XOM Exxon Mobil Corp

By Corinne Ramey 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 8, 2019).

The New York attorney general's office Thursday dropped part of its securities-fraud case against Exxon Mobil Corp. on the final day of a rare climate-change-related trial that has pushed the oil giant's accounting practices into public view.

Attorney general's office lawyers withdrew two fraud counts at the end of a nearly three-week trial examining Exxon's public and private estimates of potential climate-change regulations on its future business. But the attorney general's office proceeded with two counts that require the elements of the Martin Act, a New York state antifraud law with a lower bar of proof: that Exxon made misrepresentations to investors and that those deceptions mattered.

The attorney general's office pulled back the civil fraud counts during closing arguments of a trial that has been closely watched for its implications for the largest American oil company and the energy industry in general.

Attorney General Letitia James has accused Exxon of deceiving its investors about its financial modeling for policies that countries might enact to combat climate change. The oil company told investors it used one formula to account for these future regulations, but internally used lower numbers, the office has argued.

Jonathan Zweig, a lawyer in the attorney general's office, said the case wasn't about whether Exxon's employees were good people, as the company's lawyers suggested. "The question in this case is whether Exxon's disclosures were accurate," Mr. Zweig said. "And the evidence shows that they were not."

Lawyers for Exxon have called the case meritless and said reasonable investors wouldn't expect to know such proprietary calculations. "Exxon Mobil did not have two sets of books," Theodore Wells Jr., a lawyer for Exxon, said Thursday. "Exxon Mobil had two distinct metrics that were used for different purposes."

In court Thursday, Mr. Wells, who represents Exxon, asked the judge not to drop the fraud counts, saying the company had a right to receive a ruling on those claims. The claims had damaged the reputation of the company and its executives, he said.

"That leaves a cloud over the reputation of the people," he said. "Because of this case, and it's all connected, we have got copycat cases tracking this case word-for-word in private federal-securities cases, books and record cases," Mr. Wells said.

Mr. Wells said the Massachusetts attorney general had recently sued the company as well. A spokeswoman for the Massachusetts attorney general didn't respond to a request for comment.

State Supreme Court Justice Barry Ostrager said that while he believed the New York attorney general had a right to withdraw the claims, he would read the lawyers' written arguments on the matter. He has indicated he would rule on the case in as little as a month.

If Justice Ostrager rules in favor of the attorney general, it could spur further lawsuits or investigations into Exxon and other oil companies. A ruling in Exxon's favor would likely insulate the company against such claims, and, from the company's perspective, bolster its reputation on climate-change issues.

Either side would likely appeal the judge's ruling.

Write to Corinne Ramey at Corinne.Ramey@wsj.com

(END) Dow Jones Newswires

November 08, 2019 02:47 ET (07:47 GMT)

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