Exxon Sued by NY for Deceiving Investors on Climate Change

Lawyers for Exxon Mobil Corp. (IW 500/1) stood before a New York judge in August and told the state’s attorney general to "put up or shut up" after investigating the company’s public disclosures about climate change, saying it should sue the company or move on.

On Oct. 24, New York chose to strike.

Attorney General Barbara Underwood sued the energy giant in state court in Manhattan, accusing it of misleading investors about how future regulations could impact the company’s finances. The suit capped off an almost three-year-long investigation that reached the highest levels of Exxon’s leadership.

"Exxon built a facade to deceive investors into believing that the company was managing the risks of climate change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations," Underwood said.

The state seeks an order prohibiting Exxon from continuing to making misrepresentations and forcing the company to correct its past claims. It also seeks unspecified money damages and a disgorgement of all profit derived from the alleged fraud.

Exxon spokesman Scott Silvestri didn’t immediately respond to a message seeking comment.

Behind The Scenes
The Irving, Texas-based company in March lost a lawsuit in which it sought to have the investigation halted. Exxon has argued the case was politically motivated, having been coordinated behind the scenes with other Democratic-led states and environmental groups hostile to the oil producer.

The state in June accused Exxon of failing to comply with subpoenas for cash-flow projections reflecting how it used so-called proxy costs to calculate the financial impact on its assets from future regulations.

In the Oct. 24 lawsuit, New York said Exxon’s management, including former CEO Rex Tillerson, knew for years that the company was deviating from its public claims by using a second set of proxy costs that were lower than the publicly disclosed figures.

New York has said it wants to know exactly how the proxy cost for greenhouse gas emissions was used in making investment decisions, corporate planning reviews, reserves estimates and evaluations for more than two dozen assets and projects.

In August, at the hearing where Exxon lawyer Theodore Wells made the “put up or shut up” demand, a lawyer in Underwood’s office, Manisha Sheth, said New York had "smoking gun" evidence.

By Erik Larson