Lingle defends Chevron inquiry
By Sean Hao
Advertiser Staff Writer
Gov. Linda Lingle yesterday defended a decision by the state Attorney General's Office earlier this year not to pursue a lawsuit against ChevronTexaco Corp. for alleged tax evasion.
The comments came in response to criticism by former Gov. Ben Cayetano in the New York Times yesterday of the selection of law firm Winston & Strawn, which investigated and largely exonerated the oil company of the charge.
Cayetano said the Chicago-based law firm's prior work on behalf of ChevronTexaco posed a conflict of interest.
Lingle wouldn't comment on the selection of Winston & Strawn, but said she was satisfied that the charges were fully investigated.
"I think the analysis they did was very clear and our deputies in the Attorney General's Office who reviewed this matter did a real thorough job and regardless of who was chosen for the law firm, it was based on the facts that we had in our possession," she said. "Based on those facts we made the right decision."
Winston & Strawn was selected during Cayetano's term in office. However, he said he was unaware of the prior relationship between the law firm and the oil company.
According to the Times, Winston & Strawn disclosed that it had previously represented the oil company in matters unrelated to the tax charges, but did not disclose prior work for Texaco conducted during the 1980s.
That relationship, coupled with ChevronTexaco's ties to the Bush Administration, should have precluded the selection of Winston & Strawn, Cayetano said. National Security Adviser Condoleezza Rice is a former director of the oil company, which named one of its ships after her.
"Had Winston Strawn disclosed the cases, we would have researched it further to determine whether their conflict posed a problem," Cayetano told the Advertiser via e-mail yesterday. "If the conflicts were not significant, we would have to then decide whether the state should hire a law firm in which the former Republican Governor of Illinois was a partner.
"Under the circumstances, I would never have agreed to retain Winston Strawn to represent the state in a case which had developed political overtones."
The law firm was hired after two Michigan professors last fall alleged ChevronTexaco owed the state an estimated $536 million. The professors alleged Chevron and Texaco funneled profits through an offshore joint venture to avoid taxes and paid inflated prices for crude oil that could have led to higher prices at the pump. ChevronTexaco denied the charges.
Winston & Strawn concluded in July that even if the allegations of tax evasion were true, the most the two oil companies would owe the state is less than $4 million. The Attorney General's Office then decided not to pursue the case.
The law firm stood by its assertion to the state last November that the current and previous cases involving Chevron posed no conflict, the Times said, citing chairman James R. Thompson. Stephen Gillers, an ethics professor at New York University's law school, told the Times that Winston & Strawn had a right to proceed based on its conclusion.
Cayetano added that material provided to that state by ChevronTexaco exonerating the company should be made available to the public.
"Aside from the conflict issue, the big issue is that the Winston Strawn report was never made public," he said. "The state claims the report is protected by the 'attorney-client' privilege. But the 'client' is the state — the people of Hawai'i.
"If the governor wants to put the issue to rest why not release the Winston Strawn report for public scrutiny?" Cayetano asked.
Hugh Jones, a state deputy attorney general, said that is not an option because releasing ChevronTexaco income tax returns is precluded by federal law, while other material provided by ChevronTexaco to Winston & Strawn are protected under confidentiality agreements.
However, the state could pressure the company to voluntarily release such documents, said state Sen. Ron Menor, D-17th (Mililani, Waipi'o), chairman of the Senate Committee on Commerce and Consumer Protection.
"They should encourage the oil company to make that information available to the public," he said. "In my mind, if the oil company can provide that information to the state, then they should also provide it to the Legislature and the public so we can decide" whether the allegations are true.
Menor said he's considering proposing legislation that would allow private citizens to sue corporations for state tax evasion, something only the state is allowed to do under current law.
Bloomberg News contributed to this report.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
