Chevron 2012 Annual Report Download - page 53

Chevron Corporation 2012 Annual Report 51
jurisdiction to hear Chevron’s arbitration claims. On April 9,
2012, the Tribunal issued a scheduling order to hear issues
relating to the scope of the settlement and release agree-
ments between the Republic of Ecuador and Texpet, and on
July 9, 2012, the Tribunal indicated that it wanted to hear
the remaining issues in January 2014. On February 7, 2013,
the Tribunal issued its Fourth Interim Award in which it
declared that the Republic of Ecuador “has violated the First
and Second Interim Awards under the [BIT], the UNCIT-
RAL Rules and international law in regard to the nalization
and enforcement subject to execution of the Lago Agrio Judg-
ment within and outside Ecuador, including (but not limited
to) Canada, Brazil and Argentina.” A schedule for the Tribu-
nal’s order to show cause hearing will be issued separately.
rough a series of U.S. court proceedings initiated by
Chevron to obtain discovery relating to the Lago Agrio litiga-
tion and the BIT arbitration, Chevron obtained evidence that
it believes shows a pattern of fraud, collusion, corruption, and
other misconduct on the part of several lawyers, consultants
and others acting for the Lago Agrio plaintis. In February
2011, Chevron led a civil lawsuit in the Federal District
Court for the Southern District of New York against the Lago
Agrio plaintis and several of their lawyers, consultants and
supporters, alleging violations of the Racketeer Inuenced
and Corrupt Organizations Act and other state laws. rough
the civil lawsuit, Chevron is seeking relief that includes
an award of damages and a declaration that any judgment
against Chevron in the Lago Agrio litigation is the result of
fraud and other unlawful conduct and is therefore unenforce-
able. On March 7, 2011, the Federal District Court issued a
preliminary injunction prohibiting the Lago Agrio plaintis
and persons acting in concert with them from taking any
action in furtherance of recognition or enforcement of any
judgment against Chevron in the Lago Agrio case pending
resolution of Chevron’s civil lawsuit by the Federal District
Court. On May 31, 2011, the Federal District Court severed
claims one through eight of Chevron’s complaint from the
ninth claim for declaratory relief and imposed a discovery
stay on claims one through eight pending a trial on the ninth
claim for declaratory relief. On September 19, 2011, the U.S.
Court of Appeals for the Second Circuit vacated the prelimi-
nary injunction, stayed the trial on Chevron’s ninth claim, a
claim for declaratory relief, that had been set for November
14, 2011, and denied the defendants’ mandamus petition
to recuse the judge hearing the lawsuit. e Second Circuit
issued its opinion on January 26, 2012 ordering the dismissal
of Chevron’s ninth claim for declaratory relief. On February
16, 2012, the Federal District Court lifted the stay on claims
one through eight, and on October 18, 2012, the Federal Dis-
trict Court set a trial date of October 15, 2013.
e ultimate outcome of the foregoing matters, including
any nancial eect on Chevron, remains uncertain. Management
does not believe an estimate of a reasonably possible loss (or a
range of loss) can be made in this case. Due to the defects associ-
ated with the Ecuadorian judgment, the 2008 engineer’s report on
alleged damages and the September 2010 plaintis’ submission on
alleged damages, management does not believe these documents
have any utility in calculating a reasonably possible loss (or a range
of loss). Moreover, the highly uncertain legal environment sur-
rounding the case provides no basis for management to estimate a
reasonably possible loss (or a range of loss).
Note 14
Taxes
Income Taxes
Year ended December 31
2012 2011 2010
Taxes on income
U.S. federal
Current $ 1,703 $ 1,893 $ 1,501
Deferred 673 877 162
State and local
Current 652 596 376
Deferred (145) 41 20
Total United States 2,883 3,407 2,059
International
Current 15,626 16,548 10,483
Deferred 1,487 671 377
Total International 17,113 17,219 10,860
Total taxes on income $ 19,996 $ 20,626 $ 12,919
In 2012, before-tax income for U.S. operations, including
related corporate and other charges, was $8,456, compared
with before-tax income of $10,222 and $6,528 in 2011 and
2010, respectively. For international operations, before-tax
income was $37,876, $37,412 and $25,527 in 2012, 2011
and2010, respectively. U.S. federal income tax expense was
reduced by $165, $191 and $162 in 2012, 2011 and 2010,
respectively, for business tax credits.
e reconciliation between the U.S. statutory federal
income tax rate and the company’s eective income tax rate
isdetailed in the following table:
Year ended December 31
2012 2011 2010
U.S. statutory federal income tax rate 35.0% 35.0% 35.0%
Eect of income taxes from inter-
national operations at rates dierent
from the U.S. statutory rate 7.8 7.5 5.2
State and local taxes on income, net
of U.S. federal income tax benet 0.6 0.9 0.8
Prior-year tax adjustments (0.2) (0.1) (0.6)
Tax credits (0.4) (0.4) (0.5)
Eects of changes in tax rates 0.3 0.5 –
Other 0.1 (0.1) 0.4
Eective tax rate 43.2% 43.3% 40.3%
Note 13 Litigation – Continued