Did ExxonMobil commit securities fraud by denying climate change?

New York's state attorney general and a US congressman are looking into whether the energy giant illegally misled shareholders about climate change.

Jessica Rinaldi/Reuters
A view of the Exxon Mobil refinery in Baytown, Texas in this file photo from September 15, 2008.

New York state's attorney general, Eric Schneiderman, and US Rep. Ted Lieu (D) of California are both looking into whether the world’s largest publicly traded oil and gas company intentionally misled the public and company shareholders about its own knowledge of climate change and the inherent risks it posed to the oil industry.

The outcry started in September, when InsideClimate News published an investigation asserting that, since the 1970s, ExxonMobil, has known of fossil fuels' contribution to climate change. The company’s own scientists are said to have raised concerns that were contradicted by executives. Another inquiry published in the Los Angeles Times in October also exposed the gap between ExxonMobil’s public and private narratives over melting ice in the Arctic.

New York Attorney General Schneiderman launched his own probe last week. A New York state law called the Martin Act gives the Attorney General uniquely wide authority to prosecute securities fraud.

The New York Times reports that Mr. Schneiderman issued a subpoena for a trove of Exxon’s financial records, emails, and other related materials necessary for the Attorney General to prove the company deceived the public by misrepresenting, or omitting, a material fact in the offering of securities. The Attorney General's Office recently reached a deal with St. Louis-based Peabody Energy after investigating the firm for downplaying the risks climate change poses to the fossil fuel industry.

Schneiderman's investigation will focus on the company's funding of unaffiliated organizations that worked to undermine climate science while its own researchers presented risk speculation to Exxon executives. 

In a similar vein Rep. Lieu is calling on the US Securities and Exchange Commission (SEC) to investigate. 

In a letter to SEC Chair May Jo White, Congressman Ted Lieu of Los Angeles County asked Ms. White to explore whether Exxon Mobil broke any laws by misinforming or withholding material facts about climate change from shareholders:

As Members of the House Oversight and Government Reform Committee, we are deeply troubled by recent media reports alleging that ExxonMobil intentionally obfuscated the role of fossil fuels in influencing climate change. Investigations by the Los Angeles Times and Inside Climate News suggest that top executives at Exxon embarked on a massive campaign of denial and disinformation after company scientists connected the burning of fossil fuels with global warming.  We request your agency investigate ExxonMobil’s past filings to determine if securities laws were violated by failing to appropriately disclose material risks related to climate change.

Reuters reports the SEC has declined to comment on whether it will investigate Exxon’s climate change statements to shareholders. To claim federal securities fraud against the company, the SEC would need to prove intent or knowledge of wrongdoing, unlike in New York State, where no such grounds need to be established.

Exxon Mobil Corp. has denied all charges.

Kenneth Cohen, vice president of public and government affairs for the company, told the New York Times, “We unequivocally reject the allegations that Exxon Mobil has suppressed climate change research," and noted the company has funded and published mainstream climate research since the 1970's. Cohen also said Exxon disclosed climate risks to investors.

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