REPRESENTATIVE ADRIANO ESPAILLAT TO HOLD MTA TRANSIT UPDATE

MTA Updates in New York’s 13^th Congressional District Anticipated to Begin with Construction for 12 Deep Station and Impact 168th Street, 191st Street and 181st Street Commuters

  Representative Adriano Espaillat (NY-13) will announce scheduled MTA updates and transit renovations planned throughout his district during a press conference with MTA leadership on Wednesday, October 31^st at 9:00 a.m. at the 168^th Street Subway Station (Washington Heights – 168^th Street). 

  “I have worked closely with MTA and Chairman Joe Lhota on the ongoing renovations within the New York subway and rail stations throughout my district, including the replacement of the 6 Deep Station Traction Elevators at 181st and 190th Streets on the A line and the 12 Deep Station Traction Elevator Replacement Project on the 1 Line,” said Rep. Adriano Espaillat (NY-13). “I am delighted that transit improvements will be made throughout my district. As we move forward with updates, all residents should be advised of changes to the construction schedule for 12 Deep Station, which is now 168th Street, 191st Street and 181st Street and will impact daily commuter routes as updates begin in January 2019.” 

MAYOR DE BLASIO VISITS THE OLDE TOWNE OF FLUSHING BURIAL GROUND TO UPDATE COMMUNITY ON COMMEMORATIVE PLAZA PROJECT

  Mayor Bill de Blasio today joined Queens Borough President Melinda Katz, NYC Parks Commissioner Mitchell J. Silver, FACIP and Council Member Peter Koo to share the designs for a $1.63 million project to reconstruct a commemorative plaza at the site of the Olde Towne of Flushing Burial Ground. 

"Reconstructing this plaza is a way for New Yorkers to rediscover this sacred historical space, and it's a fitting honor for those buried here," said Mayor Bill de Blasio. "As Queens week draws to an end, we're commemorating an important part of our history and the vision of this community, which worked hard to get recognition for this site."

“The Burial Ground is the final resting place for hundreds of ancestors. Such sacred ground on park property must be treated with dignity and respect. The reconstruction of a commemorative plaza is the result of tireless efforts on the part of the community to honor those buried here,” said Queens Borough President Melinda Katz.

“Parks is thrilled to have been able to work directly with the Olde Towne of Flushing Burial Ground Conservancy and local community members to design a fitting commemorative plaza, where New Yorkers can come to reflect and remember the lives of loved ones, and ancestors,” said Parks Commissioner Mitchell Silver. “We are grateful to the Mayor, Borough President, and Council Member for their support to see through the community’s vision on this space.”

“The Olde Towne of Flushing Burial Ground is a hidden gem in our community that has been deprived of the recognition it deserves for decades,” said Council Member Peter Koo. "The community fought long and hard for a proper memorial that honors those African and Native Americans who were interned here, and their activism is finally coming to fruition. With this memorial, we let the bones beneath our feet know that times have changed and the disrespect and dishonor they received in life no longer carries over into death. Thank you to Mandingo Tshaka and the Olde Towne of Flushing Burial Ground for their relentless advocacy to ensure this historical site receives the proper recognition and respect from the City of New York.”

“I have been a long-time supporter of improving the Olde Towne of Flushing Burial Ground and I’m thrilled to help announce this critical initiative. This project will help ensure that this site receives the respect it deserves and that a proper memorial is created to honor those who are buried here. I thank Mayor de Blasio, Borough President Katz and Councilman Koo for providing this important funding and I thank the Olde Towne of Flushing Burial Ground Conservancy for all their tireless work and commitment,” said Congresswoman Grace Meng.

“The Olde Towne of Flushing Burial Ground Conservancy believes this site, now listed on the New York State and National Registry of Historic Places, is as much a part of Flushing history as any other mentioned. Native Americans and African Americans have been in Flushing since Queens was established. This will be a teaching site as well as a long-needed memorial to the forgotten souls interred here and so long disrespected. The Conservancy members joined with Mandingo Tshaka who discovered the burial ground existed. Working with our Council people, Borough Presidents and Parks we finally got to this conclusion, and we know that our work is not done,” said Robbie Garrison, Co-Chair of The Olde Towne Flushing Burial Ground Conservancy.

