In a filing with a state court in New York on Friday, Attorney General Eric Schneiderman said that former Exxon CEO Rex Tillerson, now US Secretary of State, misled investors about the likely costs of climate change. The document says that the company used one number called a proxy cost of carbon when making statements to investors but used a lower number internally.
“Exxon’s documents show that former chairman and CEO Rex Tillerson was specifically informed of, and approved of, this inconsistency,” Schneiderman’s office said in the filing with the court. The disparity came to light while Schneiderman’s office was reviewing millions of documents ExxonMobil has turned over pursuant to a subpoena issued by the AG. The company had sought to quash the subpoena previously but the trial court ruled against it.
Schneiderman’s office told the court that it “has uncovered significant evidence of potential materially false and misleading statements by Exxon” concerning how the oil giant calculated the cost of greenhouse gas (GHG) emissions in its investment decisions. It says the company used the proxy number when talking to investors but directed its employees to ignore the proxy cost or apply it improperly in order to make some investments appear better than they were.
Schneiderman’s office contends, “Exxon’s own documents suggest that if Exxon had applied the proxy cost it promised to shareholders, at least one substantial oil sands project may have projected a financial loss, rather than a profit, over the course of the project’s original timeline.” It goes further to say that, “Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public.”
Jamie Henn, communications director for 350.org, issued a statement today calling the revelations in the court filing a “bombshell.” He says they call into question Tillerson’s fitness to serve as Secretary of State. “These new revelations are another bombshell in the ever growing scandal over at ExxonMobil. If these allegations are true, and there’s every reason to believe they are, this is the largest case of corporate fraud in history. Exxon knew about climate change decades ago, but instead of taking action, they lied to the public, lied to their shareholders, and lied to federal regulators.”
Henn said Tillerson should step down if it turns out he has lied to regulators, investors, and the American people. “Sadly, corporate frauds seem to be a staple of this administration, starting with the man at the top,” he said.
At the company’s annual meeting this week, Exxon stockholders, most of them institutional investors, voted by a wide margin to require the company to include information about the costs of climate change in its communications with them. The company had vigorously opposed the resolution.
Not everyone sees it the same way, of course. An op-ed piece appeared in the Washington Examiner today entitled “Liberal AGs’ Exxon Mobil holy war running out of steam.” The piece by reactionary columnist Brian McNicholl says, “New York’s ambitious attorney general is trying to punish Exxon Mobil for allegedly hiding what it knew about climate change decades ago. The flimsy pretext of Schneiderman’s case is that the company somehow deceived shareholders with this concealment, inflating predictions of future earnings and thus stock prices.” On that topic, also see: “Trump + Russia Chaos Is Tiny Preview Of Carbon Bubble Popping” and “The Totally Insane Carbon Bubble.”
The company and its defenders have been working hard to paint the investigation by Schneiderman’s office and a companion case brought by Massachusetts Attorney General Maura Healey as politically motivated witch hunts with no legal merit. The cases are a long way from going to trial, as the discovery phase of the litigation may take years to complete. But it does seem as though a noose is tightening around Exxon. If the allegations against it are true, it has perpetrated the biggest financial fraud in history.