Private Empire: ExxonMobil and American Power

by Steve Coll

  As the Valdez wreck made obvious, Exxon’s massive daily operations—soon to produce 1.5 billion barrels of oil and gas pumped from the ground each year, and 50 billion gallons of gasoline sold worldwide—posed huge environmental risks. After the Valdez, Exxon would become again, as it had been in the first decades of Standard Oil’s existence, the most hated oil company in America.

  When gasoline prices soared, American commuters felt powerless before its influence. In effect, Exxon was America’s energy policy. Certainly there was no governmental policy of comparable coherence. After fitful, failed efforts to wean itself from imported oil during the 1970s, the United States had evolved no effective government-led energy strategy. Its de facto policy was the operation of free markets amid a jumble of patchwork subsidies, contradictory rules, and weak regulatory agencies. The very weakness of policy favored Exxon. As the public’s frustration grew over rising pump prices and dependence on oil imports that transferred billions of dollars to hostile regimes overseas, Exxon became a natural lightning rod. The corporation managed this criticism with the same coolheaded patience and indifference that it employed to endure political risk in tin-pot African dictatorships. Compromise was not the Exxon way.

  PART ONE

  THE END OF EASY OIL

  One

  “One Right Answer”

  Sidney J. Reso was typical of the men who rose into Exxon’s senior leadership ranks: an engineer by academic training; an Exxon employee for life; married for thirty-seven years to his wife, Patricia; and quietly appreciative of his privileges as his wealth grew. He maintained a membership at the Spring Brook Country Club near his office in New Jersey and owned a vacation condominium by the shore in Florida. He was not a man given to radical decisions or departures.

  It did not augur well, then, when a neighbor discovered his car idling with the driver-side door open at the end of his 250-foot driveway on a wooded cul-de-sac in Morris Township at 8:00 a.m. on the morning of April 29, 1992. Reso had passed through the front door of his large brick-and-clapboard home as usual at 7:30 a.m. that Thursday morning to make the fifteen-minute drive to his office in Florham Park. There he served as the president of a large international Exxon division responsible for oil and gas exploration and production outside of North America. Police quickly circulated fliers seeking information about a missing white man, five feet ten inches tall, 180 pounds, with blue eyes and gray hair showing a reddish tint.1

  Lawrence G. Rawl, Exxon’s soon-to-retire chief executive, and his successor, Lee Raymond, were together at an Exxon board of directors meeting in Dallas. The annual shareholder meeting would soon begin; each year, the board held a meeting beforehand. Resolutions and board member election voting passed in a ritualized, scripted session. A senior executive in Exxon’s security department entered and leaned over Lee Raymond’s shoulder as he read out to the room from prepared materials. “I’ve got to talk to you,” he said. “Right now.”

  Raymond excused himself and returned a few minutes later to report, “Sid’s been kidnapped.”

  The board sat in silence. Kidnappings were a periodic threat; attempts against executives came and went in waves. In 1974, Exxon had paid $14 million to free one of its executives, Victor Samuelson, from the Marxist People’s Revolutionary Army in Argentina. The feeling in the room was, “Not another one.” Rawl was upset; Reso had worked directly for him for years.

  A telephone caller had already issued a ransom demand to the corporation, security reported. Rawl called in the Federal Bureau of Investigation. Its director, William Sessions, began to call Raymond each morning to deliver updates. Running their investigation out of Newark, F.B.I. agents required several days to conclude that the initial caller seemed to be authentic. A ransom note demanded that Exxon gather $18.5 million in old one-hundred-dollar bills, load them into laundry bags, and prepare for a drop. The demand came from the Fernando Pereira Brigade, Warriors of the Rainbow. The name referred to the freelance photographer who drowned in the Pacific Ocean in 1985 when French intelligence agents sank the Rainbow Warrior, a vessel belonging to Greenpeace, the environmental crusaders, as it led a seaborne protest against nuclear weapons testing in French Polynesia. Since the Exxon Valdez spill, Greenpeace had made Exxon a prominent target of its anti-oil campaigning, but the group propounded nonviolence and civil disobedience, not kidnapping. (“This tragic allegation does a real disservice to legitimate environmental organizations working to protect our global environment,” its executive director, Steve D’Esposito, told a reporter while denying any involvement.)2

  The kidnappers communicated sporadically after their initial ransom demand. The F.B.I.’s agents spread out across New Jersey to conduct a massive investigation. Patricia Reso twice appeared on television to issue appeals on behalf of her family. (“Wherever he is, I wonder if he’s cold,” she said of her husband, “because his overcoat was in the car.”) As the weeks passed, the kidnappers threatened a wider war against Exxon. “If you choose not to pay, Reso will die in 24 hours,” a letter delivered in early June declared. “If you interfere in any way with the [money] delivery prior to Reso’s release we will strike at our selected targets. These people will not be seized [that is, kidnapped] but will be treated as soldiers in war.”3

  Rawl and Raymond visited the F.B.I.’s task force in Newark and were impressed by the scale of the effort. In this age before cell phones, the bureau’s investigators hypothesized that the kidnapper would use a public pay phone to communicate. They also figured he was probably still in the area. The task force rounded up enough agents to stake out every pay phone within a twenty-mile radius of the kidnapping site. On the night of June 18, one of these F.B.I. surveillance teams watched a blond man wearing gloves make a telephone call at a pay phone at a New Jersey shopping mall. The agents followed the caller’s Oldsmobile and arrested the man shortly after midnight. In the car they found laundry bags and a briefcase containing a 1985 directory of the home addresses of Exxon executives.4 Sessions called Raymond: “I think we got him.”5

  Arthur Seale grew up as the son of a policeman in Hillside, New Jersey, a middle-class town of about twenty thousand. At twenty-one he married a wealthy town girl, Jackie Szarko, whose parents owned properties, a liquor store, and a delicatessen. Arthur followed his father onto the Hillside police force but was suspended twice and fined three times in six years for defying orders and drawing his gun inappropriately. He later resigned with a $10,000 annual injury pension and took a job in Exxon’s security department in the New York area. He worked initially as a chauffeur. Whether Exxon knew of his trouble in Hillside before it hired him is not clear, but Seale performed well enough to move up to a corporate security position in Florham Park, where he earned as much as $60,000 in salary. He became angry, however, when former F.B.I. agents were promoted ahead of him, and in 1987, Exxon dismissed him. He nurtured a grudge against the oil company and the F.B.I.

  Arthur and Jackie Seale moved to Hilton Head, South Carolina, where they purchased a furniture store, bought a marsh-front house in an exclusive neighborhood, enrolled their children in private schools, and seemed to have reestablished themselves. After a little more than a year, however, they hastily moved away from South Carolina, evading $715,000 in debts and court claims. Before long they had returned to New Jersey to live with Arthur’s parents.6

  According to court records, in December 1991, Arthur and Jackie had started to covertly survey Sidney Reso’s cul-de-sac and to plot a kidnapping scheme. The couple constructed a wooden box six feet four inches in length and three feet six inches in width and placed it in a rented storage locker. Arthur consulted bankers in the Bahamas about how he might avoid taxes if he came into a large pile of cash.

  On that Thursday spring morning at the base of his driveway, when Sidney Reso stopped as usual to pick up his newspaper, Arthur Seale grabbed him by the collar, wrestled him toward a white van, and in the scuffle, accidentally fired a .45-caliber pistol, wounding Reso in the forearm. Seale said l
ater that his wife treated the wound with hydrogen peroxide and that the victim called him “sir” as he bound and gagged him with duct tape and placed him in the prefabricated wooden box. In Seale’s estimation the container was “much larger than a coffin . . . more like a closet.”7

  On the afternoon of May 2, the kidnapper and his wife inspected their container and discovered that Reso had died. They hauled his body to a state forest in southern New Jersey and buried him. Afterward they continued to demand ransom from Exxon until the F.B.I. arrested them.

  The Exxon Valdez accident had been preventable. It exposed the risks that arise when industrial systems of enormous scale and consequence are entrusted to imperfect human beings without adequate safeguards. Sidney Reso’s death three years later was of a different character and perhaps not preventable at all. Like the spill in Prince William Sound, however, it shocked Exxon’s leaders and employees. Lawrence Rawl was crushed by the loss of his colleague. The kidnapping reinforced a broader sense within the corporation, reeling from criticism and lawsuits over the Valdez, that it was under siege. It reinforced, too, a sense that Exxon’s leaders might need to find new ways to exert greater control over the world in which they operated—to seek a “rebalancing,” in Lee Raymond’s phrase, of the management of risk. The changes that Raymond would soon impose on Exxon would alter the experience of every employee and manager who worked at the corporation in the years to come.

  During the early 1990s, Exxon increasingly became Lee Raymond’s company. Lawrence Rawl retired as chairman in 1993 at age sixty-five, but the practical transfer of power had begun earlier. After the Exxon Valdez grounding, at the corporation’s monthly board meetings, it was Raymond who reported to the board about the results of his investigations into the accident’s causes and about his assessment of what corporate policies should be changed in response. His updates and recommendations for reform, linked to the Valdez investigations, were part of “every board meeting for probably two and a half years,” he recalled.8

  The Valdez wreck and soft global oil prices, which argued for cost cutting beyond the steep reductions of the 1980s, offered an opportunity to push through sweeping management reforms within Exxon at a pace that would have been difficult to achieve without the rationale of crisis. Even before the accident, Rawl had been trying to shake up Exxon’s bureaucratic ways. The 1980s had been a painful decade for oil corporations. Two Arab embargoes during the previous decade (designed to punish the United States for its support of Israel), followed by the 1979 Iranian Revolution, had driven crude prices to unprecedented highs, but by late 1985, prices had collapsed steeply. The unexpected drop squeezed cash flow so badly that for a short period Exxon borrowed money to pay its shareholder dividend. According to Raymond, Rawl, the former marine sergeant, believed that Exxon was “top heavy” and “didn’t have the accountability it needed. . . . We had committees on committees.” Advancing his mentor’s drive to tear up the old Exxon organization charts and march forward in double time, Raymond drove home an operating philosophy in which managers would be measured more directly for their performances, and safety systems would be driven relentlessly toward zero defects.9

  Raymond set up a program for every Exxon division and affiliate worldwide to “reappraise risk.” Many large industrial corporations sought to emphasize worker safety, but after the Valdez and Reso episodes, Exxon’s system became deeper and more pervasive than that of any of its peers. To encourage internal whistle-blowing about safety, fraud, or discipline problems, Raymond established a “hotline or anonymous post office box” where employees could report violations. He oversaw changes in Exxon’s drug and alcohol policy: He scrutinized every job category and named about 13 percent of them as “designated safety positions” that would henceforth be subject to special rules—these positions included not only oil tanker captains, but also gasoline delivery truck drivers and equipment operators in refineries and chemical plants. In the future, if an employee voluntarily entered drug or alcohol rehabilitation, he or she would not lose employment at Exxon but would be prohibited from ever working again in one of the designated safety jobs. A new drug- and alcohol-testing program took hold, affecting both those who had sought treatment and all of those who worked in the designated safety jobs, irrespective of their personal histories. Raymond decided that the latter category should include the corporation’s top three hundred executives, even if all they did was push paper; this edict became known as the Raymond Rule. The rules seemed more likely to drive alcoholism among senior executives into the shadows than to ensure sobriety at the top, but the emphasis now was on universal, mechanical systems.

  To revamp its internal Global Security organization and prevent any recurrence of a crime like the Reso kidnapping, Exxon hired Joseph R. Carlon, a former assistant director for investigations and intelligence at the United States Secret Service. Soon Exxon’s senior executives enjoyed personal protection regimes similar to those of American presidential candidates or holders of high national office. If a board member participated in a confidential discussion by telephone in his or her home, corporate security vetted the caller’s houseguests and surveyed the number of telephone extensions, to prevent anyone from sneaking onto the line.10

  The corporation’s revitalized safety and risk management drive increasingly took on the trappings of a cult. Exxon departments worldwide organized regular safety meetings and competitions. Groups of employees that had no reportable accidents or safety incidents might win gift cards to Walmart or blue safety jackets with the names of the winning employees stitched onto the breast pockets. The prize-chasing worker collectives ensured that office clerks did not leave their file drawers open, lest someone bump against them. Failing to turn off a coffeepot might draw a written reprimand. Cars had to be backed in to parking spaces, so that in case of an emergency, the driver could see clearly while speeding away and would not inadvertently injure colleagues. “You would not believe the number of hours we listened to them talk about driving slowly in the parking garage,” a former manager recalled. To discourage speeding down long plant driveways, the corporation installed electric signs linked to radar guns.

  Every meeting at every Exxon office, no matter the agenda and no matter the personnel assembled, had to begin with a “safety minute,” akin to a blessing before a meal, in which a randomly chosen employee would speak briefly about one safety issue or another. “Please take note of the Exit sign in the hallway,” the briefer might say, “and note that the stairway to the outdoor plaza lies to the left of the meeting room door.” If a group of employees worked together for years in the same office and held a lot of meetings, it could be very difficult to come up with a fresh safety minute, and so the briefings could become as repetitive as the routines of commercial flight attendants before takeoff. Safety minutes gradually became commonplace at many corporations engaged in dangerous industrial operations, but few companies enforced them like Exxon. (Chevron Corporation and British Petroleum later adopted the safety minute idea, and a scientist at one of the competitors reported to a friend at Exxon, “They’ve been assimilated into the Exxon Borg.”) Reportable injuries tracked in statistical reports would soon include food poisoning, bee stings, stapler pricks, and paper cuts. As one of the corporation’s senior safety managers would later explain: “If we have a whole lot of paper cuts going on, we have to ask ourselves, ‘Well, what do we do to avoid paper cuts? Do we ask people to use gloves when they use the copy machine?’”11

  The group safety confessionals at Exxon offices and plants covered conduct beyond the workplace: The correct use of a ladder while cleaning gutters at home might be discussed, or the imperative of wearing seat belts during the daily commute, or the danger of getting too much sun on a beach vacation. At these meetings employees stood and shared with their colleagues stories of “near-misses,” as in a 12-step recovery program. One twenty-eight-year manager recalled listening to a colleague confess that an object had flown out of his lawn mower while he was cut
ting the grass at home and had struck him in the leg.

  On Exxon billboards, office walls, and corporate vehicles worldwide the company would ubiquitously post a motto adopted from its oil drilling division: “Nobody Gets Hurt.” In Africa, workers were required to submit to blood tests to prove that they had taken their antimalaria medication, Malarone; if they failed the test, the workers could be fired and sent home on a plane ticket they paid for themselves. Particularly in poorer countries without traffic enforcement, if accidents became a chronic problem, Exxon would install electronic monitoring systems in its vehicles to track drivers’ whereabouts remotely, to ensure they did not exceed the company’s own imposed speed limit. Managers purchased radar guns and dispatched oil workers onto rudimentary clay African roads to monitor their colleagues’ speeds. Drivers might be fired for a single violation.12

  Raymond integrated the new corporate safety rules into an intensified top-down culture of command management emanating from Exxon’s headquarters. At his yearly meeting with Wall Street analysts, he conspicuously announced Exxon’s safety record before enumerating the corporation’s profit performance. He described his safety drive as a proxy for more far-reaching changes that would ultimately manifest themselves on the bottom line: “The only way you can be successful in the area of safety is through disciplined commitment and day-to-day management of the business.”13