Oil giant ExxonMobil, already fighting a climate-related investor fraud case in New York, has been hit with a second lawsuit: The Massachusetts Attorney General is accusing the company of defrauding investors and threatening the world economy.
This newest legal blow landed Thursday in Suffolk County Superior Court in Boston in a complaint alleging Exxon repeatedly violated the state’s consumer and investor protection law and related regulations.
The lawsuit accuses Exxon of a broad sweep of misconduct that includes using deceptive advertising to mislead consumers in the state about the central role its fossil fuel products play in causing climate change, and intentionally misleading Massachusetts investors about material climate-driven risks to its business.
Beyond the fraud allegations, Attorney General Maura Healey also upbraids Exxon in the lawsuit for an on-going “green washing” marketing campaign that she says falsely touts the company as a leader in clean energy research and climate action.
The lawsuit further calls out Exxon over “hypocritically touting itself as an exemplary environmental corporate steward” when the company is among the largest corporate contributors to global warming.
“Collectively, as with its historic and ongoing deception campaigns about the science, the objective of ExxonMobil’s efforts is to preserve the company’s short-term profits in a carbon-dominated world economy no matter the dire long-term consequences for the company’s investors or for the consumers who buy its products,” the 211-page complaint states.
Exxon did not respond to a request for comment. The company has 20 days to formally respond to the state’s complaint in court.
“Exxon has known for decades about the catastrophic climate impacts of burning fossil fuels—its chief product,” Healey said in a prepared statement. “Yet, to this day, Exxon continues to deceive Massachusetts consumers and investors about the dangerous climate harms caused by its oil and gasoline products and the significant risks of climate change—and efforts to address it—to Exxon’s business.”
“We are suing to stop this illegal deception and penalize the company for its misconduct,” she said.
Defrauding Investors and Consumers?
The Massachusetts complaint opens a second legal front against Exxon at a time when the company is defending itself in a New York courtroom against a potentially multi-billion judgment in a financial fraud case being prosecuted by that state’s attorney general’s office.
Unlike the New York case, which rests exclusively on investor fraud allegations, the Massachusetts case more broadly includes consumer fraud allegations based on Exxon’s failure to fully disclose information that would have allowed consumers to make informed decisions to purchase Exxon oil and gasoline products.
It takes aim at Exxon with generally the same claims made by New York prosecutors, including misrepresentations in its use of proxy costs analyses of company assets and its projections of future oil and gas demand.
The New York case rests on allegations that Exxon fraudulently used two sets of books to estimate the risks it faced if governments took action to cut greenhouse gas emissions, an alleged bookkeeping sleight of hand that prosecutors say exposed investors to greater risks than Exxon had disclosed.
The Massachusetts allegations also focus on whether past statements Exxon made questioning climate change science and downplaying its risks to the company constituted a form of fraud against the public and its shareholders.
“In service of the same effort to deceive the company’s investors regarding the catastrophic risks of climate change, ExxonMobil also has deceived investors with misleading statements about how it incorporated climate change risks into its financial and business planning,” the Massachusetts complaint says.
An Impact on the Global Economy
The complaint alleges Exxon hid from investors its decades-long knowledge that fossil fuels would have a negative impact on the climate and of the systemic financial risk that climate change would have on the global economy and to Exxon’s fossil fuel business.
“In the coming decades, these catastrophic ‘systemic’ impacts threaten to impose ruinous societal costs, cascade throughout the world’s economies, and decimate the overall value of the world’s financial markets, and with them, ExxonMobil’s global business and the holdings of the company’s Massachusetts investors,” the complaint says.
It also denounces Exxon’s portrayal of itself as a leader in cutting-edge clean energy research and climate action while the company is ramping up fossil fuel production and spending only about one-half of 1 percent of revenues on developing clean energy.
“ExxonMobil’s representations in its advertising and promotional materials that consumer use of its Synergy and ‘green’ Mobil products reduces greenhouse gas emissions are highly deceptive, since ExxonMobil fails to disclose the fact that production and consumer use of such transportation fuels is a leading cause of climate change that endangers public health and consumer welfare, and thus any purported environmental benefit associated with the use of those products is illusory,” the complaint says.
What Exxon Knew, and Years of Court Battles
The complaint credits media disclosures, in part, as the foundation for the litigation. The genesis of the case came in the wake of a 2015 investigative series by InsideClimate News and later stories by the Los Angeles Times that disclosed that Exxon had long understood the science of global warming and the role fossil fuels played in accelerating climate change.
Healy and then-New York Attorney General Eric Schneiderman opened investigations into Exxon within six months of each other in 2015 and 2016.
New York fired the first legal salvo with a 2015 subpoena of Exxon seeking a sweeping array of documents laying bare the company’s business practices. Six months later, Healy’s office hit the company with a similar request—known as a civil investigative demand—seeking records back to 1976 outlining Exxon’s understanding of fossil fuels and their impact on global temperatures.
Those investigations provoked a furious fight-for-its-life response by Exxon that played out in federal courts in Texas and New York, where Exxon sought to derail the investigations, claiming the investigations were politically motivated.
A federal judge in New York rejected Exxon’s request to block the investigations and scoffed at the company’s claim that the attorneys general were a part of a conspiracy to rob the company of its First Amendment rights and silence its views on climate change. Exxon has appealed the ruling.
Exxon took its fight against Healy’s investigation all the way to the U.S. Supreme Court where it was rebuffed without comment.
The Massachusetts lawsuit was filed just hours after a judge rejected Exxon’s last-minute attempt to halt the filing. The legal flurry erupted earlier this month after the attorney general’s office notified Exxon that it is preparing to file its case.
Exxon sought to block the filing, claiming the attorney general violated state law that requires prosecutors to allow a potential defendant to present their side of the case before a lawsuit is filed. Exxon said it has had no substantive contact with prosecutors in years and had no opportunity to refute any possible allegations.
“The attorney general’s race to the courthouse has nothing to do with the sound administration of justice or the rule of law,” the company argued in its emergency motion. “It has everything to do with gamesmanship and unfairness that is unworthy of the chief legal officer for the commonwealth.”
Healey’s office called Exxon’s move a “blatantly obstructive tactic” to try to stymie its case. It said the company has had ample time to meet with prosecutors.