Schneiderman on the Defensive as #ExxonKnew Campaign Begins to Backfire on AGs

On the heels of last week’s federal court order subjecting Massachusetts Attorney General Maura Healey and parties involved in the #ExxonKnew campaign to judicial scrutiny, yesterday ExxonMobil asked a federal court to join the Green 20 ringleader – New York Attorney General Eric Schneiderman – as a defendant in the case and invalidate the subpoena he issued in 2015.

Explaining the basis for the discovery order, Bloomberg reported today that “The timing of Exxon’s filing [against Schneiderman] wasn’t happenstance.  Last week, U.S. District Judge Ed Kinkeade in Fort Worth said in writing that he was concerned that Healey may have engaged in a ‘bad faith’ pursuit” of the company given her biased and prejudicial public rhetoric on the matter.  As a result, Schneiderman, Healey, and other participants in the #ExxonKnew cabal will be compelled to produce internal emails and other documents and, potentially, sit for depositions.

In other words, the tables have turned, and the “investigators” themselves will now be investigated about what they knew, said and did in the run-up to launching their campaign.

Much like the successful filing against Healey, ExxonMobil’s motion to join Schneiderman in the case lays out compelling evidence that the New York AG was also acting (leading the coalition) in “bad faith,” and that he and Healey“joined together with each other as well as others known and unknown to conduct improper and politically motivated investigations of ExxonMobil in a coordinated effort to silence and intimidate one side of the public policy debate on how to address climate change.”

While recent Freedom of Information Act (FOIA) requests have provided quite of bit of insight into the genesis and execution of the #ExxonKnew campaign, formal discovery processes are certain to expose a whole lot more.  We know, for example, that activists like the Union of Concerned Scientists’ Peter Frumhoff were lobbying state attorneys general to bring actions designed to “hold fossil fuel companies legally accountable” as early as July of 2015, roughly four months before Schneiderman launched his crusade.  The extent to which these efforts and other collusive activities led to a “bad faith” decision to investigate ExxonMobil remains to be seen.  But we are about to find out.

Since the documents are fairly long and cover a lot of ground, EID has compiled a top three things you need to know.

#1. Schneiderman, Healey, and other AGs held “unprecedented briefings” for press; then tried to hide collusion with activists through closed door meetings and improper “Common Interest Agreement” secrecy pact

As Exxon’s complaint explains, “It is customary for law enforcement officials to maintain confidentiality of their investigations, both to protect the integrity of the investigative process and to avoid unfair prejudice to those under investigation.” (emphasis added, P. 9)

But Schneiderman has repeatedly disregarded this widely-established precedent. Mere hours after Exxon received Schneiderman’s subpoena, The New York Times was reporting on it, noting that it focused on “the company’s own long running scientific research” on climate change. Only a week later, Schneiderman appeared on PBS NewsHour to proclaim that his investigation of the company centered on his concerns that Exxon had “shifted [its] point of view” on climate change over the years.  Less than a month later, Schneiderman attended a Politico event in New York where he was openly prejudicial in his rhetoric about his investigation into ExxonMobil.

If that’s not enough, Schneiderman and his Green 20 coalition tried to make their investigations an even bigger story by announcing their grand, partisan plans at a March 29th press conference with Al Gore. At the event, Schneiderman and Healey made it very clear that they had already determined Exxon’s guilt before the investigation ever began – and as Exxon puts it in its memorandum, this shows “Schneiderman has no intention of fairly evaluating ExxonMobil’s substantial production of documents.” (P. 3-4)

Exxon’s complaint points out that activist lawyer Matt Pawa and Peter Frumhoff of the Union of Concerned Scientists (UCS) briefed the AGs behind closed doors ahead of their March 29th press conference. But, of course, the AGs didn’t want anyone to know about that. When Pawa wrote to Schneiderman’s office to inform them he’d been asked by a Wall Street Journal reporter about his involvement, Lem Srolovic of Schneiderman’s office told him, “My ask is if you speak to the reporter, to not confirm that you attended or otherwise discuss the event.”

