through these wills. Finally she decided not to leave him
anything, and I remonstrated with her. I didn't think that was
quite fair. I argued that she certainly didn't want to see him
become ill and destitute or anything of that sort. I said, "At
least you should have a provision that in the event that he does
become ill or disabled or prevented from conducting his career, you
would support him in his lifetime." So I wrote a reasonably
generous provision, with lots of elbow room in it, with discretion
to do the appropriate thing, and she -
it
Hicke: She took a blue pencil to that, you were saying.
O'Brien: Yes. The way she wrote it, it sounded like the most beady-eyed
insurance policy draft you've ever read: ". . .in the event he
became totally and permanently disabled from conducting any useful
occupation," or something of the sort. I made arrangements for her
too, to be buried in Arlington Cemetery, which soon after that were
94
needed. Because of the fact that she was a spinster and that her
father had been a naval officer, an admiral in the navy, she was
entitled to be buried in the National Cemetery, and I made
arrangements for that, and promised I'd go with her when the time
came. Instead, I was in England working on the Iranian consortium
when she died.
That was the end of the story, except for the fact that when
the nephew discovered that he was not going to inherit this
tremendous fortune, he went to Foster Dulles, who went to Herman
Phleger, who was the senior partner of Brobeck 1 and the then legal
advisor to the State Department - very eminent lawyer in San
Francisco's history. Mr. Phleger hired the McCutchen firm to see
if they could break Eudora Clover's will.
Hicke: It sounds like you had a formidable array of soldiers drawn around.
O'Brien: Yes. So they conducted an in-depth study of Miss Clover, her
habits, peccadilloes, and considered the prospect of undue
influence, or whatever. But she was far too cunning for them,
because she had left this vast fortune to this nephew's daughters,
in trust until they became thirty or thirty-five. He therefore had
the uphill task of proving that his dearly beloved auntie was out
of her mind because she'd left her money to his children rather
than to him. Besides which, under the California law, if you
successfully attack a will, you are then relegated to the next-to-
the-last will, and so this whole series of wills in which his stock
had been declining made that an absolutely insuperable obstacle.
Hicke: He wouldn't have been that much better off according to the next
will.
O'Brien: No. So I finally had a climactic conference with all the parties
and all the lawyers (including Brent Abel representing the nephew).
I produced all these wills, and that was essentially the end of it.
Hicke: That is an interesting story.
O'Brien: Yes. She was a remarkable woman. Very bright.
Hicke: Did the oil continue to come in all this time?
O'Brien: Yes. The discovery was made by Amerada, which ultimately became
Amerada Hess.
1. Brobeck, Phleger & Harrison,
95
She occasionally used to take a house in Carmel. She had a
big, black limosine, and my wife and I would drive to Carmel and be
her guests over the weekend. But she just was lonesome and lacked
company and interest in her personal equation. That's why if her
nephew had been more attentive and had helped fill her life up, and
shared his own experiences and career in the State Department, he
would have come into a large fortune.
She did have these two young Russians who lived with her. One
of them was Nikita Romanov, with whom I stayed in close touch for a
number of years; we became good friends. He went to the University
of California and became a professor of history, and then married a
very wealthy Texas girl. We corresponded - I've lost track of him
now - we corresponded for years. I would hear from him in
Mozambique or Hong Kong or someplace, and they apparently traveled
very widely.
The other son, who was Andrew Romanov, married a San Francisco
girl, left school. I don't know what became of him. But that was
an interesting sort of episode, because I was fond of Miss Clover,
and she had an interesting life.
Hicke: Yes.
Tubbs Cordage
O'Brien: Anyway, by '51, I guess it was, the cartel grand jury began.
Hicke: Okay. Before we get onto that, I have the names of some of these
other companies. Tubbs Cordage?
O'Brien: Yes. I represented them principally in connection with an
industry-wide suit charging price fixing by all of the major rope
companies in the United States. It was a complaint by the Federal
Trade Commission claiming that the pricing system used by all of
the cordage companies, which was a so-called universal delivered
price system, was a price-fixing agreement implemented through the
cordage association, the National Association of Cordage
Manufacturers .
Tubbs Cordage was a simply wonderful old California company.
Mr. Tubbs had been a contemporary of Senator [Leland] Stanford, and
if my recollection serves me, Mr. Tubbs was one of the original
Stanford trustees and had been invited by Mr. Stanford to
participate in discussions about his idea of forming a university.
96
Tubbs Cordage had an old-fashioned ropewalk here in San
Francisco where they made rope. In my day, in my earliest
association with the company, Henry Nichols was the president, a
delightful, eighteenth-century gentleman. His son, Herman Nichols,
became president of the company subsequently.
In any event, the Federal Trade Commission began this
proceeding, and - well, to make a long story short, we ultimately
won the case. We did an industry price study - a statistical
study - based on the actual invoices of all of these companies.
Their price lists would make it seem as though they were all
selling rope at a single price at a given destination.
In fact, after we had done a price study in which we examined
a representative sample over, say, a six-months' period, of all of
the sales of all of these companies, done with the help of a
statistical operating group, their prices were all over the lot.
Behind the facade of this universal delivered price, it was a very
competitive industry. When you charted the prices of individual
companies for a given product over time, and then you plotted - I
think there were twenty-one companies, defendants in this case -
you plotted all twenty-one companies, the chart looked like a bowl
of spaghetti.
There was no uniform price at all; the prices were up and
down. I was able to demonstrate to Tubbs that their own subsidiary
that presumably was following their pricing practices had different
price schedules with discounts and rebates with customers. They
were all over the lot, sometimes higher and sometimes lower than
the parent company.
So, the trial examiner in the case ultimately concluded that
there was no substance to this charge of price fixing and that
indeed it was a highly competitive business, and that ruling was
ultimately sustained by the commission itself.
Hicke: When you come up against a case like that, how do you go about
deciding how to defend it?
O'Brien: Well, you just explore the facts, you know. And some exploration
of the facts convinced me that this universal price system was
being honored in the breach. There wasn't any such system at all.
In fact, they quoted price lists, but every company individually
told its customer what discount it would give him off that price
list, and it was just done to get the business. Behind those price
lists, there was an intense struggle going on for business. Rope
was beginning to be kind of a dying industry as the plastics came
along - all sorts of plastic materials that began to take away a
significant share of the old-fashioned rope.
97
But it was a fascinating business. In the first place, it was
one of the earliest businesses in the country it goes back to
Plymouth Rope.
Hicke: Oh, it's that old?
O'Brien: Yes. Plymouth Rope Company was the biggest and the oldest,
probably. Tubbs Cordage had been started in the 1850s, and it had
been a very respectable, profitable business over all those years.
It's now gone out of existence. But I did become the general
counsel of the company - rather briefly, because it wasn't long
before I left to go to work for Chevron.
El Portal Mining Company
Hicke: I also brought a few files from El Portal [Mining Company]. Do you
want to do the oil cartel case first, or this?
O'Brien: I don't care. El Portal was just kind of a personal thing. One of
the most famous families around San Francisco for years was the
Drum family - if you just go down the street, there is a Drum
Street - and they were clients of the office. The principal
member of the family was a fellow named Frank Drum, who couldn't
have been a finer, nicer man. I think he was Marshall Madison's
client.
In any event, I had met him at Santa Ana Air Base when we were
both assigned there in early 1942. He was another one of the
ninety-day wonders who was commissioned and sent to Santa Ana, and
we had become good friends, not intimate friends.
Somewhere along in this period, Frank wanted me to help with
the El Portal Mining Company. The El Portal Mining Company, I
guess, had once been a successful mining company. Its affairs at
that time consisted principally of owning the entire town of El
Portal outside of Yosemite, and leasing some of its property to
major mining companies for prospecting. So he had all the problems
of operating a town. He owned all the stores, the residences, the
waterworks, had to run this little, miniature city.
Hicke: But there was no mining operation?
O'Brien: No mining operation.
Hicke: Oh, I see.
98
O'Brien: He just rented the houses, but we had to keep the houses up and all
that kind of business. And there was a little hotel there, and a
gas station, grocery store, and all the streets had to be paved.
It was tough.
Hicke: There was something about a railroad in the files.
O'Brien: I don't remember much about the railroad. There's no doubt that
there was a railroad, because that was the way people got to
Yosemite.
