Colossal fossil ExxonMobil stands accused of a “longstanding fraudulent scheme” to deceive investors with “false and misleading assurances” about its financial and business exposure to climate change regulations, in a major lawsuit filed Wednesday by Acting New York State Attorney General Barbara Underwood.

The filing in New York Supreme Court culminates three years of investigation by the attorneys general of New York and Massachusetts—in the face of continuing courtroom challenges from Exxon.

The suit says Exxon falsely assured shareholders it had fully disclosed the climate risk it faced, “and that its vast reserves of oil and gas weren’t at major risk of being left as strandedassets,” The Guardian reports.

“This fraud reached the highest levels of the company,” the lawsuit states, contending that ex-Exxon CEO and former U.S. secretary of state Rex Tillerson knew for years the company “was deviating” from public statements and using two sets of calculations about future climate regulations.

“Investors put their money and their trust in Exxon—which assured them of the long-term value of their shares,” Underwood said. “Yet as our investigation found, Exxon often did no such thing.”

Instead, the company “built a facade to deceive investors into believing that the company was managing the risks of climate change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations.”

“The attorney general is effectively charging them with keeping two sets of books—one for internal purposes, one for external,” said Tom Sanzillo, finance director at the Institute for Energy Economics and Financial Analysis (IEEFA). “The result is a distortion of the value of the company.”

Exxon spokesperson Scott J. Silvestri responded that “these baseless allegations are a product of closed-door lobbying by special interests, political opportunism, and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing.”.

But “the lawsuit says ExxonMobil’s dual accounting calculations had a huge impact on the purported value of the company,” the Washington Post reports. “It says the company’s failure to apply an internal price on carbon at 14 of its oil sands projects in Alberta, Canada resulted in undercounting future greenhouse gas expenses by more than US$25 billion over the lifetime of the project.” New York contends that the company also overstated the economic life of its Cold Lake, Alberta tar sands/oil sands reserves by 28 years.

“Exxon told investors that it accounted for the risk of governmental regulation of climate change by applying a ‘proxy cost’ of carbon,” the attorney general’s office said in a prepared statement. “Exxon told its investors that it used that proxy cost in its investment decisions, corporate planning, estimations of company oil and gas reserves, evaluations of whether its long-term assets remain viable, and estimations of future demand for oil and gas.”

Yet the company “frequently did not apply the proxy costs as represented in its business activities,” the AG alleged. “Instead, in many cases Exxon applied much lower proxy costs or no proxy cost at all.”

Raymond James securities analyst Pavel Molchanov said New York will need “textual, documentary evidence of deliberate deceit on the part of management” to prove its case, adding that “estimating climate-related liabilities is more art than science because of how long-term and uncertain the calculations are.”

But David Hawkins, climate policy director at the Natural Resources Defense Council, stressed the importance of the case. “ExxonMobil needs to come clean as an energy company to protect our climate,” he told the Post. “Coming clean with its investors about the need to switch from fossil fuels would be an important first step.”

In the aftermath of the lawsuit, Sanzillo and his IEEFA colleague Kathy Hipple are calling the case “a stark indication of just how risky investing in oil and gas companies has become.”

With litigation against fossil companies expanding, the New York lawsuit “only increases the many risks facing the industry as the global economy is shifting toward less energy-intensive models of growth, fracking has driven down commodity and energy costs and prices, and renewable energy and electric vehicles are gaining market share,” they write.

“Investors, who once considered the energy sector a source of stable returns, had best look elsewhere.”

The Post says the lawsuit’s success could hinge on the 1921 Martin Act, a “particularly powerful, nearly 100-year-old securities law unique to New York” that gives the AG “sweeping power” to investigate and prosecute potential financial fraud.

“Contrary to Exxon’s attempts to spin this as a political witch hunt,” said Vermont Law School environmental law professor Patrick Parenteau, “this is a very serious enforcement action alleging illegal conduct that reaches to the highest levels of the corporate structure.”