The complaint goes on to mention that #ExxonKnew activists attended a closed-door meeting in January 2016 at the Rockefeller Family Fund headquarters in New York, where they brainstormed ways they could “establish in [the] public’s mind that Exxon is a corrupt institution” and “delegitimize [ExxonMobil] as a political actor.”

As part of their effort to keep their correspondence secret, the AGs also signed on to a Common Interest Agreement which, as Exxon’s memorandum explains, clearly displays the political motivation behind these investigations:

“Public records requests also have revealed that the Green 20 executed an agreement, which was designed to shield the group’s communications from public disclosure. According to the agreement, the Green 20 shared two goals, neither of which relates to any legitimate law-enforcement objective: ‘limit[ing] climate change’ and ‘ensuring the dissemination of accurate information about climate change.’” (P. 3) (emphasis added)

#2. The “new” alleged focus of Schneiderman’s fishing expedition is at odds with current SEC regulations & Financial Accounting Standards Board (FASB) rules

Having abandoned his initial focus on what “Exxon knew” about climate change, Schneiderman now contends that his investigation is about what Exxon projects for the future and how it accounts for its reserves.  Specifically, he finds fault with the company’s stated position that, based on current conditions, none of its reserves will be “stranded” by climate-related restrictions on production.  Ironically, however, Schneiderman’s argument directly contradicts federal securities regulations and Financial Accounting Standards Board (FASB) rules. From Exxon’s complaint:

“Those [SEC] regulations prohibit companies like ExxonMobil from considering the impact of future regulations when estimating reserves. To the contrary, they require ExxonMobil to calculate its proved reserves in light of ‘existing economic conditions, operating methods, and government regulations…(emphasis added)…Attorney General Schneiderman’s theory of ‘massive securities fraud’ in ExxonMobil’s reported reserves cannot be reconciled with binding SEC regulations about how those reserves must be reported.” (P. 32)

To put it bluntly, as the memorandum does,

“The desire of Attorneys General Schneiderman and Healey to impose liability on ExxonMobil for complying with SEC disclosure requirements, and the accounting methodologies incorporated in them, would create a direct conflict with federal law.” (emphasis added, P.6)

#3. Schneiderman changed the focus of his investigation no less than three times, which demonstrates the political nature of his crusade

As outlined above, Schneiderman spectacularly changed his purpose for investigating Exxon at least three times: first he said it was about what “Exxon knew” about climate change back in the 1970s and 1980s. When that didn’t really work out he decided it was about that Exxon “predicts” – but when that argument turned out to be a flop, he decided it was actually about what Exxon “failed to predict.” As Exxon’s memorandum explains about this,

“This sharp investigative shift shows that the Attorney General is simply searching for a legal theory that will justify his efforts to use legal tools to pressure ExxonMobil to alter its position on matters of public concern. Attorney General Schneiderman’s new theory of securities fraud has nothing to do with the prior focus of his investigation on ExxonMobil’s historic climate change research. And without offering – or possessing – any supporting evidence whatsoever, the Attorney General inappropriately opined to The New York Times that there ‘may be massive securities fraud’ at ExxonMobil based on its estimation of its oil and gas reserves and valuation of its assets.” (P. 4)

As it turns out, Schneiderman’s investigation falls well outside of a now-expired statute of limitations too, as Exxon’s complaint notes.

The bottom line

Due to the federal district judge’s court order last week there’s no question we’ll find out a lot more about the inner workings of the #ExxonKnew campaign as it will expose additional documents, depositions, and inquiries. As Wall Street Journal columnist Holman Jenkins Jr. put it in a recent interview, this could be “very embarrassing” for Healey, and as for Schneiderman:

“Eric Schneiderman is somewhat embarrassed and in retreat has basically abandoned his argument. Plus he’s been embarrassed by release of an email showing that he tried to flog this Exxon case when he was out fundraising for his hoped-for governor’s bid in a couple of years. That looks like it’s not gonna come off. He’s lucky just to come away from this with egg on his face.”

It’s been clear for months now that Healey and Schneiderman’s incentive is politics, rather than anything legitimately legal, and that they are working closely with each other and outside activists to make this climate crusade happen. These filings are the best step to confirm that fact.


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