Texaco Settles Race Bias Suit for $176 Million

In the glare of scandal, Texaco Inc. on Friday signed what may be the largest settlement of a racial discrimination lawsuit, agreeing to pay an immediate $115 million in damages plus pay raises of at least 10% to about 1,400 black employees.

An unusual aspect of the settlement, valued by plaintiffs’ lawyers at $176 million in all, calls for Texaco to form a seven-member “equality and tolerance task force” that will give the plaintiffs a say in hiring and promotion policy at the giant oil company.

“The era of the ‘good ol’ boy network’ at Texaco is coming to an end,” plaintiffs’ lawyer Cyrus Mehri said, adding: “It’s going to be a new Texaco.”

After dragging on for 2 1/2 years, the case was settled in 10 days of urgent negotiations that began Nov. 12, the day after the disclosure of secret recordings of senior Texaco executives denigrating black workers and plotting to destroy incriminating evidence in the lawsuit.

Texaco officials did not attend news conferences in Washington and New York on Friday to announce the settlement, but Texaco Chairman Peter I. Bijur said in a statement: “With this litigation behind us, we can now move forward on our broader, urgent mission to make Texaco a model of workplace opportunity for all men and women.”

“I feel relieved,” Bari-Ellen Roberts, one of the original plaintiffs, said at her attorney’s office in New York. “I feel justice has been served. . . . Our cause has been brought to light and validated.”

Roberts, 44, is a senior financial analyst in Texaco’s Harrison, N.Y.-based finance department--the office where the taped meetings took place. She said she filed suit after consistently being denied chances for advancement, seminars and foreign travel while less-qualified white employees--often people she had trained--moved ahead.

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“Glued to the bottom of the bag was exactly how I felt,” Roberts said, alluding to a taped remark by one of her superiors who joked that “all of the black jelly beans seem to be glued to the bottom of the bag.”

The uproar resulting from the tapes forced Texaco to the negotiating table and led to threats by civil rights groups of a national boycott of Texaco products and a stock-divestiture movement.

The provisional settlement, which must be finalized in 30 days and approved by the U.S. District Court in New York, was not enough to appease some civil rights leaders, who said they will proceed with a planned boycott of Texaco products and demonstrations at its service stations, which were scheduled to start today.

“The mission is not complete,” said the Rev. Jesse Jackson, speaking at the Washington news conference. “The challenge to open up Texaco goes beyond opening up our share of jobs,” he said, adding that Texaco must also agree to provide more economic opportunities for minorities in the form of franchises and investment opportunities.

The settlement is “a step in the right direction,” said Celes King III, California chairman of the New York-based Congress of Racial Equality, who met Friday with two Texaco regional officials at the civil rights organization’s office in South-Central Los Angeles.

The settlement “shows that they are willing to make changes that are in the best interest of Texaco and minorities.”

The kind of behavior that is captured on the tape “goes on every day in America, and the corporate stance is to deny it . . . until someone is smart enough to have a tape recorder,” longtime CORE member Dorinda Henderson said. “In light of [Prop.] 209 [the measure passed by California voters which ends state affirmative action programs], this tape has a lot more meaning than just to Texaco. It’s America’s problem. It’s California’s problem.”

Under the terms of the settlement, all salaried black employees still at Texaco will receive raises totaling $4 million--an average of about 10%--effective Jan. 1, 1997. The raises are in addition to the $115-million cash payment that will be distributed to all plaintiffs when the settlement is finalized. Proportions will be based on pay levels, length of service and other factors.

Hourly workers were not included in the lawsuit or the settlement.

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The agreement also calls for Texaco to set up a task force consisting of three company employees, three members appointed by the plaintiffs and a jointly chosen chairperson to “evaluate all existing employment policies and practices” at Texaco. The task force is charged with developing a company-wide diversity and sensitivity-training program within six months, as well as with reviewing and revising Texaco’s recruitment, hiring and promotion practices.

