Exxon: the Peabody analogy

Someone (I forget who; remind me and I'll thank you) pointed me at Everything You Need to Know About the Exxon Climate Change Probe but were afraid to ask. That article makes some points I've already made (While environmental advocates have cheered Schneiderman’s effort to take energy firms to task over a global crisis, some legal scholars question whether he is the right man for the job. "You wonder why this is the sort of thing that a New York attorney general should be doing," said James Fanto, a professor at Brooklyn Law School. "It seems like it’s just completely politically motivated." Or perhaps "The big issue for Exxon here is what’s material," said James C. Spindler, a business school and law school professor at the University of Texas-Austin. "Assuming they did have some research they didn’t disclose, that would be an omission," although it might not be material if "the information is already out there" and available to investors. A question Schneiderman needs to answer, Spindler said, "is whether Exxon or other similarly situated energy companies are in a special position to have information that the rest of the world doesn’t."

Anyway, its worth reading; I won't quote it all. Another part I found interesting was On Sunday, meanwhile, Schneiderman reached a settlement with the largest U.S. coal miner, Peabody Energy. Which leads to Peabody Energy Resolves N.Y. Probe Into Climate Disclosures. And the settlement? That article says In a formal announcement of the agreement on Monday, Schneiderman said the company will file revised shareholder disclosures with the U.S. Securities and Exchange Commission and has agreed that all future statements to shareholders will be consistent with the terms of the accord.

Which must be pretty good news for them: no penalty, just a few revised statements. Who "won" depends on who is looking. Forbes says "Peabody, N.Y. Attorney General Reach Underwhelming Settlement On Climate Change Disclosures": The world’s largest private-sector coal company has settled an eight-year-old dispute with the New York State Attorney General’s Office over its climate change disclosure practices by agreeing to what appear to be minor tweaks in how it will draft certain federal securities filings. Whereas Inside Climate News says "Peabody Settlement Shows Muscle of Law Now Aimed at Exxon": Coal giant's climate change settlement is 'unprecedented first step' in forcing honest disclosures from fossil fuel companies, NY attorney general says.

Which one is right? I'm with Forbes on this. Notice that ICN calls it a 2-year investigation, but Forbes thinks its 8. The Graun agrees with 8, as does Peabody's press statement so I think it was 8.

And the message to Exxon? I can't help but think this will cheer them up. The similarities are strong: the Graun even helpfully reminds me that Peabody has a history of telling porkies about GW too.

[Update: since everyone is pushing the tobacco analogy, I'm interested in examples. I haven't seen any good ones yet. There's an appallingly bad one at Curry's which really shows how astonishingly low she has sunk -W]

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Talk to your CFO about risk disclosure statements and shareholder suits. Shareholder lawyers can now claim their clients were mislead (esp given the fall in coal stock prices).

[They can try to. But Peabody can point to the IPCC reports, what the Prez has been saying, and endless public statements by scientists and others pointing out the dangers -W]

By Eli Rabett (not verified) on 12 Nov 2015 #permalink

"The coal giant in a statement stressed that "there is no other action associated with this settlement, no admission or denial of wrongdoing and no financial penalty." Peabody also said "the company has always sought to make appropriate disclosures."

However, Peabody's past SEC filings regularly denied the company had the ability to predict the impact that potential regulation of climate change pollution would have on the firm's operations. The investigation found that Peabody and its consultants in fact "made projections that such regulation would have severe impacts on the company," Schneiderman's office said.

For instance, Peabody's internal calculations projected a 33% or more reduction in the dollar value of coal sales in the company's primary U.S. markets if aggressive regulatory action were imposed on existing power plants and future electricity generation, the state investigation showed."

http://www.usatoday.com/story/money/2015/11/09/peabody-energy-climate-s…

It strikes me that there is not a lot of difference between saying 'unable to predict the impact' rather than 'the impact is likely to be adverse but could range from minor up to and beyond the full equity value of the company'.

Just because there are some internal calculations projecting a 33% or more reduction in sales value if...., doesn't necessarily mean they have confidence in those projections. If they don't have confidence in the level of uncertainty and the company has actually lost 87% of equity value then an up to 100% of equity value potential impact would seem a necessary disclosure.

Are we moving towards the point of requiring a large proportion of all companies to disclose 'we are not sure of the impact of climate change, it could wipe us out'?

