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SEC v. TESORO PETROLEUM CORPORATION United States District Court. District of Columbia. No. 80-2961. November 20) 1980.

Litigation Release No. 9236. Release in full text.
The Securities and Exchange Comm.ission today announced the filing of a civil injunctive action in the United States District Court for the District of Columbia seeking to enjoin Tesoro Petroleum Corporation ("Tesoro") from further violations of Sections 13(a) (reporting) and 34(a) (proxy) of the Securities Exchange Act of 1934 ("EXchange Act") and rules thereunder. The Commission's complaint alleged that since at least the time Tesoro became a public company, Defendant Tesoro and others have engaged in a course of business in connection with acquiring material foreign assets, attempt. ing to acquire material foreign assets, or conducting foreign business whereby they made or caused to be made sub. stantial payments to "finders" and "consultants," where such payments. with respect to mulu-million dollar con. tracts, were disproportionate to the business obtained or the services rendered, wexe not usual or customary and were made under circUMstances such that Tesoro was and continues to be unable to account for or $8tWy itself as to the final dispOsition of such corporate fluids. In certain instances involving payments made in connection with foreign business activities, the circumstances of the pay· meats indicate that the funds, in Whole or in part, may have been directly or indirectly transferred to foreign govern· ment officials or political leaders. In another instance a significant sum was returned by such a recipient to Tesoro during the pendency of an internal Tesoro investigation of' questionable or improper payments. Further. TesolO knew that such course of business exposed and continues to expose material assets of the company te a significant and continuing risk of loss. Tesoro has failed to make timely and adequate disclosure of this course of business, the urw::countabllity of such payments, and the particular risk that such course of business poses to material assets and revenues of the company. Without admitting or denying the allegations contained in the Commission's complaint, Defendant Tesoro consented to the entry of a Final Judgment of Permanent Injunction enjoining the company from future violations of Sections 13(a) and 14{a) of the Exchange Act and rules thereunder. In its consent to the entry of the Final Judgment,· Tesoro undertook, within sixty (60) days of the entry of the Final Judgment in this matter. to appoint as a new director a person satisfactory to the Commission. Such . director will be nOminated and recommended for election at Tesoro's next annual meeting for a tenn of three years. While a director, such person shall also serve as chainnan of the audit committee of Tesoro's board of directors. The audit committee will. fonnulate and implement poliCies and procedures designed to prevent occurrence of matters of the nature alleged in the complaint and satisfy itself as to whether" any fees hereafier paid in connection with eonducting foreign business were paid directly or indirectly to any government official or employee.

thereof for purposes of influencing an act of such officis1s or parties or inducing them to use their influence to affect a foreign govemmcnt act or decision. Further, Tesoro' undertook to keep accurate boob and records and to file with the Commission a current report on Form 8-K which will attach thereto a copy of the executed Consent, Final . Judgment and Complaint in this matter. UNITED STATES DISTRICT COURT FOR THE DlSTRICT OF COLUMBIA

ments, or offers of payments, directly or indirectly, to any foreign official or any fore.lgn political party or leader

Additionally,

Tesoro undertook

not to make pay.

SECURITms AND EXCHANGE COMMISSION, SOONorth Capitol Street Washington, D. C. 20549 PJaintiff,

v.
TESORO PETROLEUM CORPORATION Defendant.

COMPLAlNT FOR PERMANENT INJUNCTION AND FOR OTHER EQUITABLE RELIEF Nov. 20, 1980 The Plaintiff Securities and Exchange Commission ("Commission") alleges that: TESORO PETROLEUM CORPORA· and others have engaged, are engaged and are about to engage in acts, practices and courses of business which constitute and will constitute violations of Sections 13(a) and 14(8) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. 7Sm(a) ap.d 7Su(a)] and Rules 12b-20, 13a·1, 13a-11, 13a·13 and 14a·9 thereunder [17 C.F.R. 240.+2b·20. 240. 138·1. 240.13&-11, 240.13a-13 and 240.14a-9}.
TION ("TESORO") 2. Defendant may. unless restrained and enjoined, . continue to engage in the acts, practices and courses of business set forth in this Complaint and in acts and practices of similar purport and object.

1.

