown this week over accusations the company deceived
investors, a rare trial over how the oil industry accounts for the
impact of climate change.
The trial, which begins Tuesday in state court in Manhattan, is
the culmination of a sprawling investigation into Exxon and its
accounting practices that spanned four years and three New York
attorneys general. It is expected to include as a witness former
Secretary of State Rex Tillerson, who was Exxon's chief executive
from 2006 to 2016.
The attorney general's office said the company told investors
that it was taking into account the future costs of regulations it
expected governments to adopt in response to climate change. But
Exxon's internal calculations didn't match its public
representations, the office said.
The attorney general's office said the company's
misrepresentations caused investors to overvalue its stock. It
estimated the damage to shareholders to be between $476 million and
$1.6 billion.
"Exxon in effect erected a Potemkin village to create the
illusion that it had fully considered the risks of future
climate-change regulation," the complaint says.
Exxon has denied wrongdoing and said a reasonable investor
wouldn't expect to know such internal details. The company has also
accused the attorneys general involved, all Democrats, of being
motivated by politics in bringing the case, which the office has
denied.
The oil industry has said that it is difficult to estimate the
future costs of climate-change regulation, which is uncertain
politically and varies across national boundaries, as investors
have demanded more information.
The trial is being watched closely, said Jennifer Rowland, an
analyst at financial-services firm Edward Jones.
A verdict in the attorney general's favor could damage Exxon's
reputation and bolster federal lawsuits filed by shareholders in
Texas and New Jersey that make similar allegations, which Exxon has
also denied. It could also spur future investigations.
"It could open up a big can of worms," Ms. Rowland said. "Other
companies could be looked at and questioned about what assumptions
they have made."
A win for Exxon could insulate the company from similar suits
and would represent another blow for climate-change lawsuits.
Federal judges have tossed other climate-change cases, including
when New York, San Francisco and other cities sued oil companies in
the past several years to recoup costs incurred from the effects of
rising global temperatures.
Tuesday's proceedings mark only the second trial of a case where
climate change is a central issue in U.S. history, said Michael
Gerrard, director of Columbia Law School's Sabin Center for Climate
Change Law. In the first, he said, a federal judge in 2007 upheld a
Vermont regulation on emissions standards that had been challenged
by auto makers and dealers.
The New York attorney general's office sued Exxon last October,
saying its climate-change disclosure methods were "sanctioned at
the highest levels of the company."
Prosecutors said Mr. Tillerson was aware of misrepresentations
to investors. They said the then-chief executive used a different
email address, with the alias Wayne Tracker, for internal
correspondence about these matters.
A spokeswoman for Mr. Tillerson referred a request for comment
to Exxon. An Exxon spokesman didn't respond to a request for
comment.
In a deposition, Mr. Tillerson said he used the Wayne Tracker
address because of the heavy volume of email going to the account
that used his real name. He also referred to differing calculations
as an "academic debate."
Central to the trial is the calculation of proxy costs, or
formulas the company used to calculate the risk of future
regulation. Such disclosures were important to investors because
they spoke to the company's financial health, the attorney
general's office said.
The differences were sometimes stark. In oil-sands projects in
Alberta, Canada, Exxon understated the costs of future government
regulation by $25 billion, the office said.
Exxon has said regulation in Alberta "has been and remains in
flux, with rival political factions enacting and repealing climate
regulations regularly."
Exxon says reasonable investors understood it weighed climate
risks while not disclosing proprietary details. It had different
ways of calculating regulation risks and applied them in
appropriate contexts, its lawyers wrote.
The case is divisive partly because it relies on the Martin Act,
a broad New York state law that has been employed to pursue Wall
Street fraud.
"This is an abuse of the Martin Act," said Tom Stebbins,
executive director of the Lawsuit Reform Alliance of New York,
which fights what it views as excessive litigation. "By all
indications, this is a lawsuit to carry out a political
agenda."
Bernie Nash, co-head of the state attorneys general practice at
firm Cozen O'Connor P.C., said the case was an atypical use of the
Martin Act. In the past, the courts have allowed for broad uses of
the Martin Act, he said.
"Philosophically, no statute is limitless and you don't know
when you've exceeded it until the court says so," Mr. Nash
said.
Write to Corinne Ramey at Corinne.Ramey@wsj.com
(END) Dow Jones Newswires
October 22, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Grafico Azioni Exxon Mobil (NYSE:XOM)
Storico
Da Feb 2024 a Mar 2024
Grafico Azioni Exxon Mobil (NYSE:XOM)
Storico
Da Mar 2023 a Mar 2024