Hicke: Yes, that was the one and it was sold, I guess, eventually.
O'Brien: Yes. Anyway I went on the El Portal board, and its affairs were
pretty largely managed by the American Trust Company in those days.
Frank had a cousin, I think his name was Hugh Drum, who was on the
board, and this bank officer and probably one other person and I
constituted the board. Anyway, it was a small operation.
We ultimately sold the whole town to the National Park
Service, because they were very eager to have someplace outside the
park where they could house some of the park employees, and they
foresaw at that time that some of their major, heavy equipment and
things that cluttered up the park could be stored at El Portal. It
would logistically fit their pistol.
So ultimately we sold the whole town and all of its works.
And I guess we must have sold all of the land, too. I guess that
mining leases came to end, and so on. I think we probably sold the
whole thing, lock, stock, and barrel, to the federal government.
But anyway, I did it really because Frank was a good friend of
mine, and I admired him. He was a very devout Catholic, and very
much interested in the Hanna Home for Boys in Marin County, of
which he was a major benefactor. So, I had clients of that sort.
Like every other lawyer, I accumulated a number of personal
clients that came to me through representing a corporation, you
know. Officers and people involved with the company would
gradually become your personal clients as well.
Hicke: It sounds like you did a little bit of everything - wills, and
real estate, and corporate law, antitrust.
O'Brien: Right. That's the way I liked it. As I told you in an earlier
meeting, that had always been my idea of the way to practice law.
But through this antitrust business, I kept getting more and
more involved in some of Standard's foreign affairs, and then in
1951, when the cartel cases started, and eventually when the civil
99
suit was filed, that became a major preoccupation of mine. For the
first year or so, before jets, I often made two round trips a week
to New York when various things were happening.
Hicke: Those were the days of real lag, not jet lag.
O'Brien: Yes, right. And we had to organize a team to produce the hundreds
of thousands of documents, and we fought and bled over the
production of all Caltex's papers around the world. Bill Martin
and Jerry Doppelt and others had a major role all through that
period in masterminding the development of a structure and orderly
procedures for all of the discovery processes in the lawsuit.
100
V OIL CARTEL CASE: 1952-1968
Inception
Hicke: Maybe we should back up a little bit and start at the beginning.
O'Brien: Yes. Well, the beginning of the case if it were told
chronologically, I guess was that the attorney general of the
United States persuaded [Harry] Truman that a big, national,
vicious attack on the oil companies was the way to win the
presidential election in 1952.
Hicke: The attorney general was?
O'Brien: [J. Howard] McGrath. So he and a fellow - I think his name was
[Stephen] Spingarn, a Federal Trade Commissioner had in their
files a report prepared by the staff of the Federal Trade
Commission, written by a guy whose name escapes me at the moment -
but he's a principal actor in this thing the staff report of the
Federal Trade Commission, entitled "International Oil Cartel."
Hicke: Let's see. I have Stan Barnes, but he was the head of the
Antitrust Division.
O'Brien: No, Barnes was later head of the Antitrust Division in the
Eisenhower Administration. Anyway, his name will occur to me.
He's the fellow who after the war was the principal author of the
antitrust laws that we foisted onto the Japanese as the occupying
power in Japan. I can't think of his name at the moment. 1
He had spent many years studying the international oil
companies, and had prepared a staff report called the
1. The gentleman was named Corwin Edwards.
101
"International Oil Cartel." It rehearsed events in the '20s -
notably in 1928 - '32, and so on, when a number of the
international oil companies, the Anglo-Persian Oil Company, Shell,
the French, and a couple of American companies - Exxon, Gulf and
for some period of time, I think, Texaco - had made a series of
arrangements about the international oil industry. Chevron was
never a part of those arrangements, because it had no interest in
the Middle East in any way.
Anyway, the Federal Trade Commission staff report - never
approved by the Federal Trade Commission itself, but gathering dust
on the shelves there - was suddenly resurrected, dusted off, and
leaked to the press. And before we knew it, a federal grand jury
had been impaneled in Washington, D.C., and all of the so-called
"Seven Sisters" 1 and a lot of other companies, had received
subpoenas duces tecum to produce their documents from the four
corners of the universe before this federal grand jury in
Washington. The newspapers absolutely ridiculed Truman, gave him
the works. Instead of taking his charges about the wicked and
sinister oil companies seriously, they were not only skeptical, but
they were downright amused by the whole thing.
