Page 6 - NorthAmOil Week 50

NorthAmOil COMMENTARY NorthAmOil
ExxonMobil wins New York securities fraud lawsuit
ExxonMobil has won a case brought against it by the New York attorney general alleging that the company had misled investors on the costs of climate change, but looks set to remain under pressure
US
WHAT:
A judge has ruled that ExxonMobil did not mislead investors on the costs it would incur as a result of climate change.
WHY:
The New York attorney general’s office failed to provide evidence of deception, the judge ruled.
WHAT NEXT:
Further litigation more specifically focused
on climate change
is pending against ExxonMobil and other oil companies.
TEXAS-HEADQUARTERED ExxonMobil emerged as the winner last week in a high-pro- file securities fraud trial, having been accused of misleading investors on the risks posed by cli- mate change to its business. The move comes as a blow to the office of New York Attorney Gen- eral Letitia James, who accused ExxonMobil of lying about its use of a “proxy cost” for carbon to account for future regulations relating to climate change.
The accusation stems from the fact that ExxonMobil has used two different metrics to account for potential carbon costs. The proxy cost was used for predicting how regulations globally might reduce demand for oil and gas, while a greenhouse gas (GHG) cost was used to assess how local regulations might affect specific projects.
ExxonMobil argued that it had applied the appropriate costs depending on the situation. But the attorney general’s office claimed the two-part system had led to emissions costs being minimised on some oil and gas projects, making them look more attractive financially.
The super-major maintained that it had done nothing wrong, had no incentive to underesti- mate future costs related to climate change, and that it had been open about the use of the two metrics for years. The court finding in the com- pany’s favour last week gives it a major boost.
“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,” New York Supreme Court Justice Barry Ostrager wrote in his ruling on the case.
“Nothing in this opinion is intended to absolve ExxonMobil from responsibility for con- tributing to climate change through the emission of greenhouse gases,” Ostrager added. “But Exx- onMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case.”
The judge noted there had been no testimony from any actual investors claiming to have been
deceived by ExxonMobil. He went on to credit the company with “a culture of disciplined analysis, planning, accounting and reporting”, describing the lawsuit as “hyperbolic”.
Victory
ExxonMobil welcomed the ruling, having repeatedly accused the case of stemming from a “baseless” investigation and having no merit.
“We provided our investors with accurate information on the risks of climate change,” the super-major said in a statement. “Lawsuits that waste millions of dollars of taxpayer money do nothing to advance meaningful actions that reduce the risks of climate change.”
The company noted that New York had “failed to make a case even with the extremely lowthresholdoftheMartinActinitsfavour”.
New York’s Martin Act empowers officials to
target a wide range of corporate behaviour that
could have a negative impact on shareholders.
Indeed, under the act the attorney general’s
office did not have to prove that ExxonMobil had
intended to mislead investors in order bring the
lawsuit against the company. The judge noted
In order to win the case, however, New York
had to prove not only that ExxonMobil had
made false statements in its public disclosures
to shareholders, but also that those statements
would have been considered important by inves-
tors when making decisions about buying and
selling company stock. investors
The attorney general’s office had already dropped two of its four claims against ExxonMo- bil during the closing statement from its lawyer, without explanation. After this, Ostrager was left to decide whether ExxonMobil had violated the Martin Act by issuing public statements about proxy costs that were materially misleading. However, he ruled that the state could not prove that ExxonMobil had done so.
What next?
The closely watched lawsuit was seen by some as a bellwether for how investors view energy com- panies’ prospects in light of climate change and
claiming to have been deceived by ExxonMobil.
there had been no testimony from any actual
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w w w . N E W S B A S E . c o m Week 50 18•December•2019