“We are thrilled that this project is coming to fruition with today’s design unveiling. We are very happy with the design, which honors the people that are interred here and have never been acknowledged before. We want to thank the Mayor, the Borough President, the Council Member, Parks and all of our past elected officials for their work to get us to this day,” said Eugene T. Kelty, Jr., Chair, Queens Community Board 7.

The project, led by NYC Parks, will reconstruct 1.6 acres of the 3.5 acre Olde Towne of Flushing Burial Ground along 46th Avenue between 164th and 165th streets.  Parks will construct a commemorative plaza and reconstruct pathways that provide better circulation throughout the site.  The plaza will include a wall which will honor those buried there, it will include their engraved names and an interpretive sign will provide historic information about the site.  A butterfly garden will be added with new benches and plantings to create an area of tranquility for all visitors, surrounded by cardinal directions written in local a Native American language. The design was created in consultation with the local community members and the Olde Towne of Flushing Burial Ground.  

This project is currently in the design phase, and is tentatively scheduled to go before the Public Design Commission in November. It is funded with $1.62 million including $600,000 from Borough President Katz, $520,000 from Council Member Koo, and an additional $500,000 from Mayor de Blasio.

The‘re-discovery’ of burial grounds within our municipality is an experience shared by many cities world-wide. The City of New York has buildings and parks that stand on former burial grounds. In the 1990’s, when Parks began a renovation of the site, local activist Mandingo Tshaka drew attention to its previous history. In response, Parks commissioned a $50,000 archaeological study in 1996. Archeologist Linda Stone concluded that the site served as the final resting-place for between 500 to 1,000 individuals. Death records for the town of Flushing exist for the period 1881 until 1898, and show that during this period, 62 percent of the buried were African American or Native American, 34 percent were unidentified, and more than half were children under the age of five.

Bronx Metro-North Station Area Study - RAIN OR SHINE! Parkchester/Van Nest Public Workshop/Open House

 

Please join us and help plan around coming Metro-North service in your neighborhood!

EVENT TOMORROW!
Parkchester/Van Nest
Public Workshop and Open House

Rain or shine, the Bronx Metro-North study will be holding our Parkchester/Van Nest Public  Workshop and Open House tomorrow! Come when you can and stay for as long as you like and help to help plan around future Metro-North service in your neighborhood. The interactive self-paced event is an important opportunity for the community to join city agencies to plan around future Metro-North service – share your local expertise, hear from your neighbors, contribute your ideas to improve Tremont Avenue, plan for the station area, consider what the service means for jobs, health, housing, youth and more.  We'll have coffee, tea and treats to keep everyone going and warm. So bring an umbrella and help plan around future Metro-North service in your neighborhood! WHEN Saturday, October 27, 2018 10AM–1PM: Workshop/Open House 1PM–1:30PM: Group Visioning Activity (Self-paced activities. Come when you wish and stay for long as you are able to.) WHERE St. Raymond’s Elementary School Monsignor Tierney Auditorium (Enter at corner of E Tremont Ave and Purdy St.) Light refreshments will be provided. For any questions or special needs, please email bmns@planning.nyc.gov or call 718 220 8500 Find Out More

Police Commissioner, Mayor, FBI, on Recent Package Bombs

  Between October 22 and 25, 2018, a total of at least ten suspected parcel improvised explosive devices (IEDs) addressed to high-profile individuals in Washington D.C., Delaware, Maryland, Florida, California, and New York were intercepted. Two of the suspicious packages were addressed to individuals in Manhattan, New York. The suspected parcel IEDs all reportedly share similarities in packaging, composition, and construction.

"First and foremost my message today is that New Yorkers are safe," said Police Commissioner James P. O'Neill. "There are no current credible threats to any individuals, organizations or locations here in New York City. New Yorkers are safe but everyone, all 8.6 million residents and the millions of visitors who come here every year should always remain vigilant and aware of their surroundings. As always I urge people to alert us to anything that might seem strange or out of place or anything that makes them feel uncomfortable."

