A federal grand jury today indicted two companies and five present or former officers of them on 84 counts in an alleged $3.8 million conspiracy to overcharge illegally for oil resold in a "daisy chain" transaction.
The indictments, the first in a series expected from a grand jury impaneled eight months ago, are the first major enforcement actions brought by the Energy and Justice departments to crack down on the illegal resale of "old" oil, which goes for about $5.55 a barrel, as "new" oil, which sells for more than $10 a barrel.
After the indictments were handed down and bench warrants issued by U.S. District Court Judge Carl O. Bue, U.S. Attorney J. A. (Tony) Canales told reporters that more pricing indictments could be expected.
In Washington, Lynn Coleman, DOE's general counsel, said, "This tells the oil industry we're serious about seeing the energy laws enforced."
Over the last year, Energy Department officials have estimated that the total amount included in resale abuses ranged from $500 million to more than $2 billion.
The two indicted companies are Uni Oil Inc. of Houston and Ball Marketing Enterprise of Layfayette, La., which together are accused of consipring to sell more than 750,000 barrels of "old" oil at "new" oil prices over a two-year period.
Under DOE regulations, "old" oil is generally that produced from wells drilled before 1973.
The indictments charge that, during 1976, Uni Oil bought more than 607,000 barrels of "old" oil from M and A Petroleum, another Texas firm, at prices ranging from $5.17 to $5.35 per barrel, and resold it for as much as $14.45 a barrel.
The indictments also charge that, during the same period, Ball Marketing Enterprise supplied Uni Oil with approximately 146,000 barrels of "old" oil that Uni Oil resold at up to $12.45 a barrel.
Minutes before the indictments were issued, Albert Alkek, a Texan whose fortune has been estimated at from $150 million to $200 million, pleaded guilty to concealing Uni Oil's pricing arrangement.
After some final-hour trading between Canales and Alkek's attorney, Thomas McDade, Alkek agreed to plead guilty to a lesser charge and receive a lesser sentence in exchange for cooperating with investigators.
McDade, an attorney with Fulbright and Jawarski, made a legal maneuver Tuesday to delay the indictments, according to sources familiar with the case. His client was not formally cited in the indictments, but had been charged separately.
Alkek is a legend in the oil industry, and is said to have controlled more gasoline on some days than any other individual without ownership ties to the major oil companies.
Bue issued bench warrants for the arrest of Uni Oil President Thomas M. [Mick'] Hajecate; his father, Thomas H. Hajecate, the company's secretary-treasurer; Uni Vice President Charles Akin and former vice president James Fisher. Fisher is president of Armada Oil Co. and Armada Petroleum Corp., which bought crude oil from Uni Oil.
A warrant also was issued for Ball Marketing Enterprise President Charles Goss.
The defendants were released after posting $200,000 bond each. None was available for comment. The defendants each face a maximum of 20 years' imprisonment and $25,000 fine for conspiracy to violate the federal Racketeer Influence and Corrupt Organizations statutes. In addition, each could receive up to five years in prison and a $1,000 fine for mail and wire fraud.
The Energy Department's investigation was inherited from the now defunct Federal Energy Administration, which, according to the congressional assessment, had delayed prosecution of alleged reseller violations. Following the 1973-74 Arab oil embargo, the number of reseller companies increased from fewer than 50 to an estimated 450.
Since DOE stepped up its investigative efforts last year, 12 referrals for criminal and civil action have been made to the Justice Department.
One indictment charges that Uni Oil officials and Goss, of Ball Marketing, prepared false domestic crude oil sales certificates to conceal illegal fees paid for "old" oil sold as "new" The indictment says, "The defendants caused a volume of 'old' oil to disappear and/or be converted to 'new' oil, thereby inflating the price of domestic oil paid by the purchaser."
The indictment also alleges that the Uni Oil officers paid an unidentified agent of M and A Petroleum Co. $2.24 million in bribes between December 1975 and July 1977. These alleged bribes were disguised as "options to purchase crude oil" and as an "investment" in a drilling venture, the indictment said.
McDade told reporters afterward that Alkek "did not knowingly receive any incentive" from Uni Oil. "My client is an honorable man whose word is his bond," McDade said. Alkel avoided reporters by leaving the courthouse through a back door.