Litigation
Aug. 6, 2002
Mine Games
There is nothing on one plain white wall of Ken Crowder's office in a glass-enclosed Century City high-rise except a photo. From its frame, a 17-year-old Peruvian girl stares out with a blank expression.
There is nothing on one plain white wall of Ken Crowder's office in a glass-enclosed Century City high-rise except a photo.
From its frame, a 17-year-old Peruvian girl stares out with a blank expression.
The girl, Consuelo Chuquitucto, was blinded by mercury - leaked from a truck, when a driver for the Yanacocha gold mine passed through her dusty Andean hamlet on his way to Lima.
"We see this picture, and we see a cause," says Crowder, of-counsel with Engstrom, Lipscomb & Lack, the Los Angeles firm that is heading the litigation against Denver-based Newmont Mining Corp., owner of the Yanacocha mine.
A continent and another lifetime from the primitive Andean countryside, Consuelo's photo inspires Crowder to bring justice to more than 1,000 indigenous villagers, some of whom face even worse consequences as a result of the toxic spill.
Crowder has never met Consuelo nor any of the other victims. Yet he thinks of them as "my people."
Pulling out drawers, he shows more photos, like displaying pictures from a family album.
So far, Crowder says, Consuelo is the only one who has lost her sight.
He points again to the photo, as he explains that her mother, Lucia Levya, must care for Consuelo's 3-year-old daughter, Tania.
Like many of the villagers, Crowder says, Consuelo never received a cent from the Yanacocha mine or Newmont.
A year ago, Engstrom Lipscomb sued Newmont in federal court in Denver. Castillo v. Newmont Mining, CV-4453 (Denver Dist. Ct., filed Aug. 17, 2001).
The firm thought it was filing a straightforward personal injury suit - like thousands of others it has won over the years.
Instead, it provoked a fierce battle with Newmont over where the case will be tried. Engstrom Lipscomb wants it heard in Denver, where Newmont is based; Newmont wants it tried in Peru, where the accident occurred and the claimants live.
It seems a simple question of jurisdiction until you scratch the surface and find a tale of intrigue leading from Peru to the White House and featuring foreign governments, intelligence agencies and international tycoons.
It is simple but for the fact that in Denver, the villagers could get a trial. And, according to their lawyers, they have no hope of justice in Peru.
A Denver judge sided with Newmont in May and dismissed the villagers' lawsuit, finding that they needed to try their claim in Peru.
Engstrom Lipscomb responded with a motion for reconsideration, insisting that its clients don't stand a chance in Peru. There, it says, Newmont is all-powerful, and the courts remain corrupt despite government reforms.
Crowder has never set foot in the country, but he has become an expert on Peru during the past year.
His office, dubbed "the war room," is lined with shelves of three-ring binders documenting Newmont's business dealings, photos of victims of mercury intoxication and a color-coded timeline of the events leading up to the spill.
On another wall, there is a map. He points to the area where the Yanacocha mine is located. Covering 22,000 acres, the massive multiple-pit, heap-leach facility is the world's second-largest gold mine (after one in Tanzania), producing gold and silver entirely for export. The mercury is a byproduct of the extraction process.
"Here," Crowder stabs a finger on the Cajamarca district, 14,000 feet up in the Peruvian Andes, 540 miles north of the capital city of Lima.
"It's the same place where the Spanish conquistadors landed," Crowder says. "Now, it's the American conquistadors. Gold fever."
Crowder traces the route the driver took June 2, 2000, transporting nine 2.6-gallon flasks of elemental mercury over mountainous terrain to Lima, where mining officials sell the liquidated metal for use in medical instruments.
Local authorities say that day, when the driver rounded a hairpin curve on the Pan American Highway, a large, empty chlorine container broke loose from its moorings in the back of the truck, striking one of the flasks. Mercury began leaking onto the ground. The driver either didn't notice or ignored it. He stopped in the hillside towns of San Juan, Choropampa and finally Magdalena, where he parked and spent the night.
Along the way, the truck sloshed 330 pounds of mercury along a 25-mile stretch of road.
Villagers, particularly children, gathered the slippery substance, using empty soda bottles, brooms, even their hands. Some boiled it for perceived medicinal powers or to try to extract gold. Others passed it on to friends throughout the valley, home to 18,000 people.
In the weeks that followed, people began streaming into local clinics.
Since then, more than 1,000 villagers have reported symptoms of acute mercury poisoning, from blindness to brain damage, cardiovascular defects, physiologic deformities and lesser ailments, according to Engstrom Lipscomb lawyers.
The toxic spill is only the latest in a string of complaints by villagers against the Yanacocha mine. Since its development in the early 1990s, the mine has been a mixed blessing, bringing prosperity in the form of jobs and money but also tragedy and hard times. Farmers complain that cyanide used to extract the metal has contaminated streams and soil, harmed indigenous plants and livestock and killed fish.
