Exxon Mobil calls accusations “baseless allegations” that are a product of “closed-door lobbying by special interests.”
New York Attorney General Barbara Underwood announced a lawsuit against Exxon Mobil Corp., alleging that the company misled investors regarding the risk that climate change regulations were expected to pose to its business.
The complaint alleges that Exxon defrauded investors by assuring them, for years, that it was accounting for the likelihood of increasing regulation of greenhouse gas emissions by applying an escalating cost of those emissions to its business planning and investment decisions. But, the suit claims that in reality Exxon did much less than it claimed. It alleges Exxon therefore deceived investors as to the company’s true financial exposure to increasing regulations and policies adopted to mitigate the effects of climate change.
The Attorney General’s complaint alleges that Exxon told investors that it accounted for the risk of governmental regulation of climate change by applying a “proxy cost” of carbon. A proxy cost serves as a stand-in for the likely effects of expected future events; in this case, the effects of the increasingly stringent climate change. The complaint alleges Exxon told its investors that it used that proxy cost in its investment decisions, corporate planning, estimations of company oil and gas reserves, evaluations of whether its long-term assets remain viable, and estimations of future demand for oil and gas.
Yet, contrary to those representations, the complaint alleges that Exxon frequently did not apply the proxy costs as represented in its business activities. Instead, in many cases Exxon applied much lower proxy costs or no proxy cost at all.
The suit also alleges that former Chairman and CEO Rex Tillerson knew for years that the company was deviating from its public representations by using a second set of proxy costs from undisclosed internal guidance that were lower than the publicly disclosed proxy costs. Exxon’s management also knew that using these lower figures made Exxon more susceptible to climate change regulatory risk, but did not align these two sets of proxy costs for years, the suit claims.
“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 in a statement.
The lawsuit was filed in New York Supreme Court, New York County on Wednesday, Oct. 24. The suit seeks an order prohibiting Exxon from continuing to misrepresent its practices in this area, and requiring it to correct its past misrepresentations.
The suit also asks the court to award damages, a disgorgement of all monies obtained in connection with the alleged fraud and restitution. Additionally, the complaint requests the court to direct a comprehensive review of Exxon’s failure to apply a proxy cost consistent with its representations, and the economic and financial consequences of that failure.
In a statement, Exxon responded to the lawsuit saying there is no evidence to support the allegations.
“The New York Attorney General’s office doubled down on its tainted, meritless investigation by filing a complaint against ExxonMobil. These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing,” Exxon said in a statement.
Exxon noted it “looks forward to refuting these claims as soon as possible and getting this meritless civil lawsuit dismissed.”