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State: Chevron
lied on prices

The firm's own witnesses and documents
describe obstruction, deception and withholding
of key profit reports, the state says
Chevron disputes the allegations in
the $2 billion price-fixing suit

By Rob Perez
Star-Bulletin

Chevron Corp.'s own documents and witnesses corroborate a former executive's testimony that the oil company willfully obstructed the state's gasoline price investigation, withheld key profitability documents, orchestrated deceptive press campaigns and lied to the Legislature, the state says.

In a document filed late yesterday in federal court, the state defended David Young, a former Chevron public relations manager, for helping to unmask what the state alleges is a decade-long fraud on Hawaii consumers.

Young is an important witness in the state's $2 billion gasoline price-fixing lawsuit against Chevron, Hawaii's market leader, and several other oil companies. He was subpoenaed by the state to testify in a confidential deposition last October.

Chevron has disputed Young's testimony, parts of which were made public in a recent court ruling. The company has called him a disgruntled former employee who now works for the state.

The state, however, paints a different picture of the man who was Chevron's public voice and lobbyist in Hawaii for 14 years.

"He is a courageous person coming forward despite repeated public attacks on his character to reveal a fraud that Chevron has perpetrated on the citizens of Hawaii," the state says in yesterday's court filing. "His testimony has been powerfully corroborated by Chevron's own witnesses and documents, all of which Chevron has designated confidential so they cannot be made public."

The state says it is unjust for Chevron to attack Young's credibility while keeping corroborating evidence under a court-ordered confidentiality seal the company requested.

"The question Chevron one day will have to answer is why it continues to fight the truth," the state says.

Chevron spokesman Albert Chee Jr. last night disputed the notion that Chevron documents corroborate Young's testimony, which Chee continued to say was not true. He said the company requested the protective order because much of the information is proprietary.

Chee also cautioned people from drawing conclusions based solely on what the state is alleging because Chevron has not presented its side in the court process.

"It's important that we wait until a full examination of the facts is made," he said. "We certainly believe once all the facts are brought out, people will clearly see that the state's allegations are not true."

Most info still confidential

San Francisco attorney Spencer Hosie, who is spearheading the state's case, declined comment, as did Young.

Since the October 1998 filing of the lawsuit, the bulk of the testimony and evidence gathered has been subject to the court's confidentiality order, as is typical for complex antitrust cases. But bits of that information have become public as the two sides file legal briefs battling over mostly procedural matters in a case not scheduled to go to trial until September 2001.

The state largely refers to still-confidential Chevron documents to argue that Young's testimony is corroborated, but because of the court order, the state does not cite much specific information from those documents.

It also does not identify the Chevron witnesses whose testimony allegedly supported Young's. But in a December court hearing, Hosie told Magistrate Francis Yamashita that the deposition of Michael Neeley, former Chevron pricing manager in Hawaii, helped corroborate what Young said.

Neeley could not be reached for comment.

Financial reports withheld

In yesterday's filing the state accused Chevron of withholding key financial reports in 1992 when the state requested all profitability documents from the company as part of the government's ongoing investigation. Investigators subsequently determined that Hawaii gas companies were not making excessive profits.

"Without the benefit of the withheld reports, the state answered the excessive profits question dead wrong," the filing said.

The internal documents that Chevron omitted clearly showed that its Hawaii business was "grotesquely more profitable" than its markets elsewhere, the state said.

Despite such documentation, Chevron and the other companies publicly claimed that the local market was no more profitable than their West Coast operations, according to the state.

Chee, however, said Chevron believed it fully complied with the state's 1992 document request and was not told otherwise at the time. Had the state asked for more information, the company would have supplied it, he said.

"Only eight years later they discover ... we didn't give them enough," Chee said. "It doesn't make sense."

He said Chevron has not concealed profitability data from the state, has cooperated in all its investigations and did not give false testimony to the Legislature.

'High profits, not high costs'

But the state, citing Young's testimony and company documents and depositions, said Chevron has been engaged in a deliberate campaign to conceal from legislators, investigators and local consumers the huge profits it was making in Hawaii.

For example, the filing noted, a Chevron executive in 1991 told the Legislature it would be "difficult if not impossible" to break out and quantify Chevron's Hawaii profits. Yet an internal company committee at the time was holding monthly meetings to discuss Hawaii profitability reports, the state said.

It also noted that the company over the past decade has justified Hawaii's high gas prices by citing the high cost of doing business here. But, the state said, "high prices are caused by high profits, not high costs. This was the central truth of its Hawaii business which Chevron was determined to conceal."

Mainland petroleum analyst Tim Hamilton said he was not surprised about the latest allegations against Chevron.

"What's uncommon about it is, they got caught," Hamilton said.