"I want to express my appreciation to all the men and women of the NYPD who have done an outstanding job yesterday and today addressing this situation, and to all our federal and state partners," said Mayor Bill de Blasio. "Everyone has been working together to address this forthrightly. One of the things that we emphasize in a moment like this is that you're going to see a lot of police presence. It's important that we proactively take steps to protect those who have come under attack. Clearly what we have seen in the last few days is an attack on media outlets, an attack on prominent public figures. We're going to make sure there's expanded presence as long as we need it, to show very vividly that New York City takes these issues seriously, that we are defending people who are coming under attack, that part of how we protect the democratic process is to show that threats like this are not taken lightly."

Deputy Commissioner John Miller offered an outline of this morning's events. "This begins in the very early hours of the morning when a retired NYPD Intelligence Bureau Detective, who was awake and watching the news, saw the image of the packaging that has been common to most of these devices as they have turned up in various locations," Said Deputy Commissioner Miller. "And it struck him that that looked very much like a package he had seen Tuesday in mail he was to screen for Robert DeNiro productions at their offices on Greenwich Street.

"Based on his experience, he knew how to contact the Bomb Squad directly. He spoke with the Bomb Squad. They advised him to also notify the 1st Precinct and they went directly to the scene. They were met by the Emergency Service, who were at the 1st Precinct, who were able to locate based on the security director's instructions.

"The Bomb Squad was then able to use their expertise and their equipment to safely package that, intact, remove it safely from the building, and then place it in the Total Containment Vessel, which is our bomb transport vehicle and bring it to the Rodman's Neck range, where it joined the other devices that we got from CNN, and from the FBI and Westchester County authorities. By late this afternoon, all of those devices should've been transported by the FBI lab in Quantico to be examined by their explosives people, so that all the evidence from all of these incidents are in one place."

The NYPD continues to work closely with the FBI and other federal, state, and local law enforcement partners as investigative efforts into these incidents move forward. The public is asked that if they see something, call 911, or call 1-888-NYC-SAFE.

Click here for more information about how you can identify what might appear to be a suspicious package.

Former Brooklyn Assemblywoman Sentenced to Prison For Multiple Fraud Schemes and Witness Tampering

Pamela Harris Defrauded Government Agencies out of Tens of Thousands of Dollars and Obstructed Justice

  Former New York State Assemblywoman Pamela Harris was sentenced today by United States District Judge Jack B. Weinstein in federal court in Brooklyn to six months in prison and 400 hours of community service following her conviction for two counts of wire fraud, one count of disaster relief fraud and one count of witness tampering.  As part of the sentence, the Court imposed restitution of $70,400 and forfeiture of $10,000.  Harris was arrested on January 9, 2018, resigned from the New York State Assembly on April 2, 2018 and pleaded guilty on June 12, 2018.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Mark G. Peters, Commissioner, New York City Department of Investigation (DOI), announced the sentence. 

“With today’s sentence, Pamela Harris has been held responsible for stealing tens of thousands of dollars in government funds set aside for underserved children and funds allocated for victims of Hurricane Sandy, as well as lying and presenting fraudulent documents to the FBI when her crimes were uncovered,” stated United States Attorney Donoghue.  “She committed these fraudulent acts both before and while she served as a New York State Assemblywoman in Brooklyn, betraying the trust placed in her by her constituents.  This Office, together with our law enforcement partners, will continue to hold accountable corrupt public officials who act as if they are above the law.”

“Today, this onetime state Assemblywoman, convicted of using the disaster of Superstorm Sandy for personal profit, was held to account for her crimes with a decisive price – prison,” stated DOI Commissioner Peters.  “Her illegal conduct exemplifies the term, ‘corrupt politician,’ claiming to be a public servant while she stole from disaster relief funds intended to assist victims of Hurricane Sandy, some of whom were constituents in her district trying to recover from the storm. This type of corruption is what saps public confidence in government. Today’s sentencing offers a measure of justice. DOI is gratified to have worked with the United States Attorney for the Eastern District of New York and the FBI on this successful investigation and prosecution.” 