After the mercury spill, Newmont dispatched scientific and medical teams from its Denver headquarters to oversee the cleanup.
While Newmont has paid $14 million to decontaminate the environment, victims who have received settlements have gotten only $500 to $6,000, depending on the severity of the effects, plus related medical costs for the next five years.
Others began seeking outside counsel.
Engstrom Lipscomb partner Lee Lipscomb says his firm got involved in the case through connections that it developed in South America representing victims and families in several airline disasters.
A licensed pilot and big-game hunter, Lipscomb speaks as passionately about helping Peruvian villagers as he does about flying and hunting, his pastimes.
"I am not so old that I cannot outlive this case," says Lipscomb, a fit, slim and healthy-looking 62.
Behind his desk in the corner office, a trophy leopard that he bagged on one of his African safaris lolls on a tree branch.
Turning to Crowder, Lipscomb continues, "And Ken is younger than I am. We are here for the long haul."
Crowder, 58, is also a licensed pilot, as are many lawyers at the firm.
Founded in 1974 to specialize in aviation accident litigation, Engstrom Lipscomb has grown from three to 30 lawyers. Its specialties have broadened to include mass torts, toxic torts, complex business litigation, catastrophic personal injury and entertainment law.
In the 1990s, the firm teamed with Los Angeles' Girardi & Keese, winning a jaw-dropping $785 million jury award on behalf of 38 Lockheed aerospace workers, who argued that they suffered from a number of carcinogens found in materials used at the Burbank "Skunk Works" plant.
The firms joined forces again to handle the toxic tort litigation made famous by the movie, "Erin Brockovich." In that case, they won a $333 million settlement from Pacific Gas and Electric Co. on behalf of residents of the small California town of Hinkley, who claimed a variety of ailments stemming from chromium that had seeped into the water supply.
Now, Engstrom Lipscomb, working with Denver's Schaden, Katzman, Lampert & McClune and Lima's Estudio Rodriguez Larrain, is staking its claim against the world's largest gold producer.
From the start, Lipscomb says, his firm concluded that, if the plaintiffs were to get just compensation, the case needed to be tried in Denver, corporate headquarters of Newmont and its subsidiaries. He says the Peruvian system is not equipped to handle a case of this magnitude and potential damage awards.
While the Peruvian courts are structured similarly to U.S. courts in the sense that there is an appellate process up to a Supreme Court, its laws are different.
For instance, Peruvian law doesn't recognize any causes of action, like those set forth in the plaintiffs' complaint, against a foreign company without a branch in Peru. Only Newmont Peru Ltd. has a branch in that country. As a result, Denver-based Newmont Mining Co., where the corporate assets are, and the other three defendants would be dismissed from the case if it were filed in Peru.
Moreover, Engstrom Lipscomb lawyers argue, alleged sloppy environmental and safety standards concocted at Newmont corporate headquarters in Denver give residents of that city an interest in ensuring that the company doesn't handle its affairs in Colorado, like it does in Peru.
Newmont responded to Engstrom Lipscomb's claim by asking the court to dismiss or stay the action under the doctrine of forum non conveniens, asserting that Denver was an inappropriate forum for the lawsuit.
Leading the argument for Newmont are Latham & Watkins partners Michael Romey of Los Angeles and Ernest J. Getto of San Francisco, with a track record in toxic tort litigation equally impressive to Engstrom Lipscomb's. Romey and Getto contend that the case should be tried in Peru. That's where all the relevant evidence is, including the claimants, witnesses, trucking company and spill site.
They contend that Peruvian law recognizes personal injury claims and provides for adequate monetary remedies.
Engstrom Lipscomb's strongest argument, however, rests on allegations of corruption in the Peruvian courts. Widespread dishonesty in Peru's judicial system was brought to public attention through the penchant of Peru's former spy chief, Vladimiro Montesinos, for recording and videotaping all his meetings.
In fact, Montesinos' recordings - most likely made to extort money from those he taped, according to news and government reports - played a major role in the government's collapse and put an end to President Alberto Fujimori's authoritarian rule.
Fujimori was hailed as a hero when he took office in 1990 and succeeded in ending years of civil war.
The tapes, however, spotlight how the right-wing Fujimori, along with his close adviser, Montesinos, used bribes and extortion to control state institutions, including the military, police, the tax office, electoral authorities - and the judiciary.
Fujimori's control began unraveling in the fall of 2000, when the Peruvian press broadcast one of Montesinos' videotapes (the first of thousands discovered) that recorded the top intelligence officer bribing a congressman to switch parties. Montesinos fled to Venezuela, where he was captured, extradited to Peru, tried and sentenced to nine years in prison for undermining democracy. He faces charges of murder and other crimes.
