Another Front Opens in the Disclosure Wars

Readers of this blog are aware of the ongoing fight over compelled corporate disclosure exemplified by the fractious history over the conflict minerals rule.  A new front has now been opened by New York Attorney General Eric Schneiderman who has moved under the Martin Act to open an investigation over whether Exxon Mobile mislead the public and shareholders about the perils of climate change.

Schneiderman subpoenaed Exxon demanding extensive financial records, emails and other documents to probe the company's knowledge and disclosures about climate change going back to the 1970s. The investigation seems to have been spurred by stories in Inside Climate News and the Los Angeles Times that the Exxon’s s own scientists had raised concerns about global warming decades ago that the company executives contradicted. 

Pressure has also come from, among others, presidential candidate Bernie Sanders who on Oct 20th wrote a letter to U.S. Attorney General Loretta Lynch stating that “it appears that Exxon knew its product was causing harm to the public, and spent millions of dollars to obfuscate the facts in the public discourse.” Sanders’s letter states that the recent investigation shows that “top Exxon scientists concluded both that climate change is real and that it was caused in part by the carbon pollution resulting from the use of Exxon’s petroleum-based products,” as early as 1977.

Under the Martin Act, the state must prove that a company deceived the public by misrepresenting or omitting a material fact in the offering of securities.  Unlike many securities laws, the Martin Act does not require proof of intent to deceive is required to bring a claim, and prosecutors do not even need to show that anyone was in fact defrauded. The act allows for criminal as well as civil charges.  The theory of the probe seems to be that if Exxon believed for decades that climate change was real and that they were in part responsible for it, the company’s failure to inform the public of that information and to instead support research that contradicted that information was fraudulent.

In response to the probe, Exxon has said it has worked on climate science in a transparent way for nearly 40 years and has regularly disclosed the business risks of climate change to investors for years.  On Wednesday, Oct. 21, the company issued a statement regarding the issue, saying that “media and environmental activists’ allegations about the company’s climate research are inaccurate and deliberately misleading.”

According to ExxonMobil’s vice president of public and government affairs, Ken Cohen, “activists deliberately cherry-picked statements attributed to various company employees to wrongly suggest definitive conclusions were reached decades ago by company researchers.”

So What is the Fight Really About?

On the factual front, the fight is about what Exxon knew about the causes of climate change and whether they mislead investors by failing to disclose information adequately.  According to Inside Climate news in the early days of climate change research:

  • the company launched its own extraordinary research into carbon dioxide from fossil fuels and its impact on the earth. Exxon’s ambitious program included both empirical CO2 sampling and rigorous climate modeling. It assembled a brain trust that would spend more than a decade deepening the company’s understanding of an environmental problem that posed an existential threat to the oil business.
  • Then, toward the end of the 1980s, Exxon curtailed its carbon dioxide research. In the decades that followed, Exxon worked instead at the forefront of climate denial. It put its muscle behind efforts to manufacture doubt about the reality of global warming its own scientists had once confirmed. It lobbied to block federal and international action to control greenhouse gas emissions. It helped to erect a vast edifice of misinformation that stands to this day.
  • In a 2012 PBS interview, Steve Coll, a staff writer at The New Yorker and author of Private Empire: ExxonMobil and American Power, said that the radical thing the Exxon did that really altered the debate around climate change was to go after the science.
  • He said that while many oil companies lobbied against past climate accords, such as the 1997 Kyoto Protocol, on “economic and fairness grounds,” Exxon took a different tact, based in large part, according to Coll, on the “personal conviction of the chief executive, Lee Raymond.”

But Where is the Law?

Celia Taylor