Jury Orders Chevron to Pay $100 Million to Louisiana
A Louisiana jury has ordered ChevronTexaco Corp. to pay the state about $100 million, including attorney fees, after concluding that the company cheated taxpayers out of oil royalties for more than 10 years.
ChevronTexaco, which books more than $100 billion in annual sales, said it would evaluate whether to appeal Thursday’s verdict, issued by a state District Court jury in Lafourche Parish.
The case stemmed from a dispute over the way the San Ramon, Calif.-based company determined Louisiana’s share of royalties for crude oil products derived from land leased from the state between 1987 and 1999, before Chevron’s 2001 merger with Texaco Inc. The case involved hundreds of properties throughout the state, mostly on coastal land.
Louisiana argued that Chevron sold oil at prices that were $1 to $2 per barrel more than the prices on which the state’s royalties had been calculated, then hid the extra money in a series of sham transactions.
“The evidence in this case is really quite shocking,†said Spencer Hosie, a San Francisco-based attorney who represented Louisiana.
The jury’s verdict, he said, “sends a powerful message to other oil companies that the state of Louisiana is minding the store and there will be no more shoplifting.†Chevron has operated in Louisiana since 1941.
ChevronTexaco said it was disappointed by the jury’s decision.
“Chevron USA followed the law and met the highest ethical standards in its business dealings with the state,†said spokeswoman Ayana McIntosh-Lee.
ChevronTexaco attorney Bill Jarman told Associated Press that the company said it could charge more per barrel on the market because it had blended the Louisiana crude with a higher-grade oil. He said the company was obligated to pay the state only the royalties that both parties agreed upon earlier.
From 1987 through 1999, Chevron paid Louisiana $250 million in royalties, the company said.
The jury said Chevron shortchanged the state by $13.5 million. The panel assessed the company $54.9 million in damages and $14 million in interest, plus $20 million in attorney fees.
Wall Street analysts appeared unconcerned about the verdict’s effect on the company or its earnings, saying it was relatively a small amount and not a case that other states might attempt to copy.
“It’s not that much money and, in this industry, it goes with the territory,†said Tom Burnett, president of Merger Insight, a New York research firm.
In fiscal 2003, ChevronTexaco’s profit rose sixfold, coming in at $7.2 billion, or $6.96 a share. For its most recent quarter ended Dec. 31, net income nearly doubled to $1.7 billion, or $1.63 a share, from $904 million, or 85 cents, in the year-earlier period. Sales for the quarter rose 13% to $30 billion.
Burnett pointed to a similar case last year against Exxon Mobil Corp. in which the state of Alabama won an $11.9-billion judgment in a suit that accused the Texas oil company of cheating the state out of natural gas royalties. That judgment is expected to be overturned, or at least reduced, on appeal.
“It certainly didn’t give them a black eye,†said Burnett of the Exxon decision. “After the dust settled, I don’t think people thought it was a big deal.â€
ChevronTexaco shares fell $1.55 to $88.20 on the New York Stock Exchange on Friday. They have risen about 40% in the last year.
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