Texaco Takes a Beating as Race Scandal Widens
Texaco Inc. took a beating in Albany, on Wall Street and in the civil rights community Tuesday as the opening of a federal criminal investigation compounded the oil giant’s widening racial scandal.
New York Comptroller H. Carl McCall--the first black elected to statewide office here and the man who controls New York’s $75-billion pension fund--called on Texaco to account for the “disregard for the law and overt racial hostility” shown by company executives in the secret tape recordings at the heart of the scandal.
The executives, including Texaco’s then-treasurer, Robert W. Ulrich, are heard at an August 1994 meeting apparently agreeing to “shred” damaging evidence in a race-discrimination lawsuit, while referring to African American workers as “niggers” and “black jellybeans.”
Meanwhile, although Texaco has vowed “immediate disciplinary action” if the allegations are proven true, it moved only against the executive who brought the scandal to light: Robert A. Lundwall, a former senior personnel manager.
Lundwall secretly taped the critical meeting and two years later--after his own job was eliminated in a consolidation--turned the tapes over to plaintiffs’ lawyers in the lawsuit. Texaco said it has suspended Lundwall’s severance pay pending the investigation.
On Wall Street, where it was a heady day for stocks generally, Texaco shares dropped $3.125 to close at $94.50 in trading on the New York Stock Exchange, capping a two-day plunge that has wiped out $1 billion of the company’s market value.
As serious as Texaco’s legal problems may be, financial analysts said the company could be hurt even more if investors--particularly huge pension funds such as New York’s--decide to shun it.
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“These funds must relate to their pensioners, and many of them are black,” noted analyst Alvin D. Silber of the New York brokerage Herzog, Heine, Geduld. “You don’t have to own Texaco. You can own Exxon or Mobil.”
Community pressure is massing against Texaco as well. The Leadership Conference on Civil Rights, a major civil rights coalition, Tuesday called on the Justice Department and the Equal Employment Opportunity Commission to intervene in the case.
The Washington-based organization represents 180 civil rights groups, including the Urban League and the National Assn. for the Advancement of Colored People.
The U.S. attorney for the Southern District of New York, the region’s top federal prosecutor, has already launched a criminal probe into possible destruction of evidence.
Prosecutors declined to comment, but a Texaco spokesman said the company was notified Tuesday that a grand jury has been convened in Texaco’s headquarters of White Plains, N.Y., to look into the situation.
James L. Van Alen, energy analyst for the Philadelphia brokerage of Janney Montgomery Scott, downgraded Texaco’s stock Tuesday to a “hold” from a “buy,” citing the firm’s “legal problems and their possible ramifications on the company’s results.”
Though Van Alen credited Peter I. Bijur, Texaco’s chairman and chief executive, with a strong statement Monday condemning the apparent misdeeds, the analyst said the turmoil could be a distraction that will hurt business.
New York Comptroller McCall, in a two-page letter to Bijur, pointed out that the pension fund holds more than 1.2 million Texaco shares valued at $114 million. He said the attitudes displayed by the executives are not only “grossly offensive,” but may hurt shareholders.
“A company cannot thrive when it denies opportunities and discourages cooperation among employees,” McCall wrote. He also asked for a copy of the results of the independent investigation Texaco has commissioned from an outside law firm.
No action has been taken against Ulrich, who retired last year, or against a third executive at the meeting, J. David Keough, then a senior assistant treasurer. Keough, the only one of the three still employed by Texaco, is an executive in a company insurance subsidiary in Bermuda.
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Texaco said its outside investigator--Michael Armstrong of the Manhattan law firm of Kirkpatrick & Lockhart--may deliver his preliminary findings as early as next week. His full report is due by Nov. 22, when Texaco faces a hearing in U.S. District Court in White Plains on the discrimination suit. The subject of the hearing is the alleged destruction of documents specifically requested by the plaintiffs’ lawyers.
The lawsuit was brought in June 1994 by six black middle managers on behalf of themselves and about 1,500 other Texaco professionals who contend that their careers have been thwarted by pervasive discrimination.