Defendant

on and gas in Algeria, Angola, Antigua, Argentina, Bolivia, Brazil, Canada, Columbia, Ecuador, Egypt, France, Ghana, Greece, Indonesia, India, Iran, Iraq, Italy, Ivory Coast, Japan, tiberia, Malaysia, MexiCO, Netherlands Netherlands Antilles, Nigeria, Norway, Peoples' Republic of China, Portugal, Romania, Singapore, Spain, Taiwan, Trinidad and Tobago, United Kingdom, U.S.s.R., Venezuela and West Germany. It also refines, transports and markets petroleum products, manufactures and leases oil field service equipment and operates on and gas drDling rigs. TESORO's . securities are registered pun"iant to Section 12(b) of the Exclumge Act [IS U.S.C. 781(b)1. and its common stock is traded on the New York and Pacific stock exchanges. COUNT I Section 13(a) of the Exchange Act [15 U.S.C. 78m· (a)] and Rules l2b-20. 13a~1, iss-n and 13a·13 [17 C.F.R. 240.12b·20, 240.13a·1, 240.13a-l1 and 240.13a-13] thereUnder. 8. Paragraphs 1 through 7 are hereby realleged and Incerporated herein by reference. 9. From about 1968 to the date hereof. TESORO and others, singly and in concert, directly and indirectly. and aiding and abetting each other, filed and caused to be filed with the Commission certain reports of TESORO including annual reports on Form 10-X, periodic repgrts on Form IQ.Q and current reports on FODll S-l{, which reports were and are mateda1ly false and· misleading in that they faUed among other things, to disclose the activities de· scribed in Paragraphs 10.through 21 below. company, Defendant TESORO and others have engaged in a course of business in connection with acqUiring material foreign assets, attempting to acquire material foreign assets, or conducting foreign business whereby they made or caused to be made substantial payments to "finders" and "consultants," where such payments, with respect to multi· million dollar contracts, were disproportionate to the business obtained Or the servi~ rendered. were not usual Of customary and were made under circumstances such that TESORO was and continues to be unable to account for or satisfy itself as to the final disposition of sueh corporate funds. In certain instances involving payments made in connection with foreign business acthities. the circumstances of the payments indicate that the funds, in whole or in part, may have been directly or indirectly transferred to foreign government officials or political leaders. In another instance a significant sum was returned by such a recipient to TESORO during the pendency of an internal TESORO investigation of questionable or improper payments.
10. Since at lout the time TESORO became a public

3. 'The Commission, pursuant to the authority granted to it by Sections 13(a), 14(a) and 23(a) of the Exchange Act [15 U.s.C. 78m(a), ?8n(a) and 78w(a)}. has promulgated Rules 12b·20, 13a-1, 13a-11 , 13a-13 and 14a-9 [17 C.P.R. 240.12b·20. 240.13a·l. 240.13a·11, 240.13a-13 and 240.14a-9) and the substance of said rules were in effect at all times relevant herein and are still in effect. JURISDICTION AND VENUE 4. The Cornmisslon brings this action pursuant to Sections 21(d) and (e) of the Exchange Act [15 U.S.C. 78u(d) and (e)], to restrain and enjoin Defendant TESORO from engaging in such acts, practices and courses of business, and to obtain certain ancillary relief,
to Sections 2I(e) and 27 of the Exchange Act (15 U.s.C.

5. This Court has jurisdiction of' this action pUIlIuant .

7Su(e) and 7Baa] .

6. Certain of the acts, praotices and courses of business and transactions alleged herein have occurred within the District of Columbia. THE DEFENDANT TESORO, a Delaware corporation at 8700 Tesoro Drive. San Antonio, Texas, is an integrated natural resources company which has since 1964 engaged in or endeavored to engage in the exploration, development, prcduction, purchase and sale of
with headquarters

7.

Defendant

Further, TESORO knew that such course of business exposed and continues to expose material assets of the company to a signiflCant and contipuing risk of loss. TESORO has failed to make timely and adequate disclosure of this course of business, the unaccountability of such payments, and the particular risk that such course of business poses to material assets and revenues of the company.
11. M part of such conduct, Defendant TESORO (1) made and kept books, records and accounts which failed in reasonable detail to accumtely and fairly reflect the transactions and dispositions of Tesoro's assets; and (2) made transfers and disbursements without adequate records and controls sufficient to insure that such transfers and dis· bursements were actually made for the purposes indicated and without adequate records and controls to document whether the services provided therefor, if any, were commensurate with the amounts paid.