Fujimori fled to Japan, his parents' homeland. So far, he has resisted extradition to Peru to face numerous corruption charges because Japan's law prohibits extradition of Japanese nationals. Moreover, Japan and Peru do not have an extradition treaty.
While news of Peru's corruption has been widely reported, Lipscomb says that what has surprised him is the extent of the corruption - and that Newmont allegedly played a major role.
"It's eye-opening, '60 Minutes' stuff," Lipscomb says.
Zeroing in on the scandal, Engstrom Lipscomb fired off a motion asking the Denver court to postpone ruling on the defendant's dismissal motion until plaintiffs had time to conduct discovery to show why Denver, rather than Peru, was an appropriate forum.
The lawyers attached two articles from Peru's newspapers, which claimed that Newmont officials were caught on tape soliciting Montesinos' help to bribe judges on Peru's Supreme Court to rule in its favor in a battle with the French Mining Bureau over control of the Yanacocha mine.
Newmont lawyers claimed that the 4-year-old shareholders' case that Engstrom Lipscomb referred to had been resolved long ago and was irrelevant. They also claimed that, since Fujimori's resignation, the Peruvian government has undergone significant reforms, including of its judiciary.
"Even were the plaintiffs able to prove their unsubstantiated allegations (which they cannot), those facts will have little, if any, probative value on the ... issue of whether Peru today provides an adequate forum in this case," Newmont's motion states.
Undaunted, Engstrom Lipscomb began amassing a voluminous file, which it submitted to the court in January, with a request for more discovery time.
Through copies of news articles, depositions and other lawsuits, Engstrom Lipscomb lawyers set out to weave an account of corporate coups and financial greed by Newmont to rival tales of the bloody conquests of the Incas by early Spanish explorers.
The story began in 1992, when Newmont joined forces with Peru's Buenaventura mining company, the French Mining Bureau and the International Finance Corp., a private-sector arm of the World Bank, to develop the Yanacocha mine, according to a color-coded timeline prepared by Crowder. Two years later, the French Mining Bureau announced plans to sell 60 percent of its 24 percent share in the mine to an Australian mining company called Normandy Ltd.
Newmont and Buenaventura sued to block the sale.
In 1997, Newmont and Buenaventura emerged from Peru's lower and appellate courts with 100 percent of the French company. The deal increased Newmont's shares of the Yanacocha to 51 percent.
The French balked, and Peru's Supreme Court agreed to review the case.
After a lengthy battle, Newmont and Buenaventura again surfaced as the victors in a 4-3 vote. Subsequently, Newmont bought Normandy Ltd., making it the world's largest gold-producing company.
These basic facts are not in dispute.
What Engstrom Lipscomb takes issue with is how Newmont secured the tie-breaking Supreme Court vote. Engstrom Lipscomb says its evidence will show that Newmont executives, backed by U.S. government officials, allegedly paid Montesinos in cash and diplomatic favors to bribe the judges. And, the firm claims, Newmont's control over the courts continues.
Supporting its allegations, Engstrom Lipscomb has submitted copies of a sworn deposition that Montesinos gave to the Peruvian government last August from his jail cell. In it, he testified that Newmont and Buenaventura conspired with him to fix the vote on the Peruvian Supreme Court to ensure their victory in gaining control of the Yanacocha mine from the French. Engstrom Lipscomb alleges that Newmont paid Montesinos $4 million for his efforts.
"The fundamental rule to follow in unmasking the players in a covert process is to follow the money," Engstrom Lipscomb's lawyers wrote.
The motion also includes testimony from Montesinos that Peter Romero, who in 1998 was the assistant U.S. secretary of state for Latin America, and John Hamilton, U.S. ambassador to Peru, asked Fujimori to intervene in the case in Newmont's favor.
Hamilton and Romero both have denied any wrongdoing. (After resigning from the Clinton administration, Romero became a private consultant for Newmont.) They say that they merely were lobbying on Newmont's behalf to make sure that the company got a fair hearing.
Latham & Watkins lawyers referred all questions to Newmont's corporate offices.
"There was nothing illegal," Newmont spokesman Doug Hock says from the company's headquarters in a downtown Denver skyscraper, fittingly nicknamed "the cash register building" for its resemblance to the money-changing machine.
Part of the job of U.S. representatives in foreign countries is promoting U.S. interests, he says, adding that the French had their own representatives in Peru.
"It's important to point out that, in all the contacts Newmont had with [Peru's] government and that our State Department had, our message was only that we wanted to see that this case got a level playing field," Hock says.
"Right," Engstrom Lipscomb name partner Lipscomb says. "They leveled the playing field all right."
