Exxon Blasts NY for Walking Back Claims at Trial's End
(Bloomberg) -- The New York attorney general’s office dropped its claim that Exxon Mobil Corp. intentionally misled investors about how it accounts for the financial risks of climate change, significantly diminishing the state’s case in the last minutes of a high-stakes securities fraud trial.
Assistant Attorney General Jonathan Zweig caused a stir Thursday when he revealed during his closing statement that the state was no longer claiming Exxon’s alleged scheme was carried out knowingly and willfully by company officials. The government also dropped its claim that investors relied on those allegedly false statements when buying stock, he said.
The state’s central allegation remains -- that Exxon violated New York’s Martin Act by issuing materially misleading statements about its use of a “proxy cost” for carbon. Under that narrower claim, the state doesn’t need to prove intent or show that investors relied on the allegedly false information.
Zweig revealed the change only after Justice Barry Ostrager, who will decide the case without a jury, asked him why he was focusing his closing remarks solely on the Martin Act and not the three other claims in the case, including common law fraud, which requires a showing of intent to deceive.
“I don’t mean to interrupt you, but there are three other claims that the attorney general advances in its complaint,” Ostrager said. “Are you going to address those claims as well?”
“Your honor, for purposes of this presentation, I’ll be focusing on the Martin Act,” Zweig said, without elaborating.
“Is that a concession that there is no common law fraud?“ the judge asked.
“Yes, your honor,” the state’s lawyer replied.
Zweig said the state’s claim of equitable fraud was also dropped, while a so-called executive law claim, which overlaps with the Martin Act, stayed put.
After lawyers for both sides had given their closing statements, Exxon attorney Theodore Wells returned to the podium in the crowded courtroom and criticized the state’s final move, suggesting the AG had dropped the claims for strategic purposes before the judge could rule against them due to a lack of evidence.
“We did not come to this trial and try this case for two weeks to have them stand up after the evidence has been presented -- and after I have given my summation -- and stand up and say we are not pressing the two claims that have caused, in many respects, the most severe reputational harm to the company and to the executives,” Wells said.
The lawyer said former Exxon Chief Executive Officer Rex Tillerson, in particular, had faced years of harsh allegations by the state, which accused the CEO of knowingly spearheading the scheme and trying to cover it up. Wells said Exxon and its officials deserve a ruling to clear their reputations.
Ostrager said he couldn’t do so because they were no longer part of the case. “This was their one opportunity to establish those claims in this courtroom and they’ve withdrawn those claims,” the justice said.
The attorney general’s office declined to comment.
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