ZME Science reported earlier that Exxon Mobil might be liable for a RICO case similar to tobacco companies for withholding information about the risks of climate change and actively seeking to manipulate public opinion to favor its business. Now, a NY Times article reports New York Attorney General Eric T. Schneiderman is investigating the oil & gas company on suspicion that the company failed to mention critical information to its investors about the risks of climate change. A subpoena was issued on Wednesday evening to Exxon Mobil, demanding extensive financial records, emails and other documents.
Of course, this isn’t a racketing case. Schneiderman might charge Exxon solely, for now, with lying through omission to its investors over the past decades. This year, we found out that Exxon had internal memos issues by its own scientific teams that said global warming is caused human activities and, inevitably, the company has an important contribution in all of this. This was in the early 1980s. Exxon’s public position has ever since decidedly been against acknowledging the dangers brought about by climate change,and even appeals by their founding family, the Rockefellers, to change company policy, fell on deaf ears. Exxon went ahead and spent more than US$30m over the years to thinktanks and groups that advocated and promoted climate change denial, according to Greenpeace.
If investors had been truthfully aware of the perils of climate change and, hence, the inevitable restrictions on fossil fuel use, they might not have decided to buy as many shares of Exxon stock. The case is that Exxon might have violated its fiduciary duties to investors.
“We unequivocally reject the allegations that Exxon Mobil has suppressed climate change research,” said Kenneth P. Cohen, vice president for public affairs at Exxon Mobil, for the NY Times.
In a similar case, ” Peabody Energy, the nation’s largest coal producer, had been under investigation by the attorney general for two years over whether it properly disclosed financial risks related to climate change.” So, we already have a precedent.
The State of New York is also particularly entrusted with legal tools other states do not have at their disposal to tackle such cases. A prime example is the Martin Act which the the New York Attorney General can use to investigate companies for nondisclosure of climate change risks. The Martin Act is New York State’s “blue sky” law, intended to protect New York investors from fraud in the offer and sale of securities. The terms of the Martin Act have been broadly interpreted, making it one of the most powerful blue sky laws in the United States.
Previously, New York State Attorney General Andrew M. Cuomo used the powerful but little-known Martin Act in 2008 to subpoena five publicly-traded companies that were connected directly or indirectly to the construction of new coal-fired power plants, demanding additional information relevant to their analysis of climate risks in connection with their business and disclosure of those risks to investors.
This case will be interesting to follow, especially since it can escalate into a RICO case. Just like tobacco companies were charged with misinforming the public on the health perils of smoking and had to settle for billions, so can Exxon along with other oil & gas companies be held liable for similar charges for their active involvement in spreading misinformation about global warming.
“This could open up years of litigation and settlements in the same way that tobacco litigation did, also spearheaded by attorneys general,” said Brandon L. Garrett, a professor at the University of Virginia School of Law. “In some ways, the theory is similar — that the public was misled about something dangerous to health. Whether the same smoking guns will emerge, we don’t know yet.”
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