[I saw some of that; it makes my point even more strongly. Peabody (unlike Exxon :-) really did have internal knowledge they didn't disclose; and yet they still got away unfined and with only minor adjustements; are all the people hoping for Exxonageddon just blowing smoke? -W]

If climate change causes earthquakes, telling lies about climate change can only make life harder for scientists accused of not forcasting them .

Should Italian seismologists sue Exxon for legal expenses , or call for the indictment of palaeontologists for drilling holes in the K-T boundary all around Gubbio?

[They can try to. But Peabody can point to the IPCC reports, what the Prez has been saying, and endless public statements by scientists and others pointing out the dangers -W]

Which works for the issue of disclosure (and I agree Exxon wont have any troubles there) but it doesnt help them if they are shown to have made statements to shareholders that are the opposite of what their internals documents show. Right?

[Not necessarily. And indeed we have a counterexample: Peabody. Taking a broader view, the SEC and so on need to make sure that investors have a full range of information available; but in the case of Exxon, they *did* have a full range. Because that info was already publically available. Investors are not expected to slavishly believe every last thing the company tells them, and totally ignore all other information -W]

> The November 4 subpoena seeks extensive financial records, emails, and other documents and “focuses on whether statements the company made to investors about climate risks as recently as this year were consistent with the company’s own long-running scientific research.”

http://blogs.law.columbia.edu/climatechange/2015/11/09/new-york-state-a…

[Notice that blog carefully avoids committing itself to any opinion -W]

> [Notice that blog carefully avoids committing itself to any opinion -W]

Yeah. Had a very quick look for someone with experience in US law to make the issues clear but came up empty. Anyone got a nice link?

> [And indeed we have a counterexample: Peabody.]

Kinda. Some changes were agreed to. But yes, minor could be an overstatement. Settlements are not always a great way to tell if someone broke the law (or not).

[Well, we have here a clearly very motivated prosecutor. I f he didn't feel able to even try to push for fines on Peabody after an 8 year investigation, that's pretty revealing, I'd say. there's another possible interpretation, that he lacks bandwidth, and was salivating to get onto Exxon, so was forced to drop Peabody. I regard that as unlikely -W]

If u are correct here

> [the SEC and so on need to make sure that investors have a full range of information available]

then I agree. But I am not sure u are. I really have no idea though. I did read that someone involved in the tobacco prosecution said it was worth looking into, but that was a wishy-washy too. Remain undecided for now.

[ps: fixed up quoting -W]

Well, Mann has commented: in the interest of equality won't somebody interview Professor Peabody?
http://insideclimatenews.org/news/12112015/michael-mann-climate-change-…

[Ha: "ICN: Climate modeling is your specialty, and Exxon did extensive modeling in the 1980s. Do you have any thoughts on the company's modeling efforts?" No, Climate modelling *isn't* Mann's speciality, which is why he avoids answering the question -W]

Link there to a more informed legal comment from last month:
http://thinkprogress.org/climate/2015/10/20/3713761/exxon-climate-denia…

Disappointingly, can't find an actual quote for "prima facie" which was a term familiar from the CRU FOIA arguments, so perhaps Mike Mann is paraphrasing.

["it’s discovered that the companies worked together to suppress knowledge about the reality of human-caused climate change" - well, no, they didn't. The put out their own PR, but they did nothing to suppress the IPCC's information. Unlike, say, Saudi Arabia which did do its best -W]

When will the Advertising Council erect a climate wars Wall of Shame, memorializing in chronological order , every firm ever to work both sides of Fleet Street or Madison Avenue ?

> endless public statements by scientists and others
> pointing out the dangers -W]

That argument worked for the tobacco companies for years.
Until it didn't.

It still works for the entire banking and securities industry. They got extensive disclosure rather than a requirement they be fiduciaries.

Ever try to compare two credit card offers to decide which is better for you?

[I have seen a good comparison against the tobacco case; have you? All I've seen is people saying "Tobacco: therefore I win" but there's a certain lack of detail -W]

By Hank Roberts (not verified) on 13 Nov 2015 #permalink

I am a lawyer. I'm not a securities lawyer or one specializing in fraud (or New York state law), and as I read up on various legal issues re Exxon, I can feel the gaps in my legal knowledge. I'd encourage my fellow non-experts to be similarly cautious in saying either side has this issue in the bag.

I'd agree the result against Peabody looks underwhelming to me, although I'd also agree with Eli that it may expose them to shareholder suits. On the third hand, Peabody's 95% stock devaluation is getting them close to judgement proof.

