On Monday Chevron announced it has reached a settlement with James Russell DeLeon, a leading funder of the fraudulent [Ecuadorian Lago Agria] lawsuit.
This is a deserved humiliation for Mr. DeLeon, a resident of Gibraltar who has said he invested some $23 million to finance left-wing activist Steven Donziger in his Captain Ahab pursuit of Chevron. In return for his cash, Mr. DeLeon was supposed to receive a 7% stake in what was a $9.5 billion judgment in the Ecuador courts against the oil giant.
But Chevron fought back in U.S. courts, and last March federal Judge Lewis Kaplan found the Ecuador ruling was the result of fraud and racketeering and judged it unenforceable in the U.S. Judge Kaplan also found Mr. Donziger liable for racketeering violations, and Chevron filed a claim against Mr. DeLeon in Gibraltar.De Leon now says he was misled about the facts in the case and wouldn't have agreed to invest in the lawsuit had he know the truth.
The settlement and public mea culpa are also useful rebukes to one of the more unsavory developments in modern law—the investor-backed tort. Politically driven litigants like Mr. Donziger are increasingly turning to wealthy investors to finance their lawsuits against business, however dubious the claims.
Funders figure the advance outlay is worth the risk because most companies settle rather than endure the legal costs and reputational damage of going to court. The funders then get a big and easy payday, like lawyers in a securities derivative suit.What it does to the citizens of a country like Ecuador, by making it a more dangerous place for foreigners to invest, remains unsettled.