A federal judge says an investor group led by T. Boone Pickens Jr. "systematically destroyed notes and other documents" and had a "habitual inability" to recall key decision-making talks.
This action by Mesa Partners II, which is locked in a battle for control of Los Angeles-based Unocal Corp., "strongly suggests a studied effort by Mesa to conceal its true intent," U.S. District Judge A. Wallace Tashima wrote in a 33-page ruling.
The document containing the ruling was made public Saturday. In it, Tashima also ruled that Unocal erroneously stated in its proxy materials that shareholders who want to bring up business at Unocal's annual meeting must give notice at least 30 days before the date of the originally scheduled meeting--even if that meeting is subsequently delayed. Tashima ruled that Unocal's interpretation of its own bylaws was erroneous and must be corrected in new proxy materials.
Tashima also delayed Unocal's annual meeting to May 13. It was originally scheduled for today.
Although Tashima, in handing down the ruling Friday, refused to block Mesa from voting its shares, as Unocal had sought, the document lists a litany of actions by Mesa that the judge said make it clear that Mesa's early stock purchases weren't "for investment purposes only."
The question of Mesa Partners' intent is central to the suit brought by Unocal, parent of Union Oil Co. of California. Mesa Partners quietly began buying Unocal stock last October and publicly announced its purchases were under way on Feb. 14, by which time it had accumulated 7.9% of the company's 173.9 million shares. At that time, the group said it intended to acquire about 15% of the company "for investment purposes only." Not until March 27 did the Mesa group announce its intention to seek control of Unocal.
Currently, the group owns 13.6% of Unocal and is offering $54 per share in cash for another 64 million shares to boost its stake to 50.1%.
Tashima, citing previous court rulings, held that U.S. securities laws require investors to disclose even tentative takeover plans in order to protect shareholders.
"The fact that Mesa executives systematically destroyed notes and other documents, together with the habitual inability of Mesa executives to recall discussions concerning the subject of intent, strongly suggests a studied effort by Mesa to conceal its true intent," the judge wrote. He cited portions of a speech earlier this month by Pickens to a group of lawyers in Galveston, Tex.
In the speech, according to excerpts in the court ruling, Pickens said: "We have a shredder in my secretary's office, and I shred anything that is not going to be of any use. . . . What we do is try to keep those files clean and not have something stupid come out."
Tashima wrote: "In the context of this case, I infer adversely to defendants (Mesa) that destroyed documents and unrecalled testimony would have been favorable to plaintiff (Unocal)."