Posted By Chris White
A legal expert in financial law said the Democrat-lead probe targeting ExxonMobil is likely illegal and a ruse to paint those investigating the company as champions “in the fight against global warming.”
The Exxon subpoena into the company’s knowledge about internal climate change reports is an abuse of extraordinary powers. It allowed attorneys general (AGs) to subpoena private documents without either obtaining a court order or filing a complaint, Merritt Fox, a professor of law at Columbia Law School, wrote Monday at National Law Journal.
Fox was referencing New York Attorney General Eric Schneiderman’s investigation into Exxon, which, according to a New York Times report, demanded “extensive financial records, emails and other documents” from the oil producer dating all the way back to the 1970s. The New York attorney general also demanded information on global warming skeptic groups Exxon had once helped fund.
Schneiderman argued the oil company hid internal knowledge about the effects climate change has on oil production from investors to justify his investigation. He used a little-known financial and securities law to justify his investigation.
Fox argued that the Martin Act, which allows the AG to investigate and eventually prosecute companies for committing fraud, requires the likelihood that a reasonable investor would consider the omitted important information and decided “not to vote or buy, sell, or hold, and that it has to significantly alter a total mix of information available to this reasonable man or reasonable investor.”
Exxon had only a smattering of scientists working on climate change, most of which shared similar views as climate scientists already in the public realm. Exxon’s climate scientists published their findings in peer-reviewed journals.
“Consequently, even if all the internal statements of the Exxon scientists had been added to the public mix, it is extremely unlikely that a reasonable investor would have changed her mind about whether to buy or sell Exxon shares,” Fox added.
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Yet another legal expert has joined at least 12 others in calling New York Attorney General Eric Schniederman’s investigation of ExxonMobil legally flimsy. This morning, Columbia Law Professor Merritt B. Fox published an op-ed in the National Law Journal with a scathing review of Schneiderman’s use of the Martin Act to investigate ExxonMobil, noting that the whole affair is an “abuse” of “extraordinary powers.” As Fox states,
“The Martin Act grants the attorney general extraordinary powers to subpoena private documents without either obtaining a court order, which is required in most ordinary New York criminal proceedings, or the filing of a complaint, which is required in an ordinary civil action and is subject to court review. The Exxon subpoena is an abuse of these extraordinary powers.” (emphasis added)
“The bigger, more unambiguous problem for Schneiderman’s investigation, however, is its misuse of tools designed for another purpose. The Martin Act regulates speech made in connection with transactions in securities. Its subpoena powers are to assist investigations of possible violations. It is very unlikely, no matter what the subpoena turns up, that the attorney general will be able to plausibly argue that Exxon in fact committed such a violation.” (emphasis added)
This abuse of power sets a troubling precedent because “At the extreme, the Martin Act subpoena power could be used to bully corporations into any kind of desired reform under the guise of a securities investigation.”