normal TESORO accounting procedures. TESORO's senior accounting finance officers were not informed of the transactions until they were notified by the bank's Vice president that the check had been cashed. West informed the TESORO executive committee of the circumstances of the payment only after it had taken place. The full TES· ORO Board was not infODDed of' the facts or circumstances of the payment until later. 1S. In 1974, in connection with the successful signing of this production sharing contract, TESORO. in addition to the $200,000 direct payment to Morgan, arranged and gual11llteed a $200,000 bank loan to a United States entity controlled by Morgan as additional payment for Morgan's "consulting services," The note became past due in Decembet 1977 and subsequently TESORO, under its guarantee, paid the note plus 560,500 in interest when Morgan defaulted on the note, 16. TESORO accounted for this payment as. a loan guarantee. However, within at least three months of the loan, West doubted. very much that Morgan would ever repay the note and instIUcted Tesoro's accounting personnel to establish a reserve for the note on TESORO's
books,

fendant TESORO through the participation of the Chairman of its Board, Robert V. West ("West") has caused payments and loans totalling approximately $460,500 to be made to or on behalf of entities associated with James L. Morgan ("Morgan"), a '''finder/consultant'' who asslsted TESORO In obtaining certain foreign oil and gas eoncessions from a foreign government. lhese payments were disproportionate to the business obtained or the services rendered. were not usual or customary, and were made under circumstances indicatlng that the funds, in whole· or in part, may have been transferred directly or indirectly to foreign government officials. TESORO was and continues to be unable to account for or satiSfy itself as to the final disposition of such corporate funds. 13. Of the $460,500 paid by TESORO in connection with its successful signing of a production sharing contract with a foreign government in 1974, $200,000 in cash was

12.

.As part of said conduct, since at least 1974 De-

paid to Morgan when West delivered to Morgan, and im· mediately thereafter assisted Morgan in cashing, a TESORO check payable to a foreign entity in which Mo{gatl was a partner. After the check was cashed, tile $200,000 in cash was delivered by Morgan to Morgan's home where an official of the national oil company of the country involved was waiting. West accompanied Morgan to Morgan's home and met with the offiCial of the national oil company. Morgan had nreviously requested that West bring the check for Morgan on a date to coinCide with tile visit of the official of the national oil company. 14. As a further part of said conduct, West, in person· ally arranging for the drafting of the check and for the bank to have sufficient money on hand to eash it, departed from

17. As further part of said conduct between December 1973 and September 1974. TESORO paid $120,000 to a consultant in connection with. an application to do business in another foreign countty. and in connection with subsequent applications by TESORO to do business in that country and a refineIy joint venture. These payments, made pUlSllant to an agreement between the consultant and TESORO w~h provided that the consultant would be paid $10,000 monthly for one year, were disproportionate to the business obtained or the' services rendered. were not usual or customary, and were made under eireumstanees indicating that the funds. in whole or in part. may have been passed on to government officials. TESORO was and continues to be unable to account for or satisfy itself as to the final disposition of such corporate funds.
·18. On December 6, 1973, during the period when TESORO's application to do business was pending, TESORO conveyed $30,000 to a bank account of the consultant at a United States bank as payment for the first three months of the agreement referred to in plll11graph 17 above. In January 1974. just prior to the time that the consultant informed West that TESORO would soon be notlfted that it had qualified to bid on exploration areas, the consultant paid a director of the national on company $20.000 via two $10,000 checks drawn on the same U.S. bank account to whicll. TESORO deposited the consultant's ,

fees. In late March, while TESORO's application to do business was still pending, the consultant paid an additional $30,000 to the director of the national oil company. The check was again drawn on the same U.S. bank account in which TESORO had deposited the fees. As of Match 1974, the consultant had transferred to a director ofthe,natioruU oil company an amount equivalent to all the money paid the consultant by TESORO at that time. 19. In May 1974, shortly after a TESORO application to purchase oil was denied by the national ,,'iii. company, West informed the consultant that TESORO desired not to renew his consulting contract. In June 1974, the consultant told West that he had retained only a percent of the money paid him and that the balance had been paid to his contacts. TESORO knew that the consultant had contacts which included many top officials of the government involved. TESORO continued to make the monthly . payments under the initial contract until it expired in September 1974. The consultant did not perfonn any substantial services for TESORO dUring the remaining period of the contract. 20. As a further part of the conduct described in paragraphs 10 and 11 above, TESORO has in connection with the acquisition of material foreign assets, made substantial payments over three years to a foreign consultant which payments represented the substantial majority of TESORO's entire cost of IIcquiring the assets. The consultant primarily provided services in connection with the successful negotiation of an agreement with II foreign government with whose officials he had direct ac~. The agreement subsequently enabled TESORO to obtain an interest in certain material foreign assets. The payments to the consultant were made without benefit of II written contract, and in a. manner designed to conceal the transaction through multiple bank transfers tenninating in II deposit in II Swiss bank account of a Liechtenstein corporation. TESORO's independent auditors questioned the disposition of such payments and whether government officials were recipients. Nevertheless, neither TESORO nOI the independent auditors were fully able to satisfy themselves as to the final disposition of such funds.
21. TESORO knew and knows that the circumstances of the payments described in paragraph 20 above exposed and continue to expose material assets of the company to' a significant and continuing risk of loss. In the hope of preventing such an occurrence, TESORO has attempted to conceal and maintain the secrecy of these payments.

poses to material assets and revenues of the company. Such disclosures as have been made were made only after the Commission commenced its investigation, and even such disclosures were inadequate with respect to the matters described in paragraphs 12 to 16 above, and wholly omitted to disclose the matters in paragraphs 17 to 21 above.
has violated, is violating and unless restrained and enjoined

23.

By reason of the foregoing, Defendant TESORO

may in the futufe violate Seetion 13(a) [IS U.S.C. 78m(a)] of the Exchange .Act and Rules 12b.20, 13a-l, 13a-11 and 13a·13 [17 C.F.R. 240.12b·20, 240.13a-11 and 24O.13a13] thereunder. COUNT II Section 14(a) of the Exchange Act [IS U.S.C. 78n(a)] and Rule 14a-9 [17 C.F.R. 240.14a-9] thereunder.

24. Paragraphs 1 through 7 and 10 through 21 are hereby realleged and incoxporated herein by reference.

From about 1969 and continuing to the date Defendant TESORO and others. singly and in directly and indirectly, and aiding and abetting one have filed and caused to be filed with the Com· proxy statements, foans of proxy, notices of meetings, and other commun!eations in connection with annual or other meetings of shareholders of TESORO, and solicited proxies from shareholders of TESORO by means of such proxy statements in violation of Section 14(a) of the Exchange Act (15 U.S.C. 78n(a:)] and Rule 14a-9 [17 C.P.R. 240.141-9] thereunder, in that such proxy statements were materially false and misleading and failed to state mater.lal facts necessary in order to make the statements made therein not misleading, in that, among other things, these proxy statements failed to disclose the activi· ties detailed in Paragraphs 10 through 21 hereinabove. 26. By reason of the foregoing, TESORO has violated, is violating and unless restrained and enjoined may in the

25. hereof, concert, another mission

future violate Section 14(a) of the Exchange Act [15 U.s.C. 78n(a)] and Rule 14a-9 [16 C.F.R 240.14a-9] thereunder. WHEREFORE, Plaintiff Commission respectfully prays and demands: . 1. A pennanent injunction restraining and enjoining Defendant TESORO, its officers, agents. servants, em· ployees and attorneys, and each of them, and those persons in active concert or participation with them, from violating, directly or indirectly, or aiding and abetting the violation of, Section 1.3(a) of the Exchange Act [15 U.S.C. 7Sm(a)] and Rules 121>-20, 13a-l, 13a-9 and 13a-11 II7 C.F.R.

22. TESORO failed to make timely and adequate disclosures of the course of business described in paragraphs 10 through 21 above, the unaccountability of such pay. ments, and the particular risks that such course of business

240.l2b-20, 240.13a-1, 240. 13a-9 and 240.13all] promulgated thereunder, by, directly or indirectly. failing to file required reports or by filing or aiding and abetting the filing with the Commission of annual. periodic, current or other reports on behalf of TESORO Or any of its affiliates or subsidiaries or any other entity that are materially false and misleading or fail to disclose material information required to be disclosed. 2. A permanent injunction restraining and enjoining Defendant TESORO its officers, agents, servants, employees and attorneys, and each of them, and those persons in active concert or participation with them, from violating, directly or lndirectly, or aiding and abetting the violation of, Section l4(a) of the Exchange Act [IS U.s.c. 78n(a}J and Rule 14a-9 [17 C.F.R. 240.14a-9] thereunder, by directly or indirectly. using the mails or means and instrumentalities of interstate commerce to file or aid and abet the filing with the Commission of definitive copies of proxy statements, or to solicit proxies from shareholders of TESORO, any of its affiliates or subsidiaries, or any other entity, when such proxy statements are materially false and
mislea~g.

