The chairmen of Phillips Petroleum Co. and Unocal Corp. yesterday called on Congress to tighten tax laws to discourage hostile takeover attempts -- such as those mounted against the two oil companies recently by Mesa Petroleum Co. Chairman T. Boone Pickens Jr.
The two executives called for an end to tax breaks on interest on money borrowed for hostile takeover attempts, limits on the use of so-called "junk bonds" to finance takeover bids, and an excise tax on the proceeds from so-called "greenmail" when a raider extracts a premium from a target company for his stock holding.
In addition, Unocal Chairman Fred C. Hartley, whose company is currently under siege by Pickens, called for a moratorium on hostile takeovers until new regulations can be implemented.
"You're looking at a real live target company -- Unocal," Hartley told the oversight subcommittee of the House Ways and Means Committee, referring to Pickens' ongoing attempt to gain control of Unocal. "The clock is ticking on this kind of climate that can bring about the destruction of a company . . . .
"Let me put it this way -- if the Russians had somehow quietly managed to murder five of the nation's leading oil companies -- and were stalking the rest -- surely I'm certain that Congress would be in an uproar, demanding action. But murder it has been, and murder it may be. And where's the congressional action?" Hartley asked. "You may be not just looking at a target right now -- you may be looking at the next guy to be murdered."
But Pickens, who also testified before the committee, defended his actions as natural parts of a free market system and said they were necessary to discipline inefficient managements. As a result, no change in current law is needed, he said. "I don't understand why you want in any way to impede this process that is going on," he said. "I don't see anybody that is being hurt by it . . . .
"Proposed tax-law changes would be pointlessly punitive," Pickens testified. "Mergers are not motivated by the tax laws or by some kind of quick-profit scheme. They reflect the response of sensible shareholders alert to market changes and problems with management. Mergers are a means by which shareholders exercise the right to run the corporations they rightfully own."
The appearances before the subcommittee by Pickens, Hartley and Phillips Chairman William C. Douce offered the first public confrontation between the maverick Pickens and the top executives of his two most recent targets. In their separate appearances, Pickens and Hartley made particularly sharp attacks on each other, a reflection of the increasingly heated pursuit of Unocal by a group headed by Pickens that owns 13.6 percent of the company's stock.
The battle erupted on another front as well yesterday, when Unocal asked a federal district court in California for an injunction against Pickens' advances on the company. Unocal charged that Pickens and his partners violated federal securities laws by purchasing Unocal stock ostensibly for investment purposes when, in fact, they planned a takeover attempt, according to Unocal.
In testimony before the subcommittee yesterday, Pickens and Hartley took personal swipes at each other, and Pickens complained that Hartley had refused to shake his hand before the hearing. Hartley retorted that he was in a conversation with someone else at the time and didn't want to rudely interrupt that to acknowledge Pickens, whose group is Unocal's largest shareholder.