Oil giant told to pay Alabama $11.9B US

posted on:
November 15, 2003

author:
Staff

category:
Fraud

A jury ordered Exxon Mobil Corp. to pay $11.9 billion US in damages Friday after finding the oil giant had cheated the state of Alabama out of natural gas royalties.

The jury, which began deliberating Thursday, awarded $63.6 million in compensatory damages and $11.8 billion in punitive damages, a record in the state.

Jurors had to find Exxon Mobil committed fraud to return the multibillion-dollar verdict Alabama sought. If the damages are upheld on appeal, the money would go into state coffers.

“We felt Exxon thought they were going to get away with this,” said jury foreman Joe King, a teacher. “We wanted to send a message that they were not, and that this corporation can’t get away with doing wrong.”

Exxon Mobil spokesman Bob Davis said the verdict was excessive and the company would appeal. “We did not engage in fraud, pure and simple,” Davis said.

The state sued Irving, Texas-based Exxon Mobil in 1999, contending the company had violated its leases for natural gas wells in state-owned waters along the Alabama coast. The state accused the company of cheating Alabama out of millions of dollars by intentionally deducting too much in expense for operating the wells.

Exxon Mobil is the world’s biggest publicly traded oil company, with Esso operations in numerous countries. In Canada, the energy giant controls Imperial Oil, Ltd. of Toronto, Canada’s biggest oil company.

In its legal dispute, ExxonMobil’s lawyers said the Texas company has followed its leases wmth the state and owed Alabama nothing.

The trial was conducted while the state has been going through a financial crisis that has resulted in about 800 state workers getting layoff notices. Some of the courthouse workers who dealt with the jury are due to lose their jobs Nov. 26, but the judge prohibited everyone involved in the case from mentioning the state’s financial troubles or Exxon Mobil’s financial condition.

Despite no mention of it, juror L.A. Wallace said Exxon’s size and the state’s problems were a factor in the decision to award more than the state’s attorneys had sought against Exxon Mobil.

“A billion dollars to them in chump change,” said Wallace, who works at a plastics factory.

Lawyers said an appeal of the verdict means it could be years before the state knows whether it will collect any money.

The case was first tried in 2000, when a Montgomery jury awarded the state $3.5 billion. The decision was overturned by the Alabama Supreme Court, which said the jury was wrongly allowed to see an internal oil company memo. That prompted a new trial that began Oct. 20.

“The jury brought the largest corporation in the world to it knees for the second time. They felt we didn’t ask for enough,” Robert Cunningham, an attorney for the state, said after the verdict.

In closing arguments Wednesday, Cunningham said the state government had been shorted $63.6 million in royalties and that the loss could have climbed to as much as $930 million over the 30-year life of the natural gas field in Mobile Bay. He asked the jury to return a verdict of up to 10 times the potential loss, or $9.3 billion.

The jury deliberated 4 ½ hours Thursday and about two hours Friday.

Exxon Mobil’s lawyers said Alabama used a new kind of a lease for wells along the coast rather than the standard industry lease. The oil company argued that its payments to the state were in line with memos from the state Conservation Department that said the company could deduct the “reasonable direct cost of manufacture and transportation.”

The state hired two of Alabama’s top plaintiff law firms, Beasley Allen and Cunningham Bounds, to handle the case on a contingency fee: nothing if they lost and 14 percent of the judgment if they won.

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