Blair Horner: Like The Planet Itself, The Fight To Take On The Oil Companies Is Heating Up
In November, New York Attorney General Eric Schneiderman announced that his office would investigate ExxonMobil—the world’s biggest oil and gas company—for misleading the public about global warming. Under New York law, the Attorney General has the power to investigate whether companies issue misleading statements that could amount to financial fraud.
The relevant New York law in this area is known as the Martin Act. The Act, passed in 1921, allows the state to bring an action against a company if it can prove that the company deceived the public by misrepresenting or omitting a material fact in the offering of its securities. The state law is unique in the nation in that no proof of intent to deceive is required to bring a claim, and prosecutors do not even need to show that anyone was in fact defrauded. The Act allows for criminal as well as civil charges. New York State's highest court ruled in 1926 that it covers "all deceitful practices contrary to the plain rules of common honesty."
It was the Martin Act that was used by former Attorney General Eliot Spitzer to aggressively go after Wall Street firms. Since then, it has been used to prosecute large-scale Ponzi schemes, major investment banks accused of misleading investors and other cases.
Now, Schneiderman is wielding the statute in his probe of Exxon. Schneiderman subpoenaed Exxon, demanding extensive financial records, emails and other documents to probe the company's knowledge and disclosures about climate change going back to the 1970s. In response to the probe, Exxon has said it has worked on climate science in a transparent way for nearly 40 years and has regularly disclosed the business risks of climate change to investors for years.
Exxon has now submitted thousands of its documents to Schneiderman’s office in response to the Attorney General’s subpoena. Since his action, nearly twenty other states’ Attorneys General have gotten involved in bringing charges against Exxon.
Exxon is, of course, not taking these actions lying down. They have filed actions to block some states’ investigations and have argued that they did not mislead the public.
Exxon has stated that it “recognizes the risks posed by climate change,” and that the accusations are based on the “preposterous” claim that the company “reached definitive conclusions about climate change before the world’s experts” and withheld it. The company shared its findings in peer-reviewed publications, it said.
The pushback came from sympathetic members of the Congress as well. Last month, Congressman Lamar Smith, from Exxon’s home state of Texas, issued a subpoena to the New York Attorney general and demanded all communications since 2012 between the AG’s office and climate change activist organizations.
Congressman Smith said that the Attorney General and environmental groups have secretly collaborated “to act under the color of law to persuade attorneys general to use their prosecutorial powers to stifle scientific discourse, intimidate private entities and individuals, and deprive them of their First Amendment rights and freedoms.”
Attorney General Schneiderman fired back saying that the Congress has no authority in this area and rejected the subpoena, arguing that the request was “unprecedented.”
Instead of a First Amendment issue – infringing on the right of a corporation to freely express its opinion – the New York Attorney General rested its argument on its power under the Martin Act. In effect, the AG argued, “The First Amendment … doesn’t give you the right to commit fraud.”
While this issue is ultimately going to be decided in the courts, New York’s unique law gives the Attorney General wide powers to police the securities marketplace and protect investors. Armed with the Martin Act, the AG can determine whether, and if so how, Exxon and other oil companies used their internal research to bamboozle the public – and investors – about the dangers of burning fossil fuels that accelerate global warming.
If he succeeds, the AG may use the legal tools of his office to force the industry to confront its role in climate change. If that happens, this may be a turning point in history.
Blair Horner is the Legislative Director of the New York Public Interest Research Group.
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