The Energy Department yesterday filed a $1.1 billion civil suit against Tulsa oil man Robert B. Sutton, claiming he "knowingly and willfully" circumvented crude-oil price controls to reap more than $700 million in allegedly unlawful profits over a five-year period.
The lawsuit is the largest ever filed by the department against an individual, officials said. The government is seeking to recover the amount investigators allege Sutton improperly added to the cost of crude oil as it flowed through the vast pipeline network in the Southwest.
The suit also asks the court to award $400 million in interest payments on the alleged overcharges passed on to consumers. A spokesman for the Energy Department said the government has not determined what it will do with the money if it wins.
Sutton's attorney, Rodney Devilliers Sr., yesterday called the lawsuit "absurd . . . . He didn't violate any pricing regulations."
The suit follows the mostly unsuccessful prosecution of Sutton last summer on charges of criminal fraud, conspiracy and obstruction of justice in transactions involving about 200 million barrels of crude oil. After a month-long trial, U.S. District Court Judge James O. Ellison said the Justice Department had failed to present enough evidence for the case to go to the jury and he dismissed 15 counts of the 17-count indictment against Sutton. The judge let stand a conspiracy count and an obstruction of justice count.
Sutton was tried and convicted on these remaining counts after the jury heard what were identified in court as FBI wiretap recordings in which Sutton asked reputed New Orleans Mafia figure Carlos Marcello to prevent witnesses against Sutton from meeting with federal investigators by having them "picked up" by the New Orleans police and locked "in the slammer."
The obstruction of justice conviction was based on evidence that Sutton had ordered an employe to destroy business records subpoenaed by the Energy Department.
Sutton is appealing both convictions, for which he was sentenced to concurrent five-year prison terms. He could not be reached for comment. Devilliers said, "I just think the fact that they Justice officials got beat in the criminal trial caused them to lose face."
The 29-page civil complaint filed in U.S. District Court in Tulsa also names as defendants four companies allegedly controlled by Sutton. The government claims that from May, 1976, through the end of price controls in January, 1981, Sutton and his companies "engaged in a continuous practice of purchasing volumes of crude oil subject to price controls" and reselling those same volumes at much higher prices after "falsely certifying" records of the transactions.
In 1974 the government created several price categories of crude oil to maintain production incentives and also to control the inflationary spiral set off by the 1973 embargo by producing nations. Under the system, "old" domestic oil was priced at about $5 a barrel, "new" oil carried prices from $10 to $12 a barrel, and exempt and foreign crude sold at world price levels of $14 in 1977 and more than $35 a barrel when controls were lifted.
The suit alleges that by manipulating the Energy Department certification and reporting process, Sutton bought large volumes of cheap "old" oil and resold it as higher priced "new" oil, exempt oil or foreign crude. Financial records show that Sutton was an $8,000-a-year salesman in 1975; after forming BPM Ltd. (Bob's Petroleum Marketing) and other companies, Sutton controlled a $2 billion conglomerate showing profits of $43 million in 1980.
The suit also claims that "in disregard of regulatory requirements," Sutton and his companies "neither maintained the required books and records of their crude oil buying and selling activities nor submitted to DOE the required monthly reports of their reselling activities . . . ."