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New York sues Exxon Mobil, saying it misled shareholders

A drum of oil poked with pins. Illustration.
Illustration: Rebecca Zisser / Axios

New York’s attorney general filed a lawsuit Wednesday against ExxonMobil, claiming the company defrauded shareholders by downplaying the expected risk of climate change to its business.

Why it matters: This lawsuit amps up the pressure significantly on Exxon as part of a broader fight over the degree to which oil companies should be held responsible in the climate change debate. Even the mere existence of a lawsuit is bad news for Exxon and the rest of the industry, and a successful lawsuit would be game-changing.

The details: The filing claims that Exxon used two sets of proxy costs — formulas that serve as a stand-in for expected future events — of carbon to simulate the impact of future climate change regulations.

  • One of the proxy costs, which was used "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," was higher than the one they used internally, according to a press release from the New York AG's office.
  • Rex Tillerson, who was the chairman and CEO of Exxon before becoming President Trump's Secretary of State, allegedly "knew the company was using lower, undisclosed proxy cost figures in its internal guidance, rather than the higher, publicly disclosed proxy cost figures in its public representations.
  • The investigation began in November 2015 by former Attorney General Eric T. Schneiderman.

The other side: "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.

One level deeper: A federal carbon tax plan, which Exxon recently funded, would give immunity to oil companies from certain types of lawsuits. However, lawsuits like this one dealing with fraud are not included, according to Ted Halstead, a top official involved in the effort told Axios before the lawsuit was filed.

  • As the plan stands now, companies would get immunity only from lawsuits dealing with past responsibility and actions related to climate change, which is a subtle but significant distinction.

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