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EX-CHIEF: EXXON EXPECTED AUDIT

Apr 18, 2001

Would have negotiated payments, Condray says

STAN BAILEY

News staff writer

MONTGOMERY - Exxon Corp. believed it was right when it underpaid oil and gas royalties to Alabama, for which a jury returned a $3.4 billion fraud verdict in December, a former top official told a judge Tuesday.

Ansel Condray, who headed Exxon until its merger with Mobil, told Montgomery County Circuit Judge Tracy McCooey the company knew its chances of winning its contract dispute with the state were low on some points but believed they would be resolved with state auditors rather than in court.

"We thought we had a reasonable and fair and right view," Condray testified in the first day of an expected two-day hearing.

Exxon's lawyers are asking McCooey to rule that the punitive damage award was excessive, and they appealed the award and the jury's finding of fraud to the Alabama Supreme Court. State lawyers contend the company deliberately tried to defraud the state and got caught.

"If we knew we were wrong and just trying to get by, it would not be ethical," Condray told the court. "We had a new lease form that nobody at that time had agreed on what it meant. We did expect we were going to be audited."

Robert Cunningham, representing the state, asked Condray about company memos that showed Exxon lawyers had estimated their chances of winning on some issues in the dispute were as low as 25 percent.

"Y'all weren't weighing the odds of Bubba figuring out what's going on here?" Cunningham asked.

Condray said Exxon considered the state auditors inexperienced, but not incompetent. "I don't agree that inexperienced people are Bubbas," he said.

McCooey several times during the day made sharp comments to Exxon's witnesses and lawyers. At one point she called President Bush a "jerk" for firing Exxon witness Walter Rosenbush, a former U.S. Interior Department official who testified that Exxon expected to be audited and there was no chance its underpayments would have gone undetected.

When Exxon witness Jonathan Walker attempted to explain a formula he used to determine that the $3.4 billion verdict was excessive, she said "No offense, Dr. Walker, but it sounds like a bunch of BS."

At another point, she told Exxon lawyer Chris King, "It's just a dumb question."

Witnesses waiting to testify were kept outside the courtroom. But McCooey told one witness, Michael J. Harris of Los Angeles, that Walker had testified the worth of a corporation doesn't matter in determining whether a verdict is excessive, "and I don't agree with it."

She asked Harris what he thought, and he said he thinks their worth does matter.

"The more they're worth, the more risk they can take?" McCooey asked. "I would agree with that," Harris said.

"What I do probably doesn't matter anyway," she said, because the company has appealed the verdict. "I have to write an order for nothing."

The hearing resumes today.

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