Opinion ID: 487723
Heading Depth: 2
Heading Rank: 1

Heading: Mobil-Samarco-Atlas

Text: 9 William Tavoulareas was at all relevant times president and chief operating officer of Mobil Corporation, the Nation's second largest oil company and its third largest industrial corporation. In his position at Mobil, Tavoulareas took an active role in the public debate during the 1970's over the manner in which the United States should respond to the rise of OPEC and the ensuing energy crisis. In particular, Tavoulareas vigorously defended the performance of the oil industry against critics who called for sweeping reforms in the structure and management of the industry, and he publicly advocated less governmental regulation of the industry as the solution to the energy shortage. In addition, he was an important proponent of Mobil's Saudi strategy of dependence on Arab oil supplies at a time when increasing American energy independence became a significant public policy objective. 10 In 1973, a group of influential Saudis approached Mobil with a plan for a jointly owned shipping company. The group included the Alirezas, a prominent merchant family in Saudi Arabia that had other business relationships with Mobil. 1 The plan called for Mobil to furnish the capital for the proposed company, which would transport Saudi crude in its ships. At that time, it was widely anticipated that Saudi Arabia would soon establish a preference system requiring that Saudi crude be shipped in Saudi vessels. If Mobil, which depended heavily on Saudi supplies, were forced to use Saudi-owned ships, much of Mobil's own large fleet would then be idled. Mobil initially rejected the offer, whereupon the Saudis found another partner, Fairfield-Maxwell. The resulting venture was called Samarco--the Saudi Maritime Company. Mobil reassesed its situation in early 1974, reversed its field, and decided to join the Saudi venture. 11 Under the Samarco arrangement, ships owned by Mobil would be bareboat-chartered to Samarco--that is, leased without crews or provisions. Samarco would then time-charter the ships back to Mobil with full crews, supplies, and fuel. 12 Mobil decided that Samarco's ships should be operated by an independent management company, Atlas Maritime Company. Mobil believed that Atlas could operate the ships at less cost than Mobil 2 and that this arrangement would avoid a conflict of interest among the Samarco partners. 13 Atlas was established by George Comnas in 1974. Comnas met with Tavoulareas in January 1974 and explained that he had just started his own business after leaving his position as managing director of C.M. Lemos & Co., one of the largest Greek shipping concerns. One of Comnas' assistants at Lemos was Tavoluareas' son Peter. Peter, 24 and fresh from business school, was working at his first job in the shipping business as a $14,000 per year employee. 3 Comnas informed Tavoulareas at the January meeting that he, Comnas, wanted Peter to join his new venture as a principal and that Comnas would like to explore the possibility of doing business with Mobil. Tavoulareas then informed Rawleigh Warner, chairman of Mobil's board of directors, and George Birrell, chairman of Mobil's Conflicts of Interest Committee, that Peter might join Comnas in performing services for Samarco. Soon thereafter, sometime in the spring of 1974, Tavoulareas personally recruited Comnas to manage Samarco's ships through Atlas. 14 In August 1974, Peter left Lemos to become an equity partner at Atlas. Ares Emmanuel, a more experienced but similarly youthful co-worker from Lemos, had also joined Atlas but was provided with a much smaller equity interest in the firm. 4 When Peter joined Atlas, Tavoulareas sent a memorandum to Paul Wolfe, executive vice-president of Mobil, stating that he would no longer be involved with anything as to Atlas and Samarco. Record Excepts (RE) at 2440; see RE at 2339. Mobil later told the Post that [f]rom the date Peter Tavoulareas joined Atlas, Mr. Tavoulareas divorced himself from involvement in matters involving business transactions between Mobil and/or SAMARCO with Atlas and that [t]his is what Mr. Warner reported to [Mobil's] Board. RE at 2344. 5 The undisputed record, however, reveals that Tavoulareas involved himself in Samarco-Atlas matters on numerous occasions after Peter joined Atlas. For example, at trial Tavoulareas admitted that he attended and participated in meetings in Geneva in August 1974 and Saudi Arabia in November 1974 at which substantive discussions took place that helped produce the final agreement between Atlas and Samarco. Tavoulareas conceded that in these meetings he was representing George Comnas' [and hence Peter's] position, Transcript (Tr.) at 1712, urging the Saudis to accept terms sought by Atlas. 15 As its inaugural project, Atlas began operating two Mobil-owned ships under contract with Samarco at an annual fee of more than $600,000, with the prospect of additional ships in the future. No other bids were solicited or received for the ship-management contract. By the time the Post published its story, Atlas had received more than $4.5 million in management fees from Samarco. 16 Shortly after Atlas began operations, Mobil grew disenchanted with Comnas, although there is disagreement among Tavoulareas' witnesses about whether the dissatisfaction arose from Comnas' business performance or some alleged misconduct on his part. What is undisputed is that Tavoulareas participated in a meeting, held in Tavoulareas' office, at which senior Mobil executives decided to seek Comnas' removal from Atlas. It is also undisputed that Tavoulareas and two other Mobil shipping executives flew to London to notify Comnas of this decision. Comnas was offered and accepted a $30,000 a year, three-year consultancy arrangement with Mobil in return for his resignation from Atlas. 17 When notified by Mobil of Comnas' resignation, the Saudi partners in Samarco, who had never been enthusiastic about using an independent management company, expressed promptly their view that the Samarco-Atlas management contract was terminated. Tavoulareas personally urged the Samarco partners to retain Atlas and successfully resisted the Saudi partners' attempts to take over some of the departed Comnas' equity interest. Most of that equity soon went to Peter. 18 After Comnas resigned, Atlas was left without an experienced hand at the helm. Harmon Hoffmann, a senior and highly respected Mobil executive, took over management of Atlas for the next six months, assisting Peter and the latter's fellow Lemos alumnus, Ares Emmanuel. Peter, whose share of Atlas increased from 40 to 75 percent in the wake of Comnas' departure, then assumed the management duties along with Emmanuel at what had become Peter's shipping firm. 6 19 In November 1976, more than two years after Peter joined Atlas and over a year after Peter became its principal owner, Tavoulareas and Warner decided to send a letter to Mobil's quarter-million stockholders informing them that Tavoulareas had not been actively involved in the planning, negotiation and direction of Atlas and did not participate in any decisions regarding the [Samarco-Atlas] relationship because his son, Peter, [was] one of the principals of that marine management firm. RE at 2650. Although Tavoulareas had formally recused himself from such matters, several of Mobil's outside directors raised objections to Peter's involvement in Atlas. Tavoulareas' potential conflict of interest also attracted the attention of the Securities and Exchange Commission, which conducted an investigation into the Mobil-Samarco-Atlas arrangements but took no enforcement action. The House Subcommittee on Energy and Power and several well-known journalists also investigated the matter.