satisfy itself whether any finders. consultants or other fees similar to those described in this Complaint, hereafter paid in connection with the acqulsition or disposition of foreign assets or the conduct of foteign business or in connection with any attempt to engage in such activities, were paid or transferred, directly or indirectly. to any foreign government officials or employees, and to make appropriate disclosute of such matters under the federal securities laws as required. 8. An order requiring Defendant TESORO to update on me with the Com· mission with respect to the matters alleged in this Complaint, so that such reports fully comply with the federal securities laws.
and amend its reports currently

AND, for such further relief as this Court deems appropriate under the circumstances. Respectfully subnlitted, GllIY N. Bundick

3. An qrder requiring Defendant TESORO to adopt poliCies and procedures intended to prevent recurrence of matters of the nature alleged in this Complaint. 4. An order prohibiting Defendant TESORO from making any payments, directly or incUrectly I to any foreign . government officials or politioalleaders in connection 'With the acquisition or disposition of any assets or the conduct of any foreign business.
An order requiring Defendant TESORO to make and keep books, records and accounts, which in reasonable S.

Paul A. FisCher

Robert F. Adams Jetry A. Isenberg Attorneys for 'Plaintiff SECURITIES AND EXCHANGE 500 North Capitol Sueet 'Washington, D.C. 20549 Telephone: (202) 272-2338 DATED~11/20/80 Washington, D.C. UNITIID STATES DISTRICT COURT FOR TIlE DISTRICT OF COLUMBIA SECURITIES AND EXCHANGE COMMISSION, Plainilif. COMMISSION .

detail, accurately and fairly reflect the transac:tions and dispositions of TESORO's assets. 6. An order tequiring Defendant TESORO to disclose in a Form 8-K filed with the Commission the amount and

circumstances of alI material ''finders,'' "consultants" or other fees similar to those descn"bed in this complaint, hereafter paid directly or indirectly to any person or entity in connection with the acquisition or disposition of foreign. assets or the conduct of foreign business or in connection with any attempt to engage in such activities; provided, however, that all finders and consultants fees similar to those described in the complaint equal to or in excess of $100,000, singly or in the aggregate, 'Wi1hin a three year period, shall be disclosed regardless of the materiality of such fee. 7. An order requiring Defendant TESORO to adopt policies and procedures intended to enable TESORO to

v.
TESORO PETROLEUM CORPORATION, Defendant. CONSENT AND UNDERTAKING LEUM CORPORATION OF TESORO PETRO.

James F. Davey, Oerk 1. Defendant Tesoro Petroleum Corporation ("Tesoro") admits the jurisdiction of this Court over it and over the subject matter of this action and further admits to the service upon it of Plaintiff Seourities and Exchange Commission's ("Commission") Complaint for Pennanent Injunction ("Complaint"). and waives the filing of an Answer. 2. Tesoro, without admitting or denying any of the allegations in the Complaint. except to juri&diction. to which it admits, hereby consents to the entry of the Final Judgment of Permanent Injunction ("Final Judgment") in the form annexed hereto, enjoining it from \'iolating Sections 13(a) and 14(a) of the Securities Exchange Act of 1934 [15 U.S.C. 7Bm(a) and 7Bn(a)] and Rules 12-20, 13a-l, 13a·11 , 13a-13 and 14a-9 thereunder [17 C.F.R. 240.12b-20, 240.13a-1, 240.13a-11, 240.13a-13 and 240.14a·9] . 3. This Consent and Undertaking of Tesoro ("Consent") is executed, and the Final Judgment in:the form ' annexed hereto is entered without trial, argument or adjudication of any issue of fact or law. Tesoro hereby waives the entry of findings of fact and conclusions onaw. 4. Tesoro waives any right it may have to appeal from the Final Judgment in the form annexed hereto.
S. Tesoro enters into this Consent voluntarily. and no promise or threat of any kind whatsoever has been made by the Commission or any members of the staff to induce Tesoro to enter into this Consent.

in order to assist Tesoro in obtaining

Ot

retaining business.