Hicke: The newspapers?
O'Brien: Yes. We kept vast files of clippings. It created, though, a
tremendous furor around the world, because the integrated,
international American oil companies were in many respects the
principal emissaries of the United States government and all of its
works in many countries of the world - the same oil companies, who
were now being branded as common criminals by the United States
government, our own government I
Hicke: That also includes at least one British company, right? And Shell?
O'Brien: Yes. Shell, the Dutch company, which is 60 percent Dutch and 40
percent British, as well as the old Anglo-Persian Oil Company, then
British Petroleum Company. They and the five American companies
and, I guess - I can't remember now - CFP [Compagnie Francaise
des Petroles], the French company, maybe?
Hicke: Oh, we can check that.
O'Brien: Yes. We all got these subpoenas to produce our papers.
Hicke: Did they subpoena companies in other countries?
1. The "Seven Sisters" are Standard Oil of New Jersey (Exxon),
Gulf, Texaco, Socal (now Chevron), Socony Mobil, British Petroleum,
Royal Dutch Shell.
102
O'Brien: Well, yes. They wanted documents from all the countries of the
world - the Far East, the Middle East, et cetera.
Historical Background
[Interview 8: July 7, 1987]##
Hicke: Well, I think today that we're about to the point where we can
start on the early roots of the oil cartel case, which I thought
maybe began in World War II antitrust immunities, but I know there
were interlocking agreements before before World War II, and you
were just now reciting to me a list of files which go back to, I
think, 1926 at least, that you have seen.
O'Brien: Yes.
Hicke: So perhaps you can give us some of the background.
O'Brien: As a matter of fact, the story really begins at the end of World
War I. The Middle East at that time was a British sphere of
influence. The Germans, who had to tried to get a big position
there, and their allies, the Turks, had lost their position in the
Middle East because they were the defeated enemy. The U.S.
Government, commencing with President Woodrow Wilson, tried from
the end of World War I for over ten years before the U.S. went
through the sound barrier and finally got the grudging consent of
the British government to permit any American oil company into
their private domain in the Middle East. And the position of the
American oil companies in the Middle East was first evidenced by
their participation in the Iraq Petroleum Company [IPC] .
Hicke: Did the Red Line Agreement come in here?
O'Brien: That came in as part of that arrangement. Exxon and Mobil, Gulf,
and I think briefly Texaco, became shareholders in the Iraq
Petroleum Company, along with Anglo-Persian, Shell, the French and
Mr. [C. S.] Gulbenkian Mr. Five Percent.
*i
There was a lot of pushing and shoving going on in the Iraq
Petroleum Company, and as a consequence, they finally agreed that
none of the participants in the Iraq Petroleum Company could
separately take any concession within the Red Line area, which was
Hicke:
O'Brien:
Hicke:
O'Brien:
Hicke:
O'Brien:
Hicke :
103
a line drawn on a map and embraced the entire Saudi Arabian
peninsula.
A circular line?
Well, it went through the Persian Gulf and up the Red Sea, and what
it meant was that none of them could individually compete for any
concessions in that area. They'd have to take any concession
jointly within the arrangements for the operation of IPC.
The Standard Oil Company of California had never been in the
Middle East. It had explored in Central and South America - as I
recall, it spent quite a lot of money for a relatively small West
Coast company - in Bolivia and elsewhere, with no great success.
But Gulf had taken a concession in Bahrain, and when its IPC
partners learned of this, they compelled Gulf to disgorge its
Bahrain concession. None of the rest of them wanted any part of
Bahrain, so they did not take it into IPC, but they made Gulf, in
effect, get rid of it, and Standard Oil Company of California
negotiated a transfer of the concession.
I've just recently looked at some of the files that affected
all of those negotiations.
That was done by PM&S?
It was handled by PM&S, and was handled - I have the company's
files here - by Mr. [Kenneth] Kingsbury, who was the president of
Standard Oil Company, Mr. [Maurice E.] Lombard!, and others. And
they were men of great courage and vision, because by the time that
concession became available, the world had fallen into deep
depression.
