Business

Exxon calls New York climate case a 'joke' on last day of trial

by Erik Larson

Bloomberg

A lawyer for Exxon Mobil Corp. mocked New York’s fraud lawsuit against the oil giant, saying the state had falsely accused engineers and scientists of cooking up a massive scheme to mislead investors about the financial risks of climate change.

“It’s a cruel joke, your honor, because the reputations of a lot of good people have been disparaged by the bringing of this complaint,” attorney Theodore Wells told a judge Thursday during his closing statement after a trial that spanned three weeks.

New York sued in 2018 after a three-year probe, claiming it found evidence that Exxon sought to use a pair of 2014 shareholder reports to trick investors into thinking the company was planning properly for a low-carbon future and inflating Exxon’s value by as much as $1.6 billion.

Wells said the state failed to prove Exxon made a material misstatement when it revealed to activist investors that it was using a “proxy cost” to account for the future impact of climate change on the business. New York also failed to prove its fraud allegations had led to a drop in the stock, he said.

Exxon’s attorney criticized what he called New York’s shifting theory of wrongdoing. He said the probe began in 2015 with claims that Exxon may have misled the public for decades about climate science and that it may have failed to adjust financial statements to account for the reduced value of oil and gas reserves as global warming leads to less demand.

The pursuit of Exxon by the New York attorney general was akin to the blind determination of Capt. Ahab in Moby-Dick, “going after the great white whale,” Wells said.

Justice Barry Ostrager, of the New York State Supreme Court in Manhattan, will decide the case without a jury.

Jonathan Zweig, a lawyer for Attorney General Letitia James, started his closing statement by telling the judge the state was dropping two fraud claims from the lawsuit. He didn’t elaborate. The crucial allegation — false promises related to financial securities in violation of the state’s powerful Martin Act — is still the centerpiece of the suit.

Zweig said Exxon’s statements to investors were like a company claiming it purchased an insurance policy and then simply not buying it.

“Exxon can’t have it both ways,” he said.

The state’s lawyer also pointed to testimony from Exxon employees that he says shows they were confused about the company’s use of proxy costs, and that Exxon backed out of applying the metric to the company’s most carbon-intensive venture, in the Alberta oil sands.

“The question isn’t whether Exxon employees were good people or were trying their best,” or whether Exxon is to blame for climate change, Zweig said. “The question is whether Exxon’s disclosures were accurate, and the evidence shows they were not.”

More than a dozen witnesses testified at the trial, including activist investors who accused Exxon of misleading them, Exxon employees who defended the company’s practices, and expert witnesses who dueled over whether the allegations had any impact on the company’s shares.

The case hinges on whether Exxon’s proxy cost — meant to account for the expected decrease in demand for fossil fuels — was supposed to be the same as an internal metric Exxon used, a greenhouse gas cost applied to specific project proposals based on existing local taxes. Exxon says the state is trying to show a false discrepancy by conflating two carbon metrics that serve different purposes.

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