"Justice for Alaska Fishing Families" Act Aims to
Pressure Exxon to Settle with those Harmed by Spill
October 06, 2004
Alaska - U.S. Senate candidate Tony Knowles Monday proposed federal legislation to bring justice and payment of the jury award to Alaska fishermen and others impacted by the 1989 Exxon Valdez oil spill by removing the financial incentive for Exxon to delay final resolution in the courts. The punitive damage award stemming from the spill has been tied up in the courts for more than a decade.
"More than 15 years have passed since the tanker Exxon Valdez ran aground on a charted reef in Prince William Sound, spilling 11 million gallons of crude oil and devastating the lives of thousands of Alaskans; it's time we saw justice," Knowles said. "Hundreds of Alaskans have died waiting for settlement of their claims. It's unconscionable that the world's most profitable company can delay paying its debts and as your U.S. Senator, I will introduce legislation that will force Exxon to settle these legitimate claims by removing the company's incentive to keep foot-dragging in the courts."
In September of 1994, an Anchorage jury awarded Alaska fishermen and others impacted by the spill a punitive damages award of $5 billion. For 10 years Exxon has repeatedly appealed rulings and filed endless motions to avoid paying the billions it owes. The courts have subsequently reduced the base amount of the award to $4.5 billion but through a statutorily imposed 6 percent interest rate, the amount has grown to almost $7 billion. Regardless of the final amount, the funds are secured only by a line of credit and Exxon has an enormous financial incentive to drag out the legal process.
In a letter to Exxon five years ago, Knowles' Attorney General Bruce Botelho and 38 other attorneys general noted: "Each year Exxon delays payment of its obligation it earns an estimated $400 million from the difference between the statutory interest rate on judgments of 6 percent and the company's internal rate of return of about 14 percent. The U.S. District Judge who heard the case clearly recognized: 'Exxon can more profitably employ its capital elsewhere, even at the risk of paying great amounts of interest on the prospective judgment in this case. Put more simply, the court is concerned that delay in paying plaintiff's judgment will profit Exxon.'"
In fact, the amount Exxon has earned by delaying the case is double the amount of the original settlement plus statutory interest. Based on the company's reported return on total capital, the original $5 billion in settlement money still held by Exxon would be worth over $20 billion to the company today.
To rectify this injustice, Knowles proposed the "Justice for Alaska Fishing Families" Act that requires Exxon to place the current value of settlement - almost $7 billion - into an escrow account to be managed by a federal or state chartered financial institution not affiliated with Exxon. Taking the funds out of the company's control removes Exxon's financial incentive to delay reaching a final, fair settlement and preserves the funds to pay off any final settlement.
"This is a simple approach that levels the playing field for both Alaskans and for Exxon," Knowles said. "It is similar to the escrow accounts established in the 1998 settlement between the tobacco industry and the states to guarantee a source of compensation and prevent companies from deriving large short-term profits. Establishing an Alaska-Exxon escrow account will expedite the legal process and will guarantee Alaskans that actual payment will be made when Exxon's appeals are exhausted."
An Anchorage jury found Exxon liable for damages because the company and Exxon Valdez Capt. Joe Hazelwood acted recklessly in running the tanker aground and spilling oil. While Exxon paid actual damages stemming from the 1989 spill, it has repeatedly appealed the punitive damage award that recognizes the additional harm caused by the spill: the high incidences of severe depression, post-traumatic stress disorder, generalized anxiety, social and community conflicts, substance abuse, bankruptcy and psychological stress. Additionally, some commercial species like herring have never fully recovered.
Members of the class action include 32,677 individuals, two-thirds of them Alaska residents, including Alaska Natives, fishermen, processors, cannery workers, and others from Prince William Sound, Kodiak, Cook Inlet and elsewhere, all of whom were affected by the spill. More than 1,200 of the plaintiffs are reported to have died by early this year, and according to the plaintiffs' attorneys, the number of plaintiffs who have died without seeing justice could now be approaching 3,000.
As governor of Alaska, Knowles repeatedly pushed for settlement of the Exxon Valdez oil spill claims in public and private meetings with Exxon officials and the plaintiffs, but he had little leverage as a state official to resolve this federal court case and put this episode behind us. As U.S. Senator, Knowles is committed to pushing for a final and fair settlement of these long overdue claims.
Knowles first made the announcement of his "Justice for Alaska Fishing Families" Act in Cordova, the Prince William Sound fishing community that was most impacted by the 1989 Exxon Valdez spill. Consistently among the top companies on the Forbes 500 list, Exxon, now ExxonMobil, reported a net profit of $17 billion in 2003 and net profits totaling over $100 billion since 1994.
Source of News Release: