TESTIMONY OF EXXON'S WITNESS FAILS TO IMPRESS CIRCUIT JUDGE

By Mike Cason

Montgomery Advertiser

Montgomery County Circuit Judge Tracy McCooey was unimpressed by the testimony of one witness called by Exxon Mobil Corp. on Tuesday as the company seeks to have a $3.42 billion jury verdict reduced or eliminated.

A Montgomery County jury awarded the verdict to the state of Alabama on Dec. 19 after finding that Exxon Mobil cheated the state out of natural gas royalties. Now Exxon Mobil is trying to convince McCooey to reduce or eliminate the award as unjust.

Jonathan Walker, a Washington, D.C. economist, testified Tuesday about an equation to determine an appropriate penalty for fraud. One factor in his equation was whether the company committing fraud expected to get caught.

"No offense, Dr. Walker, but so far, this just sounds like a bunch of BS," McCooey told the witness.

Attorneys for Exxon Mobil say there was no fraud and the case is just a disagreement over contract terms.

McCooey made no decision Tuesday, and testimony continues today. The judge can reduce, eliminate or uphold the award.

At the outset of Tuesday's hearing, McCooey told lawyers on both sides that her word would not be final. She said the case will go to the state Supreme Court.

"I sometimes think I don't even know why we're having a hearing," McCooey said.

Attorneys for the state say the verdict, a state record, is justified because of the money the company stood to gain and the wealth of the company. Gov. Don Siegelman, who initiated the state's case, has said the verdict is just and should stand.

The dispute concerns natural gas wells Exxon Mobil operates in state waters in the Gulf of Mexico. The state says the company underpaid on royalties owed to the state. The underpayment, plus interest, amounts to $87.7 million during the years 1993-1999. The jury ordered Exxon Mobil to pay that amount, in addition to the $3.42 billion for punishment.

Exxon Mobil does not have to pay while appeals are pending.

Exxon Mobil signed leases for the wells in the early 1980s and the wells began producing in 1993.

Walker's testimony concerned Exxon Mobil's argument that the company made its position clear on the lease payments and did not attempt to deceive the state. But McCooey did not accept that point.

"I've got a jury who heard testimony for two weeks and didn't agree with what you said," McCooey told Walker. "The jury thought Exxon was doing this and didn't expect to get caught."

McCooey also said the size and wealth of Exxon Mobil must be considered in determining whether the award is just.

"Does that matter? Shoot yeah," the judge said. "You've got all your little bean counters."

Ansel Condray, president of Exxon USA from 1995-99, testified Tuesday that the company thought its interpretation of the lease agreements was "reasonable and fair and the right view, but it wasn't absolutely clear."

Condray did not testify during the jury trial.