New York’s attorney general announced the state was suing fossil fuel giant Exxon Mobil on Wednesday, accusing the company of defrauding shareholders by downplaying the expected regulatory risk of climate change to its business.
In the complaint, New York Attorney General Barbara Underwood argues that the alleged fraud reached the highest levels of the company. Exxon’s management, including former chairman and CEO Rex Tillerson, knowingly deceived investors regarding the company’s true financial exposure to increasing regulations and policies adopted to mitigate the adverse effects of climate change, according to the lawsuit.
The lawsuit, filed in the Supreme Court of the State of New York, 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.
The New York attorney general’s office also wants the court to order a comprehensive review of Exxon’s failure to properly represent the costs on the company’s share price of potential climate regulations.
“Investors put their money and their trust in Exxon — which assured them of the long-term value of their shares, as the company claimed to be factoring the risk of increasing climate change regulation into its business decisions,” Underwood said in a statement. “Yet as our investigation found, Exxon often did no such thing.”
The attorney general contends Exxon “built a facade” to deceive investors into believing that the company was managing the risks of climate change regulation to its business. But, in fact, the company was “intentionally and systematically underestimating or ignoring them, contrary to its public representations,” Underwood said.
The lawsuit does not accuse Exxon of playing a role in causing climate change, though the burning of fossil fuels is a major contributor to human-driven global warming. The attorney general brought the lawsuit under the Martin Act, a state law that gives the office the power to investigate and prosecute securities fraud.
Three years ago, reports emerged that the New York attorney general’s office, under the former attorney general, Eric Schneiderman, had begun an investigation of Exxon to determine whether the company lied to the public about the risks of climate change or to investors about how such risks might hurt the oil business.
On a press call about the Trump administration’s proposed rollback of auto emissions standards, Illinois Attorney General Lisa Madigan said the New York lawsuit sends a message that Exxon and the other fossil fuel companies that were at the “forefront” of causing climate change “long knew that this was taking place and withheld information to the detriment” of its investors and the general public.
Madigan noted that it would be more difficult for her to file a similar lawsuit against Exxon in Illinois. In New York, the Martin Act grants the state attorney general law enforcement powers to conduct investigations of securities fraud and bring civil or criminal actions against alleged violators of the law. Illinois does not have a law that grants the state attorney similar powers.
Greenpeace applauded the lawsuit Wednesday. According to the environmental group, Exxon “ran a colossal climate denial operation for decades, which significantly impacted how the climate change debate played out in business, science, and politics.”
The recent Intergovernmental Panel on Climate Change (IPCC) report made it clear that the world has slightly more than a decade to make serious changes to avoid climate catastrophe. “The stakes have never been higher in capping carbon emissions. It’s time Exxon’s actions to sow doubt on climate change among its stakeholders undergoes the full scrutiny of the law,” Greenpeace’s Naomi Ages said.
Exxon has tried to block the investigation in three states, calling it an attempt by its critics to restrict the company’s First Amendment rights.
On Wednesday, Exxon Mobil claimed the lawsuit was built on “baseless allegations” that it misled investors by downplaying the risks climate change posed to its business. “The New York Attorney General’s office doubled down on its tainted, meritless investigation by filing a complaint against Exxon Mobil,” spokesman Scott Silvestri said in an email to Politico.
In March, a federal judge dismissed a lawsuit brought by Exxon against the New York and Massachusetts attorneys general investigating the company for its history of climate deception. The judge called the company’s attempts to get the lawsuits thrown out and allegations against the attorneys general “implausible.”
The lawsuit is tied to the idea of “stranded assets” and whether companies will be forced to leave oil, natural gas, and coal in the ground as a result of greenhouse gas regulations. Some analysts have expressed concern regarding the viability of fossil fuel companies in the coming years given the potential for stringent climate policies.
The lawsuit alleges Exxon told investors it uses a “proxy cost” to price carbon pollution and to assess the effect of carbon regulation on its business, but that the company actually “applied much lower proxy costs or no proxy cost at all,” Underwood’s office said in its statement.
This article has been updated with comments from Illinois Attorney General Lisa Madigan, Greenpeace USA, and Exxon Mobil.