Exxon Found Not Guilty of Fraud in Climate-Change Accounting Case -- 3rd Update
December 10 2019 - 12:25PM
Dow Jones News
By Corinne Ramey
A New York state judge found Exxon Mobil Corp. not guilty of
fraud, saying Tuesday that the New York state attorney general had
failed to establish the oil giant had deceived its investors about
how it accounted for the cost of future climate-change
regulations.
The verdict, which capped a nearly three-week civil trial
between Exxon and the New York attorney general's office, is a
victory for the company, which had spent several years fighting the
case. The company is also 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 had failed to
prove the company violated either 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 ExxonMobil made any material
misstatements or omissions about its practices and procedures that
misled any reasonable investor," Justice Ostrager wrote.
Still, he noted the case was a securities-fraud one, and his
ruling only revolved around that issue. "Nothing in this opinion is
intended to absolve ExxonMobil 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 the company planned for these costs
mattered to investors, the office said, since it would impact the
future health of the company.
The attorney general had estimated the damage to shareholders to
be as much as $1.6 billion.
Lawyers for Exxon said the company had done nothing wrong. A
reasonable investor wouldn't expect to know such internal
calculations, the company said. It 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
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, saying the company deserved a ruling.
Justice Ostrager said because he found 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.
In addition to the New York case, Exxon faces a lawsuit from the
Massachusetts attorney general's office, which has accused the
company of deceiving investors about climate-change costs, similar
to the allegations in New York. The Massachusetts suit also accuses
Exxon of violating a state consumer-protection law by conducting a
deceptive marketing campaign.
Both the New York and Massachusetts cases, which were filed in
state courts, allege the company broke state laws.
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 10, 2019 12:10 ET (17:10 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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