According to the indictment, court filings and facts presented during the sentencing hearing, between 2012 and 2017, Harris defrauded the Federal Emergency Management Agency (FEMA) and the New York City Council (NYC Council), among other entities, of tens of thousands of dollars, and then pressured witnesses to lie to FBI agents who were conducting the grand jury investigation into her fraud schemes.   

Between 2012 and 2014, Harris defrauded FEMA out of nearly $25,000 in temporary relocation funds by falsely claiming that she had been forced out of her Coney Island residence because of damage caused by Hurricane Sandy.  In furtherance of the scheme, she claimed that she was paying rent in Staten Island and submitted fake lease agreements and fraudulent rent payment receipts to FEMA.  In reality, Harris continued to live at her Coney Island residence and pocketed the FEMA payments for her own benefit.  Harris subsequently made similar misrepresentations to other organizations providing hurricane relief funds, including New York City’s Build it Back Agency.

Between August 2014 and January 2017—both before and while she served as a New York State Assemblywoman—Harris defrauded the New York City Council of $45,600 in discretionary funding allocated to Coney Island Generation Gap (CIGG), a not-for-profit organization that she controlled.  Harris falsely represented that she intended to use the funds to pay for rental space and to provide cash stipends to adolescents who participated in CIGG programs.  In support of these claims, she submitted fraudulent lease agreements containing forged signatures and fraudulent sign-in sheets with forged signatures of the adolescents.  When CIGG received the funds, Harris diverted them to her own bank account and used them to pay her personal expenses.  Harris also misappropriated CIGG’s money from its bank accounts to fund her purchase of a sauna and a hot tub and to make mortgage payments on her residence. 

Between March 2017 and September 2017, as the investigation into her fraudulent conduct progressed, Harris obstructed the investigation, including by pressuring close family members and a CIGG associate to lie to the FBI and destroy evidence.   

The government’s case is being handled by the Office’s Public Integrity Section.  Assistant United States Attorneys Erik Paulsen and Robert Polemeni are in charge of the prosecution.

Two New York Diamond Merchants Convicted For Defrauding Victims Out Of More Than $12 Million In Diamonds

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SHOLOM MURATOV and MENACHEM ABRAMOV were convicted yesterday, following a seven-day trial in Manhattan federal court, of conspiring to defraud diamond sellers in Mumbai, India out of more than $12 million in loose diamonds. MURATOV will be sentenced on March 26, 2019 and ABRAMOV will be sentenced on March 28, 2019, by Judge Lorna G. Schofield, who presided over the trial.

Ten other defendants have previously pled guilty in connection with their participation in this and related schemes.

Manhattan U.S. Attorney Geoffrey S. Berman said: “These defendants engaged in a brazen, multi-million dollar fraud scheme extending from New York to Mumbai.  Thanks to the outstanding work of our law enforcement partners, these fraudsters have been convicted at trial and will be sentenced for their crime.

According to the evidence presented at trial:

From in or about December 2015, up to and including at least in or about December 2016, MURATOV and ABRAMOV participated in a coordinated and wide-ranging conspiracy to defraud a group of diamond wholesalers in Mumbai (the “Victim Merchants”) out of millions of dollars in loose diamonds known as “melee” diamonds. The scheme involved numerous misrepresentations to the Victim Merchants, including but not limited to: (i) the defendants’ corporate affiliations; (ii) the longevity and track records of those corporations; (iii) that the defendants were not affiliated with one another, and, most significantly; (iv) purporting to agree to payment terms proposed by the Victim Merchants in order to induce the Victim Merchants to release diamonds without having received full payment.  Together, through these fraudulent misrepresentations, the defendants succeeded in convincing the Victim Merchants to provide them over $12 million worth of loose diamonds, for which MURATOV, ABRAMOV, and their co-conspirators provided no payment.  Members of the conspiracy then sold the diamonds in Manhattan’s Diamond District.