8. Tesoro undertakes to make and keep books, records and accounts, which in reasonable detan, accurately and fairly reflect the transactions regarding disposition of Tesoro's assets.

the

9. Tesoro undertakes that following the entry of the Final Judgment in this matter it will promptly file with the Commission a current report on Form g·K which will .attach thereto a copy of the executed Consent, Final Judgment and Complaint in this matter. 10. Tesoro undertakes to disclose in a Form 8·K filed with the Commission the amount and circumstances of all material "finders," "consultants" or other fees simiIarto those described in the complaint, hereafter paid directly or indirectly to any person Or entity in connection with the acquisition or disposition of foreign assets or the conduct of foreign business or in connection with any attempt to engage in such activities; provided, however, that all finders and oonsultants fees, similar to those described in the complaint, which are equal to or in excess of $100,000. to any finder or oonsultant, singly Or in the aggregate, within a three year period, shall be disclosed regardless of the materiality of such fees. 11. Tesoro represents that the audit committee of its board of directors is comprised of (1) Elmo R. Zumwalt, Jr.; and (2) Jmng Kristol. 12. Tesoro undertakes that its board of directors shall, within sixty (60) days of entry of the Final .Judgment in this matter, elect as a director a person who shall have been proposed by Tesoro and who is satisfactory to the Commission. Such director shall not be a present or fonner member of Tesoro's management and shall not have, or have had in the past, any business relationship with Tesoro, any of its affiliates or subsidiaries or any business or family relationship with any existing officer or director of Tesoro. 13. Tesoro undertakes to nominate and recommend for election the director elected pursuant to paragraph 12 above to its Board of Directors at Tesoro's next annual meeting. Said director shall be nominated and recommended for a board position having a term of at least three years. 14. Tesoro undertakes that the director elected to its Board of Directors pursuant to paragraphs 12 and 13 above, while a director, shall also serve as the Chairman of its audit committee and will have M1 voting rights with regard to all matters which come before the audit committee.

6. Tesoro agrees that the Finalludgment in the form annexed hereto may be presented by the Commission to the Court for signature and entry without further notice. 7. Tesoro undertakes not to make any payments or offers of payments to any foreign official, as defined in 15 U.S.C. 78dd-l(b), any foreign political party or official thereof, or to any other person, while knowing or having reason to know that all or a portion of such payment will be offered or given, directly or indirectly. to any foreign official or to any foreign political Plll1Y or official thereof, for the purposes of: . (a) influencing any act or decision of such officials or party; or ' (b) inducing such officials or party to use their tnfluence to affect or influence a foreign government act or decision;

15. Tesoro undertakes that in the event that the director appointed and elected pursuant to paragraphs 12 and 13 should cease to be a director or chairman of the audit committee prior to the expiration of said three year period, Tesoro will propose and appoint a replacement who shall be satisfactory to the Commission. Such replacement shall not be a present or fanner member of Tesoro's management and shall not have, or have bad in the past, any business relationship with Tesoro, any of its affiliates or subsidiaries or any business or family relationship with any existing officer or director of Tesoro. Such replacement shall serve until the expiration of said three year period. 16. Tesoro undertakes to direct its audit committee to formulate and implement policies and procedures designed to accomplish the following: a.
b.

Tesoro of any issue, fact, or claim in this action, prOVided, however, that the Final Judgment and this Consent may be introduced in any proceeding, suit or action brought or instituted for the enforcement of the terms and conditions of the Final Judgment.and this Consent. TESORO PETROLEUM Harvey M. Spear, Esq. DaVis & Cox OneSateStreet~ New York, NY 10004Attorney for Defendant Tesoro Petroleum Corporation Dated: November 6, 1980 Washington, D.C. ) ) SS: ) CORPORATION

To prevent occurrence of matters of the nature alleged in the complaint; To allow Tesoro to satisfy itself as to whether any finders, consultants or other fees similar to those described in the complaint, hereafter paid In connection with the acquisition and disposition of foreign assets or the conduct of foreign business or in connection with any attempt to engage in such actiVities, were paid or transferred, directly or indirectly, to any foreign government official or employee; To aid Tesoro in complying with all other of its undertakings herein.

