Exxon Mobil (NYSE:XOM)
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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 (December 11, 2019).
A New York state judge cleared Exxon Mobil Corp. of fraud claims, saying New York's attorney general had failed to establish that the oil giant had deceived investors about how it accounted for the cost of future climate-change regulation.
The verdict Tuesday capped a nearly three-week civil trial between the state and Exxon, which had spent several years fighting the case. The company is battling similar accusations in other state and federal courts.
In his 55-page ruling, New York State Supreme Court Justice Barry Ostrager said the attorney general's office didn't prove that the company had violated the Martin Act, a broad antifraud statute commonly used to pursue financial crime, or other similar laws.
"The Office of the Attorney General failed to prove, by a preponderance of the evidence, that Exxon Mobil made any material misstatements or omissions about its practices and procedures that misled any reasonable investor," Justice Ostrager wrote.
Still, he noted that the case and his ruling centered on allegations of securities fraud. "Nothing in this opinion is intended to absolve Exxon Mobil from responsibility for contributing to climate change through the emission of greenhouse gases in the production of its fossil fuel products," the judge wrote.
During the trial, the office of Attorney General Letitia James, a Democrat, accused the company of using two different accounting methods -- one public, and one internal -- to project its business costs in countries that were expected to implement policies to combat climate change.
How Exxon planned for these costs and their potential impact on the company's health mattered to investors, the office said, with the omission of the information resulting in an inflated stock price.
The attorney general estimated the damage to shareholders to be as much as $1.6 billion.
Lawyers for Exxon said the company, while acknowledging the existence of internal calculations, had done nothing wrong and that a reasonable investor wouldn't expect to have access to the information.
The company had also accused the attorney general's office of being motivated by politics in bringing the case.
A spokesman for Exxon said the ruling affirmed the company's position that it had provided investors with accurate information.
"The court agreed that the attorney general failed to make a case, even with the extremely low threshold of the Martin Act in its favor," the spokesman said.
Ms. James said in a statement that investors are entitled to the truth. "Despite this decision, we will continue to fight to ensure companies are held responsible for actions that undermine and jeopardize the financial health and safety of Americans across our country, and we will continue to fight to end climate change," she said.
During the trial's closing arguments, the attorney general's office dropped two of the four fraud counts from its case.
Lawyers for Exxon argued the office shouldn't be allowed to drop those counts and that the company deserved a ruling.
Justice Ostrager said by finding the attorney general hadn't proved the Martin Act-related counts, his ruling also established the company wasn't liable on the other fraud counts, which carry a higher burden of proof.
Exxon faces a similar lawsuit in state court in Massachusetts, whose attorney general's office has accused the company of deceiving investors about climate-change costs.
The Massachusetts suit also accuses Exxon of violating a state consumer-protection law by conducting a deceptive marketing campaign.
The company also faces shareholder lawsuits in federal courts in Texas and New Jersey that allege violations of federal securities law and accuse the company of deceiving investors.
In all those cases, Exxon has denied wrongdoing.
Write to Corinne Ramey at Corinne.Ramey@wsj.com
(END) Dow Jones Newswires
December 11, 2019 02:47 ET (07:47 GMT)
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