SCANDALS: Darkening Storm over Gulf

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Few U.S. corporations have been so badly tarred by revelations of illegal political contributions at home and questionable payments abroad as Gulf Oil Corp. Since those dark days a year and a half ago, Gulf had seemed to make considerable progress in restoring its reputation. Among other things, it ousted Chairman Bob Dorsey and replaced him with Jerry McAfee, who had run its Canadian oil subsidiary and had no connection with the payoffs. Yet last week the Pittsburgh-based multinational was enmeshed in a new web of scandal—especially concerning a uranium price-fixing cartel that it had joined with McAfee's awareness.

That was not Gulfs only problem. A federal grand jury in Pittsburgh last week also indicted two Gulf executives, Vice President Fred W. Standefer and Tax Compliance Manager Joseph F. Fitzgerald, on charges of bribing an Internal Revenue Service agent who audited Gulfs books. According to the indictment, Gulf paid $3,300 in air fares, lodging and other perks, to send the tax man, Cyril J. Niederberger, and his family on five vacation trips to such places as Pebble Beach, Calif., and Las Vegas. Niederberger has already been convicted for his part in the scandal and is appealing a six-month jail sentence. During his trial the Government charged that Niederberger greatly underestimated the amount Gulf paid to political candidates.

Serious as the bribery charges were, they are far overshadowed by the uranium cartel. Gulf, through its Canadian mining subsidiary, was the only U.S.-affiliated member. Other participants were the governments of Canada, France, Australia and South Africa, a string of major uranium-producing companies in those countries and an English-based mining company, Rio Tinto-Zinc. According to a stack of sensitive Gulf and Canadian government documents—subpoenaed by a House Commerce subcommittee and made public last week —the cartel was highly organized, with a paid secretariat in Paris and detailed rules for 5 rigging bids, allocating markets and driving up prices.

Though the cartel existed only from 1972 to 1975, it appears to have hit a jackpot. During that period world uranium prices exploded from $6 a pound to more than $40; they are still around that level.

One consequence of the price rise was that Westinghouse Electric Corp. in 1975 reneged on contracts it had made with 27 U.S. utilities to supply them with uranium for their reactors at an average price of $9.50 a pound for 20 years. The utilities sued Westinghouse and the matter is still before the courts. Westinghouse in turn sued 29 uranium producers, including Gulf, charging them with price fixing. A Washington grand jury began investigating last year after the Justice Department, which is also probing the matter, received a number of Gulf documents. If an antitrust case against the producers could be made to stick, Westinghouse's legal justification for scrapping its contracts would be greatly strengthened.