Continental Oil Co. and two other Texas oil firms pleaded nolo contendere in Houston yesterday to federal criminal charge of overpricing refined oil, and agreed to pay the government more than $3 million in fines, penalties and refunds.
The case marks the first time criminal felony charges have been leveled against an oil company for violating price regulations set by the department of Energy.
The other two firms were Foremost Oil Co. and M&S Petroleum. The felony and misdemeanors were described in a four-count indictment handed down yesterday afternoon by a federal grand jury in Houston.
The indictment charges that Conoco sold refined petroleum to M&A and Foremost in 1973 at prices higher than permitted by the Cost of Living Council, and then submitted falsified reports of the transactions to the Federal Energy Office.
Conoco, in a consent order it signed when its no-contest pleas were entered, agreed to refund $2 million which the government will attempt to pass along to consumers who were overcharged as a result of Conoco's action.
Conoco also agreed to pay a $10,000 fine for the felony charge, $5,000 for the misdemeanor charge, an extraordinary $985,000 penalty resulting from negotiations with the Department of Energy.
Similarly, M&S agreed to pay $10,000 for its felony charge and $40,000 in penalties, and Foremost agreed to pay $5,000 for its misdemeanor violation and $45,000 in penalties.
The investigation began last year after Conoco discovered evidence of possible unlawful sales during its own probe of an internal company matter. The company informed the government that it had discovered that one of its executives, already under investigation for allegedly engineering unauthorized political payments, might also have authorized the sales of oil in excess of price ceilings during the oil shortage.
On Tuesday of this week, former Conoco executive vice president Willard H. Burnap plead no contest to federal charges of authorizing overcharges and was fined $5,000. He agreed to cooperate with the government in a plea-bargaining arrangement. The government agreed not to prosecute Burnap for specific transactions in exchange for his testimony in the corporate case.
This case is part of a huge Department of Energy investigation into compliance by all of the major oil companies with complex set of pricing regulations that grew out of the oil shortages of the early 1970s.
DOE special counsel Paul Bloom, who announced yesterday's action with Attorney General Griffin Bell, has brought or proposed civil actions against several firms for alleged violations of a number of pricing regulations, but this is the first criminal felony indictment.
Although the Conoco case was begun before Bloom's special investigative unit was set up at DOE late last year, DOE was able to provide considerable support to the U.S. attorney on the case. And it was the DOE that negotiated the additional penalty payments by the defendants.
According to Bloom, DOE will shortly announce a claims procedure under which persons or corporations who believe they were overcharged can present and argue their claims for restitution.
M&S and Foremost have agreed to waive any claims for allowing themselves to be overcharged, Bloom said, but jobbers and other users who show that the overcharges were passed on to them by those who compaines will be reimbursed by the government.
"DOE is hopeful," Bloom added, "that this resolution of this investigation will discourage other companies - both major refiners and others - from similar violations of the law."