Note: The first item is the Texaco press release announcing the publishing of the findings of the independent investigators hired by Texaco. It is followed by the report itself, at the end of which appears a printed excerpt from the controversial tapes of meetings between Texaco executives.

TEXACO RELEASES FINDINGS OF INDEPENDENT INVESTIGATION RELATED TO RACIAL EPITHETS

FOR RELEASE: MONDAY, NOVEMBER 11, 1996.

WHITE PLAINS, N.Y., Nov. 11 - Texaco Inc. today released the findings of independent investigator Michael Armstrong into taped conversations among four current and former employees of Texaco released last week. Transcripts of the conversations were contained in an affidavit filed by plaintiffs in the Roberts v. Texaco race discrimination lawsuit. [Note: copies of the report and corrected transcript are attached.]

Mr. Armstrong, former Assistant U.S. Attorney for the Southern District of New York, was retained by Texaco to investigate taped conversations and determine whether Texaco officials heard on the tapes uttered racial epithets and destroyed or withheld documents.

The report released today is confined to the issue of racial epithets only. Mr. Armstrong's investigation into the possible destruction or withholding of documents is ongoing.

Peter I. Bijur, Chairman and Chief Executive Officer of Texaco, said, "These preliminary findings merely set the record straight as to the exact words spoken in the conversations, but they do not change the categorically unacceptable context and tone of those conversations. Nor do these findings change at all Texaco's unwavering responsibility and commitment to eradicate discrimination thoroughly from our company, wherever and however it exists.

"We remain unalterably committed to using this agonizing glare of the spotlight as a catalyst to make Texaco a model in creating opportunity and a tolerant workplace for all. Our clear, focused and critical mission is to leave absolutely no doubt that all our people are accorded the equal opportunity, dignified treatment and individual respect to which every woman and man is entitled."

CONTACTS:

K. Peter Maneri 914-253-4181
Chris Gidez 914-253-6170
Jim Swords 914-253-4156

Memorandum To:

Stephen M. Turner
Senior Vice President and General Counsel Texaco, Inc.

From:

Michael Armstrong
Kirkpatrick & Lockhart, LLP New York, New York

Date: November 11, 1996

Re: INTERIM REPORT OF INDEPENDENT COUNSEL

INTRODUCTION

On Friday, November 1, 1996, I was retained by Texaco as Independent Counsel to investigation allegations made in an affidavit filed by Plaintiffs on October 28, 1996 in the Roberts vs. Texaco race discrimination lawsuit. Attached to Plaintiffs' affidavit was a 9 page transcript purporting to contain excerpts from taped conversations surreptitiously recorded by Texaco finance department manager Richard Lundwall during conversations between Lundwall and Texaco finance department officials. I was retained to ascertain the truth or falsity of allegations in the taped transcript excerpts that Texaco officials (1) uttered racial epithets and (2) obstructed the document discovery process in the Roberts litigation.

To assist in this project, I retained Decision Strategies International, Inc., an investigative firm headed by Bart M. Schwartz, former Chief of the Criminal Division in the United States Attorney's office for the Southern District of New York.

We have been able to reach certain conclusions with respect to the first of these assignments. You have asked me to report those conclusions in this interim report.

The transcript filed by Plaintiffs contains four instances of remarks with apparent racial connotations: (1) a statement characterizing African-Americans as "fucking niggers"; (2) a statement, "you know how black jelly beans agree***", followed by other remarks relating to jelly beans; (3) references to an event at which African-Americans allegedly sat through the playing of the United States National Anthem while standing for a song presented as the Black National Anthem; and (4) references to Hanukkah and Kwanzaa.

Public attention has focused almost exclusively on the first two of these transcript references. With respect to these two references, our investigation concludes: (1) that the words "fucking niggers" are not on the tape and (2) that the references to jelly beans are in some respects inaccurately recorded on Plaintiffs' transcripts and, in context, do not constitute a racial slur.

1. Analysis of the Tapes

On Tuesday, November 5, 1996, Texaco was provided with copies of the tapes from which the excerpts in the Plaintiffs' transcript were derived. An additional version of the tapes was provided on Wednesday, November 6. We concluded that the audibility of each of these copies was unsatisfactory and undertook to obtain high quality copies which could be professionally enhanced for maximum audibility.