MENCHAM ABRAMOV, 32, and SHOLOM MURATOV, 36, have been convicted of conspiring to commit mail fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. 

Mr. Berman praised the outstanding work of the FBI, the CBP, and the NYPD.

Adidas Executive And Two Others Convicted Of Defrauding Adidas-Sponsored Universities In Connection With Athletic Scholarships

  Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced the convictions of JAMES GATTO, a/k/a “Jim,” MERL CODE, and CHRISTIAN DAWKINS for conspiring to defraud universities by funneling illicit payments to the families of high-school and college basketball players and concealing those payments – which were prohibited by university policies and NCAA rules – from the schools.  GATTO, the Director of Global Basketball Sports Marketing at Adidas, CODE, an Adidas consultant, and DAWKINS, an aspiring manager of professional athletes, will be sentenced on March 5, 2019, at 10:00 a.m. by Judge Kaplan, who presided over the four-week trial.

Two other scheme participants, MUNISH SOOD, a financial advisor, and THOMAS “T.J.” GASSNOLA, a former Adidas consultant, previously pled guilty in connection with their participation in the fraudulent scheme. 

Mr. Khuzami said:  “Today’s convictions expose an underground culture of illicit payments, deception and corruption in world of college basketball.  These defendants now stand convicted of not simply flouting the rules but breaking the law for their own personal gain.  As a jury has now found, the defendants not only deceived universities into issuing scholarships under false pretenses, they deprived the universities of their economic rights and tarnished an ideal which makes college sports a beloved tradition by so many fans all over the world.”

According to the allegations contained in the Complaint, Indictment, Superseding Indictment, and evidence presented during the trial in Manhattan federal court: 

Overview of the Scheme

As found by the jury, GATTO, CODE, and DAWKINS brokered and facilitated the payments funded by Adidas to the families of high school and college aged basketball players in connection with decisions by those players to commit to Adidas-sponsored schools and a promise that the players also would retain the services of DAWKINS and sign lucrative endorsement deals with Adidas upon turning professional.  The payments, which the defendants took great lengths to conceal from the victim-universities, served to defraud the relevant universities in several ways.  First, because the illicit payments to the families of student-athletes rendered those student-athletes ineligible to participate in collegiate athletics, scheme participants conspired to conceal these payments from the universities, thereby causing them to provide or agree to provide athletic-based scholarships and financial aid under false and fraudulent pretenses. Indeed, the defendants and their co-conspirators, who included the families of the student-athletes and, in certain instances, one or more corrupt coaches at the universities, knew that, for the scheme to succeed and the athletic scholarships to be awarded, the illicit payments had to be concealed from the universities, and that certifications, falsely representing that the student-athletes were eligible to compete in Division I athletics, would be submitted to the universities.

Second, the scheme participants further defrauded the universities by depriving the universities of significant and necessary information regarding the non-compliance with NCAA rules by the relevant student-athletes and their families, and, in some cases, by certain corrupt coaches involved in the scheme.  In doing so, the scheme participants interfered with the universities’ ability to control their assets and created a risk of tangible economic harm to the universities, including, among other things, decision-making about the distribution of their limited athletic scholarships; the possible disgorgement of certain profit-sharing by the NCAA; monetary fines; restrictions on athlete recruitment and the distribution of athletic scholarships; and the potential ineligibility of the universities’ basketball teams to compete in NCAA programs generally, and the ineligibility of certain student-athletes in particular.

Allegations Involving the University of Louisville

Beginning in approximately May 2017, GATTO, CODE, DAWKINS, and others worked together to illicitly funnel approximately $100,000 from Adidas to the father of Brian Bowen, then a top-rated high school basketball player, in connection with Bowen’s commitment to play at the University of Louisville, a school whose athletic programs are sponsored by Adidas.  Because the payments to the family of Bowen were both in violation of NCAA rules and illegal, the defendants took steps to conceal them from the University, including funneling the money indirectly through an amateur team affiliated with CODE and a corporation controlled by DAWKINS.  The payments were all funded by Adidas pursuant to phony invoices approved by GATTO, and the first installment was delivered to Bowen’s father in cash in July 2017 in a parking lot in New Jersey.

