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Exxon Fires Back at New York’s Attorney General, Calling Latest Accusations ‘Reckless’

Exxon Mobil Corp. isn’t taking lightly the accusations that it may have engaged in accounting gimmicks to downplay its CO2 releases, calling them “inflammatory and reckless.” The remarks are specifically aimed at New York’s attorney general, who had said that Exxon’s accounting of those releases had been a “sham.”

“Filled with inflammatory, reckless, and false allegations of an ‘ongoing fraudulent scheme’ and ‘sham’ business practices, the attorney general’s brief was filed with this court minutes before detailed press accounts appeared describing his baseless claims,” Exxon attorneys wrote, as referenced in the The Hill. 

Exxon said that Attorney General Eric Schneiderman is “pandering” by giving reporters a copy of his complaint against the oil giant before he had filed it in court.  “No further evidence is required to establish the political motivation of the attorney general’s fruitless year-and-a-half long investigation pursuing his ever-shifting and unraveling investigative theories,” Exxon’s continued, in the The Hill.

The concern is that the oil giant may have known about the perils climate change dating back to 1980, although NY’s Attorney General didn’t get involved until 2015.

And about a week ago, the office filed court documents that say that between 2010 and 2014, Exxon used “secret internal figures” that were less than the numbers it had provided to investors: Internally, it applied a cost of $40 per ton of CO2 in 2030 while externally, it said it had been using $60 a ton in 2030. That made the company’s financials look better, the AG alleges.

“Exxon’s documents show that former Chairman and CEO Rex Tillerson was specifically informed of, and approved of, this inconsistency,” Attorney General Eric Schneiderman said, in the filing. “Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public.” 

Exxon not only says that there nothing illegal about those practices, but it also says that whole investigation into its previous knowledge of climate is politically charged. For its part, the oil giant says that the information it had 37 years ago was not conclusive. But it quickly adds that today a lot more is known — and that climate change is real and that everyone needs to do their part.

The New York Attorney General office has said that its main interest in this case is to protect investors, who as owners of a company are entitled to know what management knows. 

Is NY’s AG too aggressive and is he politically motivated? Without a doubt, corporate management must keep their shareholders in the loop. Stockholders must have all information in an effort to know whether to buy, sell or hold their shares. Withholding that information would run afoul of federal law and in some cases, state laws, such as that of New York.

But the rules are a bit nuanced in that the AGs may be asking companies to divulge findings that — at the time — could not have been proven or that can’t yet be known. Would a carbon tax hurt share prices for oil companies? Perhaps, but what if such a tax is never instituted? Presumably, shareholders are fully aware of the climate debate and the steps government may take. 

“For a prosecutor proceeding in good faith, the absence of any evidence of wrongdoing is grounds for closing an investigation, not expanding it,” Exxon wrote, as referenced in Reuters.

Meantime, Exxon is coming under increased pressure from its institutional investors to divulge more about how it will account for risks associated to climate change. Last week, BlackRock that owns 4% of Exxon stepped up the pressure not long after the company’s shareholders voted to have Exxon increase the visibility into its operations.

While Exxon didn’t support the shareholder led drive, it did say that it would abide by those demands. Other companies, meanwhile, are doing the same:

“The more transparent we are, (the more) our investors can make the judgement based on how important it is to them,” Doug Pontsler, vice president of sustainability at Owens Corning, told an Environmental Leader conference in Denver.

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