Verdict on Valdez Could Cost Exxon Billions : Environment: Jury in massive civil suit finds that company and tanker’s skipper acted recklessly. Oil spill was worst in U.S. history.
In a verdict that could cost Exxon Corp. billions of dollars, a jury found Monday that company executives and the skipper of the Exxon Valdez acted recklessly in the events leading to America’s worst oil spill.
The verdict came in a massive civil lawsuit brought by some 10,000 commercial fishermen, Native Americans, landowners and others harmed by the 1989 spill in Prince William Sound.
The plaintiffs are seeking $1.5 billion in actual damages and a punitive award of $15 billion--the amount their lawyers argue is needed to punish Exxon, one of the world’s largest businesses.
“This was the most important part of the trial--whether Exxon could be (ordered to pay) punitive damages,” said Bernard J. Picchi, an oil industry analyst with Kidder Peabody in New York. “I can’t imagine that the damages couldn’t--on a company this size--be mind-boggling.”
Uncertainty about the potential for monetary damages sent Exxon’s stock plunging $2.50 to $59.625 in New York Stock Exchange trading Monday.
Adam E. Sieminski, an oil analyst in the Washington office of NatWest Securities, estimated that concern about the trial has cost Exxon $8 billion in market capital since March. “The problem is, what if the jury says the punitive damages amount to $15 billion?” he said. “Even for Exxon, that’s a big number. That would be a big number for the Treasury Department.”
The three-phase trial began May 2 and is expected to last through August. In the initial phase, the jury was asked to decide whether Exxon and Exxon Valdez Capt. Joseph Hazelwood were reckless and should therefore pay punitive damages.
The second phase of the trial, to begin next week, will determine the amount of actual damages Exxon must pay. The company has admitted it was responsible for the accident, but it notes it has already paid some $3.5 billion in attempts to clean up the spill and settle lawsuits with the state and federal governments.
The final phase of the trial will determine the amount of punitive damages. The same jury--nine women and three men--will hear the entire case.
As the verdict was read Monday, a group of fishermen in the crowded courtroom cheered, drawing a scolding from U.S. District Judge H. Russel Holland.
Outside, the plaintiffs’ lead attorney, Brian O’Neill of Minneapolis, said the decision is proof that “even with a company as big and powerful as Exxon Corp. is, our system brings them to justice.”
O’Neill and other lawyers for the plaintiffs have asserted that Exxon must be punished to deter other companies from placing the environment at risk.
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“Nobody wants to cripple Exxon,” O’Neill said. “We want to change Exxon. We want to make the Exxons of the world aware of the fact that they’re responsible.”
Exxon’s lead attorney, Patrick Lynch of Los Angeles, said the firm has already been punished enough. “The actions that Exxon took from the day after the spill are exemplary of their citizenship and have obviously been an enormous burden on the corporation,” he said.
Testimony in the first civil trial resulting from the disaster has focused so far on whether the spill was merely an accident or the product of recklessness and corporate indifference. The oil-laden Exxon Valdez strayed from shipping lanes and ran aground on a charted reef, ripping open the hull and spewing nearly 11 million gallons of crude oil.
Much of the evidence centered on the actions of Hazelwood, who had placed the tanker under the control of a less-experienced officer and was in his cabin when the ship ran aground. A criminal jury four years ago acquitted Hazelwood of operating the tanker while drunk.
Hazelwood did not speak at the criminal trial. But testifying in the civil case, he said last month that he lied to U.S. Coast Guard investigators when he told them he had had only one beer the night of the spill. In fact, he acknowledged, he had at least three double vodkas in the port city of Valdez that afternoon.
The plaintiffs tried to show that company officials knew for years that Hazelwood had a serious drinking problem, arguing that the company should never have allowed him to operate tankers. Exxon executives testified that Hazelwood was closely monitored.
A turning point in the case may have been the testimony of former Exxon Chairman Lawrence Rawl, who recanted statements he made to two congressional committees and in the news media after the spill.
Rawl testified that he was wrong when he told Congress that Hazelwood was drunk the night of the spill and that Exxon had made a mistake by allowing him to return to driving tankers after he was treated for alcohol abuse in 1985. Rawl told the jury the remarks were based on inaccurate information in the frenzied days immediately after the oil spill.
Faced with a federal criminal indictment alleging environmental crimes, Exxon agreed in 1990 to pay the government $100 million in restitution and $150 million in fines.
The next year it paid $900 million to settle state and federal civil damage claims.
The Exxon Valdez Spill: a Chronology * March 24, 1989: The tanker runs aground in Prince William Sound, Alaska, spilling 10.8 million gallons of crude oil.
* March, 1990: Valdez Capt. Joseph Hazelwood is acquitted of three major charges and convicted on a misdemeanor charge of negligent discharge of oil. He is sentenced to 1,000 hours of beach cleanup work and as much as $50,000 in restitution.
* October, 1991: A federal judge approves a $1.15-billion agreement between Exxon and the U.S. and Alaska governments to settle criminal and civil cases.
* June, 1992: A three-year cleanup effort mounted by Exxon, costing an estimated $3.5 billion, officially ends.
* July, 1992: The Alaska Court of Appeals overturns Hazelwood’s conviction on negligent discharge of oil.
* November, 1992: Alaska authorities and the Justice Department announce a $31.7-million settlement, ending the last of the government lawsuits over the incident.
* June 13, 1994: A federal jury finds Exxon and Hazelwood recklessly caused the spill. Hazelwood is also found to be negligent. Source: Times staff and wire reports; Bloomberg Business News
Times staff writer Michael Parrish in Los Angeles contributed to this report.
