New York Sues Exxon Mobil, Saying It Deceived Shareholders on Climate Change

Source: By John Schwartz, New York Times • Posted: Thursday, October 25, 2018

The lawsuit says Exxon engaged in a “longstanding fraudulent scheme” to deceive investors and analysts.Chona Kasinger/Bloomberg, via Getty Images

New York’s attorney general filed a lawsuit against Exxon Mobil on Wednesday that claims the company defrauded shareholders by downplaying the expected risk of climate change to its business.

The litigation, which follows more than three years of investigation, poses a financial risk to Exxon, as well as a potential reputational blow to a company that has worked to build an image of being concerned about climate change. It could also expose the company to other litigation.

The suit does not charge Exxon with playing a role in creating climate change, though the burning of fossil fuels is a major contributor to human-driven global warming. Rather, it says the company engaged in a “longstanding fraudulent scheme” to deceive investors, analysts and underwriters “concerning the company’s management of the risks posed to its business by climate change regulation.”

Exxon told the world that it was prepared for the more stringent regulations that would inevitably be required to combat climate change, the attorney general’s office said. But in reality, according to the complaint, the company “employed internal practices that were inconsistent with its representations, were undisclosed to investors, and exposed the company to greater risk from climate change regulation than investors were led to believe.”

The investigation has spanned the tenures of two New York attorneys general and has also involved attorneys general from other states. Exxon has attempted to block the investigation in courts in three states, and has painted it as an attempt by bullies to restrict the company’s First Amendment rights and as part of an anti-fossil-fuel conspiracy backed by, among others, the Rockefeller family.

Attorney General Barbara D. Underwood of New York. Todd Heisler/The New York Times

Exxon Mobil did not immediately respond to a request for comment.

Barbara D. Underwood, the current New York attorney general, brought the lawsuit under the Martin Act, a state law that gives her sweeping powers to investigate and prosecute securities fraud. The suit demands that Exxon turn over all the money it made through the alleged fraud and make restitution to investors. The suit does not name a sum to be paid, but if the case is successful, the amounts could run into the hundreds of millions of dollars, if not more.

The investigation first came to light in November 2015, about a year after it was begun by former Attorney General Eric T. Schneiderman. Before long, other state attorneys general announced their support for Mr. Schneiderman’s efforts; some, notably Maura Healey of Massachusetts, started investigations of their own.

Exxon Mobil has long conducted research into climate change, much of it published in the scientific literature. In 2015, Inside Climate News and The Los Angeles Times reported that the company was well aware of the risks of climate change and used that research in its long-term planning for activities like drilling in the Arctic, even as it funded groups from the 1990s to the mid-2000s that denied serious climate risks.

Exxon Mobil stopped funding groups that directly challenged the science of climate change in the mid-2000s, and says today that it accepts the science of climate change and the need for action to blunt its worst effects. The company supported the Paris climate deal and opposed the decision by President Trump to withdraw from the agreement.