So they literally purchased this concession?
Yes, they bought the rights, and it took an absolutely heroic
effort. The foreign relations of Bahrain were handled by the
British government, and it took heroic efforts finally to persuade
the British government to let in this intruder, this upstart oil
company, not part of IPC or anything, totally a maverick, totally
outside whatever arrangements they had.
Who handled that for PM&S, do you know?
company?
Who represented the
O'Brien: Felix Smith.
In the upshot, they got the concession. I subsequently
learned when I - in a later stage of the cartel case - got access
to the papers that had been produced by Standard Oil of New Jersey
104
and Gulf, that IPC was very much alarmed at this. They - BP
[British Petroleum] controlled the oil production in Iran. BP
and its partners controlled oil production in Iraq. And that was
it.
Hicke: This was Anglo-Persian, before BP.
O'Brien: Yes. Yes, before BP.
Hicke: And so here they had somebody completely from outside getting into
this Red Line area.
O'Brien: Yes. Right.
Hicke: But then, they really forced Gulf to do that. What else did they
expect?
O'Brien: Well, I don't know what they expected. Maybe they expected Gulf to
cancel the concession.
Hicke: Oh, I see.
O'Brien: They didn't expect the competition from the Standard Oil Company of
California.
Mootness Study
O'Brien: All of this is briefly described in a chapter of the Mootness
Study, in which I wrote the history of our participation in foreign
oil production.
Hicke: That's on your shelf, isn't it?
O'Brien: Yes. Let me get it.
Hicke: Okay.
O'Brien: There's a much more detailed and longer history of all this.
Hicke: Oh, yes.
O'Brien: The Jacoby Study.
Hicke: That was done by Neil Jacoby for -
O'Brien: Yes. This is called the Mootness Study, which was titled "Postwar
Changes in The Foreign Oil Industry," and it was written in 1963,
105
ten years after the cartel case began. Let's see, it's Chapter Two
of the study, I guess.
Hicke: Is that study available anyplace except here in your office?
O'Brien: Oh, yes. I finally put it into evidence in the Church hearings.
Vhen it was prepared in '63, it was submitted to the head of the
antitrust division as a confidential document - we had numbered
copies - because it had chapters describing our relationships with
foreign governments and a lot of other sensitive material.
I made a presentation of the findings of the study to the
Department of Justice, with all the crowned heads - the assistant
attorney general and the head of the trial staff and the works,
along with [Francis] Kirkham and John Sonnett from the Cahill firm.
But Jacoby, Jerry Doppelt, and I and a platoon of economists -
some of his choosing and many in the company - spent nearly two
years writing this.
Hicke: That's a gigantic work.
O'Brien: Yes. I'm getting ahead of myself. But it was submitted to the
Attorney General, and they then asked for some additional copies to
submit to the State Department, the Defense Department, Joint
Chiefs of Staff, and so on, which was done. And that's another
day.
But Chapter Two of this study describes what I've been saying
to you. It discusses the structure of the international oil
industry prior to World War I, the consequences of our efforts -
the United States 's efforts - to get foreign oil concessions in
the Middle East before World War I, and then after World War I, the
efforts by Congress and the president to formulate proposals to
encourage foreign exploration by the United States. Because as
this study indicates, the U.S. feared our country was running out
of oil. It was commonly said that the Allies in World War I had
floated to victory on a sea of oil. And we had made a major
contribution of our. oil supplies to fuel the navies of the world,
and there was anxiety that we were running out of oil.
So the United States adopted a policy of encouraging American
oil companies to look abroad for oil. But we couldn't get into the
Middle East. That's why I say our presidents, starting with
President Wilson, spent from about 1918 to '28 before we broke into
the Middle East. All of that is discussed, and I don't really need
to elaborate on all of it; all you need to do is to read this
study.
Here's an example here, "The American government of 1919 had
already viewed the situation with sufficient concern to declare
106
Hicke:
O'Brien:
Hicke:
O'Brien:
Hicke:
O'Brien:
Hicke:
O'Brien:
that the British administration in these areas - " this was also