[Suing something you own seems totally pointless -W]

The AG's ability to investigate Peabody wasn't open-ended. it was limited by what potential claims could be raised by the evidence the AG had. The initial info that the AG has on Exxon is a little different so their subpoenas could go further.

I'm not sure what to do with the info Peabody didn't disclose on internal analysis of regulatory risk. OTOH, I expect there's lots of caselaw on exactly that issue (say, pharma companies). An expert judgment would rely on that caselaw, not the Peabody example.

[I'm not sure whether Pharma would be a good analogy. They're more likely to lie about things that they really did have secret internal info about -W]

That other entities like IPCC told the truth about carbon doesn't give Exxon a free hand to lie (assuming it can be proven to lie). Again I'll bet there's good caselaw about this, maybe some penny stock advancing some ridiculous health cure.

[I agree Exxon doesn't have free leave to lie. OTOH, do you think that actually did lie in their SEC filings? No-one has put forward any examples so far -W]

There's also the matter of fraud committed against the public and government agencies by Exxon, not just against investors. That's a somewhat separate legal issue from the investigation of Peabody.

[That's a new one on me. What do you mean? -W]

By Brian Schmidt (not verified) on 13 Nov 2015 #permalink

> a good comparison against the tobacco case?

Depends on what turns up in the science papers mentioned by their spokesman in the interview linked above that he said were not sent to peer reviewed publications. That's what really nailed the tobacco industry when the papers were finally disclosed -- the fact that they'd had the information and hidden it away by a plethora of perfectly legal maneuvers.

Have a lawyer read it -- it's attorney-client privileged. Check.
Host it overseas -- it's not reachable. Check.

Saying that their lawyers will have likely done all the right things in terms of the time to tidily put away anything they weren't compelled to disclose.

I'd be rather surprised and greatly pleased if they knew nothing that they didn't try to hide when they found it out.

[I'm still baffled by you reluctance to concede this point. It seems blatantly obvious to me that Exxon knew nothing about climate science that wasn't public -W]

By Hank Roberts (not verified) on 13 Nov 2015 #permalink

"In the mid 1990s, more than 40 states commenced litigation against the tobacco industry, seeking monetary, equitable, and injunctive relief under various consumer-protection and antitrust laws."

"The first was declared in May 1994 by Mississippi Attorney General Mike Moore."

"Faced with the prospect of defending multiple actions nationwide, the Majors sought a congressional remedy, primarily in the form of a national legislative settlement.[9] In June 1997, the National Association of Attorneys General and the Majors jointly petitioned Congress for a global resolution. On June 20, 1997, Mississippi Attorney General Michael Moore and a group of other attorneys general announced the details of the settlement."

So it was 49 state AG's that joined in litigation of the four largest United States tobacco companies.

Then after all was said and done the feds came in at the request of Big Tobacco to simplify the settlement issue with the remaining 46 states (plus some territories).

You have ONE state AG going after ONE company dealing solely with SEC issues.

All ExxonMobil has to do is point to climate sensitivity of 1.5-4.5 degrees C (66% certainty) and that it would take millennia to reach a new equilibrium. That that estimate has not changed in several decades.

Now, if you find the Seven Sisters in collision like Big Tobacco and Operation Berkshire, you might have something. The probability of that happening is less than zero.

"By the mid-1950s, individuals in the United States began to sue the companies responsible for manufacturing and marketing cigarettes for damages related to the effects of smoking."

Do you all have four decades of individuals suing Big Oil over health issues related to the specific long term effects of climate change? Remember the issue here is climate change not other activities leading to more immediate health issues (like oil spills).

Big Tobacco knew there were immediate health effects to individuals in their lifetimes. Big Oil? Go ahead and find their estimated body counts in their emails.

https://en.wikipedia.org/wiki/Tobacco_Master_Settlement_Agreement
https://en.wikipedia.org/wiki/Operation_Berkshire

By Everett F Sargent (not verified) on 14 Nov 2015 #permalink

>"[Suing something you own seems totally pointless -W]"

You do realise the action can be against directors as individuals not just against the company. Such directors may have insurance against such actions as part of their remuneration. Insurance = deeper pocket worth pursuing.