Allegations Involving the University of Kansas

Between 2016 and 2017, GATTO and GASSNOLA worked together to funnel approximately $90,000 from Adidas to the family of Billy Preston, then a high school basketball player, in connection with Preston’s commitment to play at the University of Kansas, a university whose athletic programs are sponsored by Adidas.  To conceal the payments from the University, GATTO routed the money to Billy Preston’s family indirectly, through an Adidas-sponsored amateur team affiliated with GASSNOLA, and pursuant to sham invoices which GATTO approved.

In addition, in the summer of 2017, GATTO and GASSNOLA agreed to funnel money to the legal guardian of Silvio De Sousa, then a high school basketball player, in connection with De Sousa’s commitment to play at the University of Kansas.  In one instance, GATTO and GASSNOLA were intercepted over a wiretap discussing a $20,000 payment to the legal guardian.

Allegations Involving the North Carolina State University

In approximately November 2015, GATTO and GASSNOLA agreed to funnel approximately $40,000 from Adidas to the family of Dennis Smith Jr., then a high school basketball player, in order to stop Smith Jr. from de-committing from North Carolina State University, a university whose athletic programs are sponsored by Adidas.  GASSNOLA flew to North Carolina to personally deliver the money in cash to a basketball coach at North Carolina State University, who then routed the money to Smith Jr.’s family.  After GASSNOLA made the payment, GATTO reimbursed GASSNOLA via his Adidas-sponsored amateur team. 

GATTO, 48, of Wilsonville, Oregon, CODE, 44, of Greer, South Carolina, and DAWKINS, 25, of Atlanta, Georgia, were each convicted of one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carry a maximum sentence of 20 years in prison.  GATTO was also convicted of an additional count of wire fraud.

Mr. Khuzami thanked the FBI and the Special Agents of the U.S. Attorney’s Office of the Southern District of New York for their tireless efforts during the investigation and prosecution of this case.

A.G. Underwood Files Lawsuit Against Exxonmobil For Defrauding Investors Regarding Financial Risk The Company Faces From Climate Change Regulations

Investigation into Exxon’s Business Practices Uncovered an Alleged Fraudulent Scheme to Systematically and Repeatedly Deceive Investors About the Significant Impact That Future Climate Change Regulations Could Have on the Company’s Assets and Value

Alleged Fraud Reached Highest Levels, as former Chairman and CEO Rex Tillerson Knew of Misrepresentations for Years

  Attorney General Barbara D. Underwood announced a lawsuit against Exxon Mobil Corporation (“Exxon”), alleging that the company misled investors regarding the risk that climate change regulations posed to its business. As alleged in the complaint, Exxon for years assured investors that it was accounting for the likelihood of increasingly stringent regulation of greenhouse gas emissions – which are driving climate change and which Exxon emits in large quantity – by rigorously and consistently applying an escalating cost of those emissions to its business planning, investment decisions, calculations of the amount and value of company reserves and resources, impairment assessments, and projections of future demand for oil and gas. However, Exxon did not abide by these representations, and instead did much less than it claimed, deceiving investors as to the company’s true financial exposure to increasing regulations and policies adopted to mitigate the adverse effects of climate change.

Exxon marketed the company as a secure long-term investment and courted long-term investors such as institutional shareholders, life insurance companies, and pension funds. For example, the New York State Common Retirement Fund (CRF), which is entrusted with the retirement security of over one million state employees and retirees, and the New York State Teachers Retirement System, which serves over 425,000 members, hold Exxon shares with a combined value of approximately $1.5 billion. These investors depend on companies to provide complete, accurate information about the value of their assets to make informed investment decisions. In fact, over the course of the past decade, Exxon institutional shareholders repeatedly sought more information and disclosure regarding the risk the company faced due to climate change 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. Yet as our investigation found, Exxon often did no such thing,” Attorney General Underwood said. “Instead, Exxon built a facade to deceive investors into believing that the company was managing the risks of climate change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations.”