“It’s a task force with real teeth,” said Daniel Berger, a New York-based lawyer for the plaintiffs.

In pure dollars, the settlement is believed to be the largest ever in a race discrimination case, said Linda Dardarian, an attorney at Saperstein, Goldstein, Demchak & Baller, an Oakland-based firm specializing in civil rights class-action lawsuits.

The largest previous race discrimination settlement was $132 million awarded to a group of African American employees of the Shoney’s restaurant chain who had been denied jobs other than cooks, Dardarian said.

The only civil rights case with a larger cash settlement that Dardarian knew of was a sex discrimination case against State Farm Insurance that was settled in 1992 for $250 million. The suit was brought by 1,000 women who had applied for and been denied positions as insurance agents, Dardarian said.

“It seems like Texaco acted responsibly in settling it quickly and for what seems like a significant amount of money,” Dardarian said. “They are agreeing to significant changes in human-resources function, and that’s more important in the long run than the money.”

Texaco may have gotten off cheaply, said several legal experts and Wall Street analysts who agreed Friday that the company was smart to settle, not just for the dollars it was at risk of losing in court but for the time, trouble and distraction that would have resulted from months of trial and courtroom preparations.

Frank Cronin, an Irvine attorney specializing in labor and employment law, said Texaco would have been in a deep hole had the case gone to trial because of the incriminating recordings and the discussion of evidence destruction.

“The jury would have awarded massive punitive damages. I was horrified to read the evidence as it was coming out of the press because it was direct evidence at highest levels of racial animus, which is the worst kind of evidence to deal with at trial,” Cronin said.

Philip Tendler, an oil analyst with the Schroder Wertheim investment firm in San Francisco, said the dollar amount of the settlement “is not the worst it could have been. The maximum financial cost to Texaco, if the case had gone to trial, would have been $320 million, and now they settled for less than that.”

Texaco still faces possible criminal charges from a grand jury investigation into whether documents were in fact destroyed.

Todd Putnam, president of National Boycott News, a Seattle-based Web page, said the settlement would not be a record in terms of financial costs wrought by a real or threatened boycott. He noted that past boycotts of Adolph Coors Co. and General Electric Co., to name two cases, cost those companies more money.

Texaco took the “proactive” approach in settling the boycott before it could begin, an example of how boycotts have been settled more quickly in recent years, Putnam said. From an average duration of seven to 10 years a decade ago, boycotts now average one to two years, he said. Currently, about 200 boycotts are in progress in the nation, he said.

“Companies figure that if they are going to resolve it anyway, as most of them do, let’s get it done with so we don’t have the negative image problems down the road. In fact, they can use a settlement to make it look like they are being responsive right off the bat,” Putnam said.

Times staff writers Andrea Ford in Los Angeles and Jube Shiver Jr. in Washington contributed to this story. Kraul reported from San Diego, Mulligan from New York.

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Texaco Timeline

Key dates in the Texaco discrimination case:

* June 1994: A discrimination lawsuit is brought by six Texaco employees on behalf of themselves and at least 1,500 other African American employees who worked at the company between 1991 and 1994.

* August 1994: A Texaco executive secretly records executives discussing destroying documents linked to the suit.

* Nov. 4, 1996: Plaintiffs’ attorneys release partial transcripts of the tape and claim a racial epithet was used by former Texaco Treasurer Robert Ulrich. Later enhancements of the poor-quality tapes showed the slur wasn’t spoken.

* Nov. 6, 1996: Texaco suspends two executives and cuts off the retirement benefits of its former treasurer, as the oil giant responds to a racial and legal scandal that has spawned a criminal investigation into possible destruction of documents that could be used as evidence.

* Nov. 12, 1996: Jesse Jackson calls for boycott of Texaco, beginning today, unless the company reaches agreement with black employees who filed the discrimination lawsuit.

* Nov: 15, 1996: Texaco agrees to pay $176.1 million to settle the discrimination suit.