STATE OF Texas COUNTY OF Bexar

c,

On this 13th day of October, 1980. before me personally comes James C. Phelps, who executed the foregOing Consent and Undertaking on behalf of Tesoro Petroleum Corporation, and he being by me duly sworn did depose and say that he is the President of Tesoro Petroleum Corporation and haS been duly and properly authorized and empowered to make:, execute and deliver the foregoing Consent ·and Undertaking on behalf of Tesoro Petroleum Corporation. JANET M. MOORE Notary Public, Dew County, Texas Commission Expires: 7-29-81

17. For a period of three yeatS subsequent to the entry of the Final Judgment in this matter. Tesoro undertakes not to make any changes in its audit committee unless those changes are reported in a Form S.K filed with the Commission. entry of the Final Judgment in this matter, Tesoro undertakes to keep minutes of all meetings of the Audit Committee, which fairly and in reasonable detail reflect the consideration and dispOsition of all matters addressed at such meetings. They shall also reflect any dissenting votes on matters considered by the audit committee and the reasons for such' dissenting votes. 19. Tesoro agrees that this Consent shall be incorporated by reference in, and made part of, the Final Judgment to be entered against Tesoro in this action, with the understanding that nothing in this Consent or in the Final Judgment shall be considered, construed, deemed, or used by anyone in this or in any other action, as an ac1mission by

18. For a period of three years subsequent to the

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SECURITIES AND EXCHANGE COMMISSION, PlaJntiff, v. TESORO PETROLEUM CORPORATION,

Defendant.

FINAL JUDGMENT OF PERMANENT INJUNCTION AGAINST TESORO PETROLEUM CORPORATION November 20,1980 James E. Davey. Clerk Plaintiff Securities and Exchange Commission ("Commission") having med its Complaint for Pennanent Injunction (''Complaint'') and defendant Tesoro Petroleum Corporation ("Tesoro") (1) having appeared and admitted the jurisdiction of the Court over it and over the subject matter of this action, (2) haVing waived making any findings of fact or conclusions of law, (3) before the taking of any testimony and without trial, argument or adjudica. tion of any issue of fact or law hereunder. (4) without admitting or denying the allegations of the Complaint and (5) having consented to the entry of this Fina11udgment of Permanent Injunction Against Tesoro Petroleum Corporation as contained in the Consent and Undertaking of Tesoro Petroleum Corporation annexed hereto and incorporated herein, therefore: IT IS HEREBY ORDERED, CREBDthat: ADJUDGED AND DE-

I. Tesoro, its officers, directors, agents, servants, employees, attorneys-ill.fact, successors, assigns, affiliates and subsidiaries, and each of them, and all persons acting in concert or participation with them, are hereby pennanently restrained and enjOined from violating Section 13(a) of the Securities Exchange Act [lS U.S.C. 7Sm(a») and Rules 12b·20. 13a.I,13a-11 and 13a-13 [17 C.F.R. 240.12b·20, 240. 13a-1, 240.13a-11 and 240.13a.131 tb.~reUDder, by, directly or indirectly J filing or aiding and abetting the filing with the Commission on behalf of Tesoro, any of its affiliates and subsidiaries, or any other issuer, of any Annual, Cutrent or Quarterly Report, which is materially false or misleading or which omits to state a material fact necessary to make the statements made, in the light of the circumstances under whieh they were made, not misleading or which fails to contain infonnation required to be contained on Fonn IO-I(, Fonn 8·K or Fonn lQ.Q, respectively.

n. Tesoro, its officers, directors. agents, servants, employees, attorneys-in·fact. successors, assigns, affiliates and subsidiaries, and each o( th~1 and an persons acting in concert or participation with them, are hereby pennanently restrained and enjoined from violating Section 14{a) of the Securities Exch.ange Act of 1934 [15 U.S.C. 7Sn(a») and Rule 141·9 [17 C.F.R. 240.14a-9] thereunder by, directly or indirectly, maJdng or aiding and abetting the making of any solicitation of proxies of shareholders of Tesoro or any other issuer, by:means of any proxy statement, fonn of proxy notice of meeting or other communication, written or oral, containing any statement which is at the time and in the light of the circumstances under which it is made, false or misleading with respect to any material fact or which omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or ne<:eSsary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading, or making any proxy solicitation in which any person solicited is not timely furnished with a written proxy statement containing the infonnation specified in Schedule 14A [17 C.F.R. 240.14a.101], except where provision of a written proxy statement is not required by applicable law or regulation.
Ill. IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the annexed Consent and Undertaking of Tesoro be, and the same hereby is, incorporated herein with the same force and effect as if fully set forth herein. IV. IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Tesoro shall fully comply with its undertakings as set forth in the Consent and Undertaking of Tesoro incorporated herein by reference.

v. IT IS FUR'IlIER ORDERED, ADJUDGED AND DECREED that this Court retain jurisdiction of this matter for all purposes.
UNITED STATES DISTRICT COURT DATED: November20,1980 Washington, D.C.