[Its a point. For a smaller company it might even be reasonable. For something the size of Exxon I doubt it. I bet it did no good in the case of tobacco, since that's on everyone's minds -W]

[Update: since everyone is pushing the tobacco analogy, I’m interested in examples. I haven’t seen any good ones yet. There’s an appallingly bad one at Curry’s which really shows how astonishingly low she has sunk -W]

Well, I see that I've made some of those same arguments. :-)

From the previous link to Tobacco Master Settlement Agreement (TMSA, because, no I don't remember everything that did go down, but then again, I'm not delusional about what did go down and what is actually going down today wrt TSMA) ...

"The general theory of these lawsuits was that the cigarettes produced by the tobacco industry contributed to health problems among the population, which in turn resulted in significant costs to the states' public health systems."

So it would appear that it wasn't their lies that got them into trouble but the actual associated costs to the state health care systems.

Fast forward 15-16-17-18 (and so on for many years to come) and use the oracle aka Google and the words "tobacco" and "settlement" (actually the two words in that order no quotes) and you will see what has actually happened with those so called "windfall" monies the states have gotten and how those monies are actually being used.

LA? NJ? It's like winning the lottery, do you want your monies now (at pennies on the dollar) or do you want 25 years of annual payments? Does the hedge fund manager make like $100 million dollars on NJ bonds (because that's what actually happened).

http://www.tobaccofreekids.org/microsites/statereport2015/

Carbon taxes? Yes, I fully support HUGE carbon taxes with HUGE strings attached, meaning those monies being 100% vectored towards ANY energy technologies that are not FF based (actually building stuff that takes FF based technologies permanently offline).

Enough with my rant-screed-manifesto.

By Everett F Sargent (not verified) on 14 Nov 2015 #permalink

[Update: since everyone is pushing the tobacco analogy, I’m interested in examples. I haven’t seen any good ones yet. There’s an appallingly bad one at Curry’s which really shows how astonishingly low she has sunk -W]

Honestly, I'm still looking.

I did find this link though ...
http://www.climateaccountability.org/

And this paper ...
The climate responsibilities of industrial carbon producers
http://link.springer.com/article/10.1007%2Fs10584-015-1472-5

Tobacco is mentioned in said paper. But we do have the actual history of how things went down and I've presented that link above, the actual history as it happened circa 1994-8.

Here's another link ...
Legacy Tobacco Documents Library
https://en.wikipedia.org/wiki/Legacy_Tobacco_Documents_Library

"LTDL contains over 14 million documents produced by major tobacco companies and organizations, many of them internal strategic memoranda made public as a consequence of the Tobacco Master Settlement Agreement."

"As part of this Master Settlement Agreement, the U.S. tobacco companies were ordered to release the internal documents produced for the case for public access in both a physical depository in Minnesota and on their own document websites."

See that part? TMSA!

The USDOJ only started in 1999 and the case was settled under the Bush Administration and his DOJ in 2006 ...

"In 2006, U.S. District Judge Gladys Kessler ruled in a separate case that the nation's top tobacco companies violated racketeering laws, misleading the public for years about the health hazards of smoking. These companies were convicted under the Racketeer Influenced and Corrupt Organizations Act (RICO Act). Philip Morris and R.J. Reynolds filed an appeal but Judge Kessler's ruling was upheld. As a result of this case and its appeals, the companies are now obliged to make available any documents produced for litigation on smoking and health until 2021."

Fast forward to circa 2012 and the story we are NOW being told (MSM) does appear to be rather different from the actual story as it actually went down.

So now, circa 2015 with Captain Hindsight (20-20 via the after the fact documents) very much involved, we find us ONE convenient scapegoat, call them ExxonMobil, and they try to RICOfry their azzez.

Using the guilt by association informal logical fallacy no less.

So, no you won't ever find a compelling fact based historical telling of this story that even comes close to the actual Big Tobacco story and how it actually went down and what everyone thinks is a parallel with Big Bad ExxonMobil today.

The facts, as I understand them are that a hick AG from the sticks in MS took Big Tobacco down. It wasn't DOJ and it wasn't RICO.

Who are you going to believe? The rewriting of history as told to you by Oreskes or the actual boots-on-the-ground facts.

You can't adjudicate CO2 away and you can't adjudicate humanity away either (Although, with regards to the latter, I do have a rather diabolical plan involving several billion sacrificial offerings).

By Everett F Sargent (not verified) on 15 Nov 2015 #permalink

Do dig further , Mr. Sargent- where o where are all the tobacco apologetics Oreskes and her video publicists anachronistically attribute to the Gang of Three ?