On Thursday, November 7, we were given access by the Federal Bureau of Investigation to the original microcassettes, which the Government had obtained from the Plaintiffs. We retained Paul Ginsburg, President of Professional Audio Laboratories, Inc., who, in the presence of a Special Agent form the Federal Bureau of Investigation at the FBI's offices in New Rochelle, New York, made a complete digital copy of the tapes from the original. This digital copy was processed by Mr. Ginsburg, who is a court-qualified expert in the enhancement, forensic authentication and transcription of electronic tape recorded evidence. Mr. Ginsburg is well known in the area of tape recording enhancement. He has been retained, at various times, by many Federal investigative agencies, the U.S. State Department, the U.S. Senate Special Committee on Investigations, as well as agencies in the intelligence community. Mr. Ginsburg was employed by the U.S. Department of Justice to enhance the Branch Davidian FBI tapes. Mr. Ginsburg has also been a consultant with all three major broadcasting networks and 25 news gathering agencies and studios.

Mr. Ginsburg enhanced the recordings by using state of the art digital processing techniques, including slowing the tape and electronically restoring pitch to normal so as to improve the audibility and removing ambient sounds that tended to mask the conversations and interfere with the clarity of the recordings. These techniques in no way altered the content of the tapes. The enhanced tapes were transcribed by a team of stenographers, and portions were reviewed by Mr. Ginsburg. Copies of the relevant portions of the tapes, together with corresponding passages from the transcript filed by Plaintiffs, are annexed hereto as Exhibit A.

2. The Specific Racial Epithet

The most inflammatory allegation in this investigation is the charge that a Texaco executive, an a business meeting, used the epithet "fucking niggers." The transcript of the taped conversation filed with Plaintiffs' motion contains the following quote: "I'm still having trouble with Hanukkah. Now we have Kwanzaa...(laughter by FIRST). Fucking niggers they shitted all over us with this." (Plaintiffs' Transcript, p.8).

The enhanced tapes reveal that Plaintiffs' transcript is in error. The actual words on the tape are: "*** I'm still struggling with Hanukkah and now we have Kwanzaa, I mean I lost Christmas, poor St. Nicholas, they shitted all over his beard."

There is no use of the words "nigger" or "niggers" anywhere else in the tapes.

3. References to Jelly Beans

Plaintiffs' transcript includes the following segment:

ULRICH: (Inaud.) ... I agree. This diversity thing. You know how black jelly beans agree ....

LUNDWALL: That's funny. All the black jelly beans seem to be glued to the bottom of the bag.

ULRICH: You can't have just we and them. You can't just have black jelly beans and other jelly beans. It doesn't work.

LUNDWALL: Yeah. But they're perpetuating the black jelly beans. (Plaintiffs' Transcript, p.7).

This passage has been publicly characterized as a derogatory reference to African-Americans as "black jelly beans". The underlined phrase, "you know how black jelly beans agree***" seems to support an interpretation that the speaker was lumping African-Americans together and gratuitously characterizing them as "jelly beans".

Mr. Ulrich, through his attorney Jonathan Rosner, a former Assistant United States Attorney in the Southern District of New York, has stated to us that the reference on the tape was not in any way intended to be a racial slur. Mr. Rosner points out that the term jelly bean is not, in and of itself, known to be a pejorative term, and Mr. Ulrich did not have any reason to think that the reference carried any such connotations. Mr. Rosner states that Mr. Ulrich's reference to jelly beans was prompted by a speech given by an African-American at a conference at which the speaker, advocating integration and opposing separatist philosophies, illustrated his remarks by analogizing to jars of jelly beans of many colors.

While Mr. Ulrich could not remember the name of the speaker to whom he referred, we have identified Doctor R. Roosevelt Thomas, Jr. as the probable source of the remarks alluded to by Mr. Ulrich. Dr. Thomas is the founder and former President of the American Institute for Managing Diversity, located at Morehouse College, Atlanta, Georgia. He is currently President of R. Thomas & Associates. Dr. Thomas confirms that in his speeches he customarily uses a jelly bean analogy, similar to the one described by Mr. Ulrich, as a means of explaining the concept of diversity. In his lecture, Dr. Thomas customarily uses slide illustrations of different colored jelly beans in jars to illustrate his points. Dr. Thomas remembers using this analogy during a speech at which Texaco officials were, to his knowledge, in attendance.

Dr. Thomas has also published articles containing this analogy. For example, in an article written by Dr. Thomas entitled "Managing Diversity: Utilizing the Talents Of The New Work Force" contained in The Portable MBA in Management by Allan R. Cohen, published in 1993, Dr. Thomas discusses his jelly bean analogy and reproduces his illustrative slides. Attached as Exhibit B are excerpts from Dr. Thomas's article and copies of his slides, as reproduced in this article. Dr. Thomas also produced a video for American Media Inc. located in Des Moines, Iowa, entitled "Dynamics of Diversity" in which he employed the jelly bean analogy.

