By Kemol King
ExxonMobil has been alleged to have facilitated a wide-ranging deception in a landmark lawsuit brought against it by the State of New York. The company stands accused of misrepresenting the effect climate change would have on the cost of its operations.
It was also sued by the State of Massachusetts for allegedly hiding its early knowledge of the climate crisis from the general public, and misleading its Massachusetts investors about the future financial impact of global warming, two days after the trial started on similar claims in New York.
The suits raise major questions for a country like Guyana, as the country is about to become a major oil producing nation, with Exxon at the helm of the budding sector.
The most daunting of those questions is – If Exxon is willing to lie to its own investors, what would it lie about to a country like Guyana, which is severely underprepared to bring the oil giant to heel?
This concern was raised by Canada-based engineer and member of the Oil and Gas Governance Network (OGGN), Darshanand Khusial.
In a letter published in Sunday’s Kaieteur News, Khusial wrote about the New York lawsuit. “Exxon is accused of cooking the books. One set of accounting records for shareholders (investors) and another for its management,” he said, noting that the multinational’s alleged lies could cost its shareholders up to $1.6B.
Simply put, ExxonMobil devised for its investors a tool to take into account the social, ecological and economic costs of its GHG emissions, but the lawsuit claims that the oil company did not follow the system through.
The New York Attorney General’s summons states that the primary drafters of the allegedly falsified reports included a series of high level managers, including Exxon’s then Chief Executive Officer.
Khusial reasoned “…When the CEO of one of the largest companies in the world is accused of knowing employees were keeping double books, then you have to question the integrity of the entire Exxon culture.”
This is especially worrying, according to Khusial, since the top priority of the managers of Exxon is to make good on its returns to its shareholders.
According to Bloomberg, Massachusetts Attorney General Maura Healey, who is seeking unspecified monetary damages, said ExxonMobil forecast troubling levels of carbon dioxide in the atmosphere as early as 1982 and hid it from the public.
Bloomberg also reported that the complaint states, among other infractions, that Exxon even disregarded findings of one of its own scientists, who decades ago correctly predicted the amount of carbon dioxide in the atmosphere in 2019 and said that climate change would become “catastrophic.”
The Massachusetts Attorney General said that ExxonMobil refused to cooperate with the investigation, so her office got its information from banks, advertising agencies, New York’s investigation and other sources.
Healey said that Exxon put up several obstacles, including an attempt to depose her, and a lawsuit alleging the probe was politically motivated.
Khusial suggested that Attorney-at-law Christopher Ram’s analysis of Exxon’s pre-contract costs for the Stabroek Block – which found the first invoice of US$960M to be overstated by US$92M – could have been bolstered to uncover even more misrepresentations if he were backed by a team of 700 lawyers, as the State of New York has as its disposal, to sort through millions of pages of documents.
That also, said Khusial, raises a question about whether the UK firm, IHS Markit Limited, which has been recruited by the Energy Department to audit Exxon’s stated investments, would have the similar access to document as New York to perform a reasonable analysis.
Another question Khusial raised is whether a provision in the Stabroek Production Sharing Agreement (PSA) would allow the oil major even more free reign to hide something from Guyana.
That provision states “The Minister, through duly appointed representatives, upon providing the contractor with at least seven (7) days’ notice, shall be entitled to observe the Petroleum Operations conducted by the Contractor …”
“Why would the Guyana government agree to those terms? Do auditors from the Government of Guyana give seven-day notice before showing up to inspect sugar and rice factories?” Khusial asked.
He further said that there is irony in ExxonMobil, which waxes about the sanctity of contracts, allegedly conducting serious securities fraud in the context of its fiduciary duty to its shareholders.
Khusial said that it is important to contemplate the gravity of the situation of a State as populous and as powerful as New York – or Massachusetts – takes one of the company’s largest companies to court.
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