Houston Chronicle

Expert witness for Exxon mocks New York’s claims

- By Erik Larson

NEW YORK — Exxon Mobil Corp.’s expert witness — a Harvard Law School professor — challenged New York’s claim in a securities fraud trial that investors lost as much as $1.6 billion when an alleged climate change cover-up was exposed, calling the argument “a tad circular.”

Allen Ferrell, who’s also a senior consultant at Compass Lexecon, said it was convenient for an authority to cite its own investigat­ion as the cause of a company’s losses.

“You don’t shoot the arrow and then draw a bull’s-eye around it,” Ferrell, expected to be the last witness in the threeweek trial, said under questionin­g from Exxon’s lawyer, Daniel Toal.

New York Attorney General Letitia James alleges Exxon intentiona­lly misled investors about the way it planned for the expected impact of climate change on its business. According to the complaint, investors lost between $476 million and $1.6 billion when the alleged scheme was exposed.

The complaint points to three news events that allegedly resulted in Exxon’s

stock dropping, including New York’s claim in June 2017 that it uncovered evidence of a “sham.” The other news events used by New York to calculate the alleged losses relate to climate probes in 2016 by the California attorney general and the U.S. Securities and Exchange Commission.

“The evidence will show that when the deception uncovered by the state’s investigat­ion and related investigat­ions was revealed, Exxon Mobil’s stock price fell, injuring investors who must now be made whole,” the New York attorney general said in a pretrial memorandum.

Exxon says there weren’t any losses because there was no deception.

New York claims former Exxon Chief Executive Officer Rex Tillerson spearheade­d a plan to dupe investors into thinking it was applying a high “proxy cost” for carbon to its investment decisions, while secretly using a lower figure to evaluate projects, including those in the oil sands in Alberta. Tillerson last week testified the allegation­s were false.

Ferrell’s testimony aimed to undermine two expert witnesses who’ve already testified for the state: Eli Bartov, an accounting professor at New York University, and Peter Boukouzis, an assistant professor of business management at the University of Saint Katherine in San Marcos, Calif.

Bartov previously testified that Exxon had inflated its stock by lying to concerned investors starting in 2014, while Boukouzis testified about the resulting stock drop.

Ferrell said Bartov’s study of Exxon’s share price movements hadn’t controlled for fluctuatio­ns in the energy industry and that Boukouzis wrongfully cited two news-related stock movements that don’t qualify as statistica­lly significan­t.

Closing arguments are set for today. New York Justice Barry Ostrager will decide the case without a jury.

“You don’t shoot the arrow and then draw a bull’s-eye around it.”

Allen Ferrell, Harvard law professor, on New York state’s claim its investigat­ion led to a drop in Exxon stock price

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