Texas-based oil giant Exxon Mobil has faced high-profile lawsuits from states and environmental groups over allegations that it covered up what it knew about global warming for decades. But one lawsuit has flown under the radar.
Sam Bonderoff represents current and former Exxon Mobil employees who say the company artificially inflated its stock prices by obfuscating what it knew about climate change.
He says there are parallels between how Exxon Mobil handled climate change and how big tobacco companies handled the link between cigarettes and cancer.
“Even though they espoused this position that you couldn’t really be sure if cigarettes were carcinogenic, in fact, their own scientists had known for a long time that they were causing a severe public health crisis," Bonderoff says. "And something similar has been going on at Exxon Mobil.”
The suit claims that if Exxon obscured what it knew about global warming, it defrauded employees whose retirement plans were wrapped up in the company's stock.
“Those employees who had bought or held shares of the company stock plan during the time when fraud was going on, they bought at an artificially high price,” says Bonderoff. “And when the correction occurred, they took a pretty big loss, and even if and when the stock price recovers they’ve still lost out.”
Exxon Mobil has filed a motion to dismiss the lawsuit.
In an statement emailed to KUT, the company called the lawsuit and its allegations of fraud "simply not credible."
"Allegations in this frivolous lawsuit are false and completely without merit. We will defend ourselves and are confident our financial reporting and communications with investors fully comply with all legal and accounting requirement" read the statement in part.
Regardless of what you think of the company or the lawsuit, plaintiffs face an uphill battle.
James Spindler, a law professor at UT Austin, says suits alleging that a company mismanaged its employees' money are difficult to win in general. This case will be even harder to win, he says, because the plaintiffs need to show Exxon Mobil is also guilty of fraud.
“Which generally requires that, the speaker, in this case Exxon or executives at Exxon, knew that they were telling mistruths and that those mistruths were actually important and material and not something that was already out there in the public domain,” Spindler says, “and that those mistruths actually caused the drop in price that led to the plaintiffs' losses.”
Bonderoff agrees the case will be a heavy lift, but he says if he can prove fraud, the rest of his argument should fall into place.
“If you’re committing fraud, when the fraud gets corrected there will definitely be a stock price drop,” he says. “That’s inherent in the nature of how stock fraud works.”
A judge in the U.S. District Court for the Southern District of Texas is considering Exxon's motion to dismiss the suit.
Regardless of that decision, Bonderoff thinks more suits like this could be on the horizon, not unlike what happened with tobacco companies.
“When litigation started against them the initial litigation was all about damage to individuals,” he says. “Eventually it did make its way to the securities fraud context.”