CIVIL PROCEEDINGS
MOTION FOR SUMMARY JUDGMENT ENTERED IN THE FUNDPACK, FINAL JUDGMENT ENTERED AGAINST MORRIE SCHACTMAN INC. CASE;

The Commission announced that on November 20 the Honorable June L. Green, U.S. District Judge for the District of Columbia, granted the Commission's motion for summary judgment in SEC v. The Fundpack, Inc. and entered a Final Judgment of Permanent Injunction as to defendant Morrie Schactman. Schactman was a co-defendant with The Fundpack, Inc. (Fundpack), Holding Trust (Trust) and Holdings of U.S. Government Securities, Inc. (Government), a complex of mutual funds in Coral Gables, Florida (the Funds), Fundpack Management, Inc. (Management) (the Funds' former investment adviser) and its two subsidiaries, and 11 of the Funds other former officers and directors, in an amended complaint filed by the Commission on May 10, 1979. Schactman, who resides in Miami, Florida, is presently Assistant to the President of Lodging Investments, Ltd. He was formerly Chief Financial Officer and Secretary-Treasurer of the Funds and of Management and its subsidiaries, and a Director of Management and its subsidiaries and of Trust and Government. The Commission's complaint alleged that Schactman, as well as the other defendants in the action, violated numerous provisions of the antifraud, proxy, reporting, registration and fiduciary obligation provisions of the securities laws. The Final Judgment permanently enjoins Schactman from engaging in conduct violating the antifraud, registration, reporting and proxy provisions of the securities laws. In addition, the Final Judgment enjoins Schactman from serving or acting as an officer, director or investment advisor to any registered investment company and enjoins him from any course of conduct constituting a breach of fiduciary duty involving personal misconduct with respect to any registered investment company for which he may hold such a position. The Final Judgment was entered by the Court immediately following a hearing on the Commission's summary judgment motion. Mr. Schactman was the last remaining defendant in the Commission's action against the Fundpack complex and its officers and directors. All of the other defendants previously settled this action with the Commission by consenting to the entry of Final Orders or Final Judgments of the Court. (SEC v. The Fundpack, Inc., et al., U.S.D.C. D.C., Civil Action No. 79-0859). (LR-9237) CO~PLAINT NAMES TESORO PETROLEUM CORPORATION

The Commission announced on November 20 the filing of a civil injunctive action in the U.S. District Court for the District of Columbia seeking to enjoin Tesoro Petroleum Corporation from further violations of the reporting and proxy provisions of the Securities Exchange Act of 1934 and rules thereunder. The Commission's complaint alleged that since at least the time Tesoro became a public company, Tesoro and others have engaged in a course of business in connection with conducting foreign business whereby they made substantial payments to "finders" and "consultants," where such payments with respect to multi-million dollar contracts were disproportionate to the business obtained or the services rendered, were not usual or customary and were made under circumstances such that Tesoro was and continues to be unable to account for or satisfy itself as to the final disposition of such corporate funds. In certain instances involving payments made in connection with foreign business activities, the circumstances of the payments indicate that the funds, in whole or in part, may have been directly or indirectly .transferred to foreign government officials of political leaders. Further, Tesoro knew that such course of business exposed and continues to expose material assets of the company to a significant and continuing risk of 105s. Tesoro has failed to make timely and adequate disclosure of these matters. Without admitting or denying the allegations contained in the Commission's complaint, Tesoro consented to the entry of a Final Judgment of Permanent Injunction enjoining the company from future violations of Sections 13(a) and 14(a) of the Exchange Act and Rules thereunder. a new director satisfactory to the Commission who shall of the audit corr~ittee of Tesoro's board of directors. Corporation, U.S.D.C. D.C., Civil Action No. 80-2961).

In its consent to the entry of the Final Judgment, Tesoro undertook

to appoint also serve as chairman (SEC v. Tesoro Petroleum (LR-9236)

~EWS DIGEST,

November

21, 1980