Battle of Ideas: Legal Action is Necessary Against Chevron-Texaco to Recoup State Money

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“Ron Menor Image”

”’Hawaii Reporter is running a series of floor speeches from the 2003 Legislative Session in an effort to further debate in the state and make more public the Battle of Ideas that goes on at the state Legislature. This is the floor speech given by Sen. Ron Menor, D-Mililani, on March 31, 2003, during the 2003 Hawaii Legislative session in defense of the state’s investigation into Chevron-Texaco by the state attorney general, which began under Gov. Benjamin Cayetano. Earlier this week, the state attorney general announced it would not pursue a lawsuit against the oil company because “there is no case.””’


Mr. President, I rise to offer some brief remarks in support of Stand. Com. Rep. Nos. 1216 and 1217.

Mr. President, I believe that the testimony received by your Committee on Commerce, Consumer Protection and Housing with respect to these resolutions has made it abundantly clear that legal action against Chevron-Texaco is necessary if the State of Hawaii is to stand any chance of recovering millions of dollars in back taxes that the oil company has apparently failed to pay. During the hearings that the CPH Committee conducted on this issue, the Committee heard from a nationally recognized accounting and tax expert, Professor James E. Wheeler of the University of Michigan and the University of Hawaii, who explained in detail the complex and elaborate tax evasion scheme that Chevron and Texaco may have entered into with their joint venture, Caltex, and the government of Indonesia.

Mr. President, the specifics of this tax evasion scheme are summarized in the resolutions that are before all of you. So in the interest of time, I will not revisit them at this time. However, I would like to point out that according to Professor Wheeler, the state of Hawaii may be owed over $470 million in back taxes. Moreover, I would like to emphasize that it is especially important for Hawaii to proceed with litigation since it appears that the oil company not only avoided paying the state of Hawaii millions of dollars in taxes at prior years, but that the company continues to pursue this practice of tax evasion, according to Professor Wheeler.

Mr. President, there are several compelling reasons why I believe the state should proceed with legal action immediately. First of all, our state faces difficult economic times and we need the millions of dollars that the oil company may owe Hawaii, to fund important programs and services. We also need to stop any tax fraud that may be occurring and start receiving the unpaid taxes that the oil company owes the people of Hawaii. There also exists a likelihood that Hawaii’s consumers overpaid and continue to overpay for gasoline, since the State imports a significant percentage of its crude oil from Indonesia where the oil company is accused of conspiring to purchase crude oil at deliberately inflated prices as part of a tax evasion scheme.

The state also cannot look the other way if laws are being broken, and there is substantial evidence pointing to the oil company’s potential involvement in unlawful activities, including accepting kickbacks, filing false income tax returns, and falsely reporting business transactions. The government also has a basic obligation to enforce the law, not only as a matter of principle, but also in fairness to the honest taxpayers of our State who have to pay more than their share to cover the shortfall of those who do not.

The state must enforce the laws that we have on the books if it wants to maintain the public’s faith in our government institutions. At this time when many Hawaii families are struggling to make ends meet, we cannot let one of the wealthiest companies in Hawaii, and in the world, break our laws with impunity and leave the taxpayers of Hawaii holding the bag.

Finally, I believe that there is much to gain if legal action is successful, and little to lose, since the Chicago-based Winston & Strawn, one of the largest and most highly respected law firms in the nation on tax issues, is willing to take on this case at no cost to the state.

For these reasons, Mr. President, I ask my colleagues in the Senate to vote in favor of these resolutions so that they may serve as a catalyst to initiate a legal process which I think ultimately will benefit the people of Hawaii.

Thank you.

”’Ron Menor is the Democrat Senator representing the Mililani area of Oahu.”’