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.
Fox noted similar concerns in May, telling a Columbia Law School panel he believes Schneiderman’s investigation into Exxon is unlikely to bear fruit, as the oil company does not appear to have broken the law.
But since, “the market was well supplied with information about climate change,” he said. “It’s not, I don’t know what the documents would discover, but I’d be kind of amazed if what the Exxon scientists knew was so different from what other scientists outside Exxon knew and were publicly available that it would change that total mix in a significant way.”
He doubled down on those criticisms in Monday’s National Law Journal piece.
Fox, who is also the NASDAQ professor for the Law and Economics of Capital Markets at Columbia University, suggested that from his vantage point, the inquisition looks more like an AG attempting to convince people he is a warrior in the battle against global warming.
“It is really about the attorney general acting as a champion in the fight against global warming,” Fox said, referencing a press release announcing the probe by Schneiderman in which the AG describes storm damage to his state as one of the reasons for the investigation.
“That’s why I am committed to the fight to combat climate change,” Schneiderman said at the time.
“At the extreme,” Fox warned. “The Martin Act subpoena power could be used to bully corporations into any kind of desired reform under the guise of a securities investigation.”
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