The enhanced tape supports Mr. Rosner's interpretation of his client's remarks. While the Plaintiffs' transcript refers to a supposed statement that black jelly beans "agree," the enhanced tape reveals that the phrase in question is; "I*** I've heard that diversity thing. We don't have black jelly beans or green ***" After an interruption, Mr. Ulrich continues "*** you can't, you can't, you can't just have 'we' and 'them'. You can't have black jelly beans and other jelly beans. *** it doesn't work."

There is nothing inherently derogatory in any of the references to jelly beans on the enhanced tape. The remark by Mr. Lundwall, who was taping the conversation, to black jelly beans being "glued to the bottom of the bag" is an ambiguous reference, but may be a reference to inequities imposed upon African-Americans by society, rather than a criticism. Mr. Lundwall has not made himself available for interview.

4. References to the National Anthem, Kwanzaa and Hanukkah

The remaining two categories of references relating to racial subjects do not appear to be different, in relevant part, in the enhanced tapes as opposed to the Plaintiffs' transcripts.

CONCLUSION

We conclude, on the basis of professionally enhanced copies of the tape recordings at issue, that the words "fucking niggers" were not spoken during the recorded conversations of Texaco executives, and the references to "jelly beans" do not appear to us to have been intended as a racial slur.

EXHIBIT A

INDEPENDENT COUNSEL (MICHAEL ARMSTRONG) TRANSCRIPT

NOVEMBER 10, 1996

Note: In the following excerpt, 'MV' means 'Male Voice'.

* * *

Ulrich: ... the pendulum's swinging the other way guys I hate to tell you.

LUNDWALL: They're perpetuating an us/them atmosphere. Las week last Friday - -

MV: -- yeah you told me yeah but --

(unintelligible brief discussion, several voices) .. yeah... I say that group I said.... and outside...

LUNDWALL: Imagine that's when I said to you, you want a frag grenade you know duck I'm going to throw one, well that's what I was alluding to, but the point is, now that's not bad in itself, but, it does perpetuate, us/them --

MV: Yeah

LUNDWALL: (continuing) -- and if you're trying to get away from and get to the we, you can't do that kind of stuff.

ULRICH: I.. .. I've heard that diversity thing, we don't have black jelly beans or green...

LUNDWALL: ...that's funny, all the black jelly beans seem to be glued to the bottom of the bag (laughing).

ULRICH: ... I gonna say you can't, you can't, you can't just have "we" and "them." You can't have black jelly beans and other jelly beans.

LUNDWALL: Yeah.

ULRICH: It doesn't work.

LUNDWALL: But they're perpetuating the black jelly bean - - * * *

LUNDWALL: I'm wearing all I know is during April which is national Oden month in Norway, I'm wearing my Viking hat, and I don't want anybody to say anything like hmm my little horns, because I'm celebrating my heritage.

Meade: And I think Friday was national clean up your desk day, I wish I knew that, I would've posted the sign on a couple of people in the trading room...

Ulrich: ... I've seen the end...

(talking over each other inaudible)

Ulrich: ...I'm not going to the end this year. I refuse to go --

Meade: -- When they came in with these African things --

Ulrich: I refuse to go to that. I went last year out of curiosity I'm not .. ...

Lundwall: I walked out during, I'm sorry, when they did their version, when they when they --

MV: -- of the national anthem --

Lundwall: -- when they when they when they sat, during ours, quote, you here listen to me: "ours", as though they're not included, and stood for their modified one (pause) and I won't apologize to nobody for walking out of there. I really would not.... we have two friggin national anthems.

Ulrich: Alright...

(snapping sound) Oop. Sounds like tape off.

MV: come on

MV: You know I'm still struggling --

MV: -- he didn't get a job offer --

Ulrich: -- I'm still struggling with Hanukah and now we have Kwanza, I mean I lost Christmas, poor St. Nicholas, they shitted all over his beard.

(some inaudible conversation, laughter) (Snapping sound. Tape off and on again.)

Laughter and unintelligible conversation.

MV: .... noticed

MV: They just kind of showed up....

MV: Well well why not obviously. ...unintelligible conversation

MV: I had I had I had a....

Lundwall: -- Only seven candles, not eight, that's the only difference.

MV: Yea..got ...the uh

Lundwall: Well it's not a menorah, its three candles...

MV: It looks like a menorah.

Lundwall: there are seven candles, a menorah has eight. There are three representing the three days coming in, then there's the one black candle in the center. The three days, you're supposed to think about what you've done --

Ulrich: -- and that's bigger than the other candles.

Lundwall: The one that where we are and the other red candles are where we're going.

MV: Uh blood.

Lundwall: Only reason I know this my friend's daughter who teaches was ... she was a little bit annoyed shed had to give a class or at least discuss with her 4th or 4th graders, Kwansa, and she was telling me all this.