Engstrom Lipscomb's motion also contained a copy of a civil racketeering suit that Patrick Maugein, a flamboyant oil and gas tycoon, filed last year in Denver federal court. The 55-year-old French multimillionaire is demanding $25 million in punitive damages, before trebling, from Newmont and others for cheating him out of the fee he would have earned as an adviser to the French company had Newmont allegedly not fixed the court to rule in its favor.
"This case is the poster child for the concept of 'inadequate forum' ... because it involves nothing less than defendants who are alleged to have participated in the successful corruption of a court system attempting to drag the plaintiffs suing them into the courts of that system," Engstrom Lipscomb's motion argued.
Despite Engstrom Lipscomb's pleas, on May 20, in what the firm characterized as "a bolt from the blue," Denver Judge Warren O. Martin issued a terse dismissal of the plaintiffs' case - without ruling on Engstrom Lipscomb's motion or holding a hearing.
Citing Newmont's grounds of forum non conveniens, Martin's one-page order said the case should be tried in Peru, where the spill occurred and all the plaintiffs live.
Days later, Martin, a highly regarded judge for 22 years, retired.
Afterward, Engstrom Lipscomb filed a motion for reconsideration before Martin's replacement, Denver Judge William Robbins, a former chief deputy district attorney.
The 4-inch-thick pleading reiterates many of the firm's past allegations.
But this time, the lawyers included a new element: a certified audiotape from the Congress of Peru of a secret meeting between Lawrence T. Kurlander, who recently retired as Newmont's vice president and chief administrative officer, and Montesinos, in which the duo allegedly conspire to fix Peru's 1998 Supreme Court vote.
"Hello, I'm Larry Kurlander," the tape begins. "We have a very serious problem in Peru with our company and Minera Buenaventura. So I have enlisted the support of some of my friends from a variety of intelligence communities."
Montesinos replies that he is aware of the problem and that he will put pressure on the Supreme Court's vote, according to the transcript.
Kurlander, a former director of criminal justice for New York state, tells Montesinos that he has friends in U.S. intelligence agencies, mentioning among others Brent Scowcroft, former national security adviser under two U.S. presidents. The conversation centers on how each could help the other with his problems.
"This evidence could not be more material to the issue of the adequacy of Peru as a forum for plaintiff's lawsuit," Engstrom Lipscomb's motion states.
Newmont's lawyers brush off the allegations with little more than a shrug, saying in their reply that Engstrom Lipscomb's papers "merely regurgitate the voluminous argument and evidence" presented about speculations concerning an unrelated case that was resolved years ago.
"There is nothing new here," Latham & Watkins' motion states. "The judge was not persuaded before and shouldn't be now."
In response, Engstrom Lipscomb says that Newmont's "conspicuous" avoidance in denying that Kurlander allegedly conspired with Montesinos amounts to an admission of guilt.
But Hock says that the plaintiffs always had alleged that a Newmont representative was involved. They just didn't have a name before. And, Hock says, that doesn't change the fact that a judge thought the allegations were irrelevant, so the Latham & Watkins attorneys didn't believe it merited mentioning.
The case underlying the corruption allegations is long over. Fujimori has fled the country, and Montesinos is locked up. But Lipscomb says that it is a common belief in Peru that the court system remains corrupt and easily manipulated by Newmont.
An affidavit submitted on Engstrom Lipscomb's behalf by Alberto Achas Castillo, a law professor at the University of Lima, states, "None of the ostensible reforms instituted to date reduces the access of those with wealth and power to those judges remaining on the bench who have been compromised in the past by Vladimiro Montesinos or the other powerful corrupting interests so common in official Peru over the past decade."
Peru's new government has continued to uncover videotapes and recordings of Montesinos' secret meetings. With only a fraction of the thousands of tapes reviewed, more shock waves are expected.
"This is only the tip of the iceberg," Lipscomb says.
If the new judge also agrees that the case should be tried in Peru, Lipscomb says that the firm will appeal because the claimants can't get a fair trial there.
Colorado law gives the judge 60 days to rule on a motion for reconsideration. That period was set to run Aug. 3. As of press time, the judge had made no ruling, which is tantamount to a dismissal.
"These people are rich. They are powerful, and their friends are powerful, and they are used to getting their way," Lipscomb says of Newmont, which makes $514 million a year from the Yanacocha mine alone.
"Our job is to get justice for our clients," Lipscomb continues, "and we intend to."
For the Record In a story published on August 5, 2002 in the Daily Journal EXTRA, about the Engstrom. Lipscomb & Lack suing Newmont Mining Corp. EXTRA named the incorrect court, the class action was filed in Colorado state court.
The Daily Journal EXTRA regrets the error.
Susan Mc Rae
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