The Lago Agrio plaintiffs have published a memorandum by Graham Erion, a Canadian lawyer also licensed to practice in New York, arguing that Chevron is guilty of securities fraud because it misstated the law and the facts relevant to the Lago Agrio litigation and, in general, understated the risks the company faces. Among other things, Erion suggests: (1) that while Chevron’s most recent 10-K acknowledges that the plaintiffs intend to seek to enforce the Ecuadoran judgment, Chevron did not disclose the risks of irreparable harm to investors that it argued to Judge Kaplan when seeking a preliminary injunction; and (2) that under GAAP, Chevron should have estimated the amount of the loss contingency it faces. (If you’re interested, Chevron’s disclosures concerning the litigation risks begins on page 110 of the PDF).

I like the irony of the Lago Agrio plaintiffs looking out for the best interests of Chevron’s owners, who, no doubt, would be happy if the Lago Agrio judgment vanished in a poof of smoke tomorrow. My guess is that this memorandum is not a prelude to a securities fraud lawsuit under the 1934 Act in the short term, since the memorandum does not suggest that any shareholders have suffered a loss to date. But the plaintiffs, via a sympathetic shareholder, may be lobbying the SEC to take regulatory action. One could also imagine a shareholder derivative action challenging either the board of directors’ current decisionmaking or their decisions regarding the Chevron/Texaco merger, though such actions face high hurdles as a general matter (and the Chevron/Texaco merger is ancient history as far as these things go).

We will have to wait and see whether any Chevron shareholders take up this challenge!