TMSA is not a DOI #

Gang of Three? Big Oil, Big Tobacco and Big Pharma (but I'm thinking there are a few other Big Corporations one could use).

Apologetics and Anachronism appear to have rather dangerously close ties to established Religion.

If you are talking about Merchants of Doubt (e. g. where o where), won't read it or see it either.

"Regardless of one’s personal beliefs, it’s tough to respect a movie that ultimately invites viewers to question every case of propaganda except its own."

By Everett F Sargent (not verified) on 15 Nov 2015 #permalink

“Regardless of one’s personal beliefs, it’s tough to respect a movie that ultimately invites viewers to question every case of propaganda except its own.”

The structural problem with propaganda films is that they allow polemicists to project selective citation on to the popular imagination

[... do you think that actually did lie in their SEC filings?
No-one has put forward any examples so far -W]

The SEC looks for filings omitting known information.

That would be called sins of omission, in Catholic theology, tho' I gather telling clever lies by giving only partial truths is not considered lying in some religions. YMMV.

By Hank Roberts (not verified) on 15 Nov 2015 #permalink

https://www.google.com/search?q="sin+of+omission"+securities+filing+SEC

Plenty written about that kind of lie, have a look

[Yeah, but. What exactly are you talking about? If you're talking about some kind of moral duty to provide relevant information in SEC filings, then I think you're just wrong: the information was freely available. Exxon committed no moral wrong at all by omitting it. If you're talking about a *legal* duty then I'm not desperately interested, because the law is an ass -W]

By Hank Roberts (not verified) on 17 Nov 2015 #permalink

and I want to encourage folks not familiar with the concept to look into that. Seriously. Having grown up both as a science department faculty brat, and a student in a Catholic grade school (the only integrated school system in our state, at the time) -- I learned the core concept of providing all relevant information on all sides of any question, drilled into me as behavior required under the rules of both the science and the theology.

Anyone who has raised a child, or been one, knows the innate tendency to obfuscate and omit and weasel (excuse me, do I mean rabbit?) around a subject in order to present it most strongly spinning toward a desired outcome.

Those without the benefit of adult scientists and/or Dominicans -- who don't grow up with the concept of the sin of omission hammered into their malleable young souls (excuse me, do I mean forebrains?) -- will come up against the SEC's rule on omitting relevant information unprepared and perhaps unwilling to believe they could possibly mean what they say.

They do mean that. Omitting relevant information is actionable under the SEC's rules.

That's what Exxon has to face -- the same thing Enron had to face.

By Hank Roberts (not verified) on 17 Nov 2015 #permalink

Americans.....You are either Democrat or Republican.....Both who are totally FUNDED by the Corporations...So it does not matter which you put in power the both kneel to the same God...The private bankers, the Fed, The Trilateral Commission etc. The only two people in the government that I know of, are the team of Ron & Rand PAUL.. When are Americans going to stop wasting their time on the small trivia and DEAL with those that would try to take control of the WORLD.

By Robert Allaire (not verified) on 17 Nov 2015 #permalink

Yes Canada and my brain is not fogged with several hundred years of parental badgering....l, My dad was Republican or My dad was Democrat. . I look at the big picture and see the wars that have been started for corporate or political gain. The Corporations have you by the throat and are squeezing very hard. Don't get me wrong, We in Canada have the same problem but it was much smoother until we got PM Harper and then the claws came out. Canadians are just as blind, they are so wrapped up in their Sports and partying and Golf and sailing ...and ...and ...and, they, like you, do not see the "Forest for the Trees"
Violence is NOT the answer "EDUCATION" is.

By Robert Allaire (not verified) on 17 Nov 2015 #permalink

Asinine or not, the law is what we have to work with.

If you want to punish and reward based on morals, then you can't accept that Your Morals May Vary. And if you can't accept that YMMV, you're a fundie. I don't think so.

Yes, I do think the legal system, like the economic system, can only grow until it becomes absurd and falls over or is pushed over -- there's no simplification process for either.

Alas.

“Dear future generations: Please accept our apologies. We were rolling drunk on petroleum.”
― Kurt Vonnegut

“Say what you will about the sweet miracle of unquestioning faith, I consider a capacity for it terrifying and absolutely vile.”
― Kurt Vonnegut, Mother Night

By Hank Roberts (not verified) on 17 Nov 2015 #permalink