The Attorney General’s complaint alleges that Exxon told investors that it accounted for the risk of governmental regulation of climate change by applying a “proxy cost” of carbon. A proxy cost serves as a stand-in for the likely effects of expected future events; in this case, the effects of the increasingly stringent climate change regulations that Exxon has publicly stated it expects governments throughout the world to impose and steadily increase over the course of several decades. As the complaint alleges, Exxon told its investors that it used that proxy cost 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.

Yet, contrary to those representations, the complaint alleges that Exxon frequently did not apply the proxy costs as represented in its business activities. Instead, in many cases Exxon applied much lower proxy costs or no proxy cost at all.

The complaint alleges that this fraud reached the highest levels of the company. Exxon’s management, including former Chairman and Chief Executive Officer (CEO) Rex W. Tillerson knew for years that the company was deviating from its public representations by using a second set of proxy costs from undisclosed internal guidance that were lower than the publicly disclosed proxy costs. Exxon’s management also knew that using these lower figures made Exxon more susceptible to climate change regulatory risk, but did not align these two sets of proxy costs for years.

The complaint alleges that the fraud continued even after Exxon increased its internal proxy cost guidance to conform to its public representations. Indeed, when the company realized that applying the publicly represented proxy costs would result in “massive” costs and “large write-downs,” and shorter asset lives, Exxon management decided to apply an undisclosed “alternate methodology.” Under this “alternate methodology,” Exxon chose not to apply any proxy cost and, instead, allegedly chose to assume that existing climate regulations would remain in place and unchanged, indefinitely into the future. 

The complaint further alleges that in various other aspects of its business – including evaluating the volume of its oil and gas reserves, determining whether to write down its major assets, and estimating demand for its products in the transportation sector – Exxon chose not to apply proxy costs in the manner it represented to investors. By applying a lower proxy cost or not applying any proxy cost at all, Exxon repeatedly and consistently underestimated the potential financial risk that increasing climate change regulation posed to its assets and value. 

According to the allegations in the complaint, Exxon made these misrepresentations knowing that its shareholders were concerned about the company’s management of the risk of future climate change regulations, particularly given its carbon intensive assets. Those investors included institutional investors such as New York’s CRF. In responding to shareholder requests for an explanation of how it accounted for the likelihood of increased climate change regulations, Exxon allegedly made numerous misrepresentations, including offering a misleading analysis in which it understated the financial risks that it would face in a “two degree scenario” – that is, if governments acted to limit global temperature rise to two degrees Celsius above pre-industrial levels. Exxon continued to present that analysis to investors even after being warned by the author of a study upon which it purported to rely that the analysis was “misleading.”

The impact of Exxon’s alleged fraud on the company’s value is significant in scale and scope. For example:

• For 14 of Exxon’s oil sands projects in Alberta, Canada, Exxon’s failure to apply its publicly represented proxy costs resulted in undercounting of projected greenhouse-gas related expenses by more than $25 billion over the projected lifetime of the projects.
• Exxon undercounted projected greenhouse gas-related costs by as much as 94% – equal to about $11 billion – in an economic forecast for its Kearl oil sands asset in Alberta.
• Exxon failed to apply the proxy costs it represented to the public in estimating company reserves at Cold Lake, a major oil sands asset in Alberta, resulting in an overestimation of its projected economic life by 28 years, and an overestimation of company reserves volumes by more than 300 million oil-equivalent barrels, representing billions of dollars of revenues.

The lawsuit announced was filed in New York Supreme Court, New York County. The suit seeks an order prohibiting Exxon from continuing to misrepresent its practices in this area, and requiring it to correct its past misrepresentations; in other words, to tell investors the truth. The suit also asks the court to award damages, a disgorgement of all monies obtained in connection with the alleged fraud, and restitution. Additionally, the complaint requests the court to direct a comprehensive review of Exxon’s failure to apply a proxy cost consistent with its representations, and the economic and financial consequences of that failure.