## Facts

- Occidental Petroleum Corporation (Oxy) was a publicly traded company whose securities were registered with the SEC.
- Oxy conducted worldwide exploration for, development of, and production of natural resources, including oil, gas, and coal, and it marketed and distributed petroleum and petroleum products.
- Oxy also manufactured and distributed chemicals through a wholly owned subsidiary, Hooker Chemical Corporation (Hooker).
- Oxy’s 1979 annual report reported net sales of about $9.55 billion and net income of about $561.7 million.
- Roughly 42% of Oxy’s total revenues came from oil-and-gas exploration and production in Libya and other countries; about 21% came from chemical operations.
- The SEC’s Division of Enforcement opened an investigation to determine whether Oxy failed to include required information in its SEC filings.
- The SEC focused on possible missing or incomplete disclosure concerning:
  - Administrative and judicial proceedings about allegedly improper pollutant discharges.
  - The effects of environmental-protection regulation compliance on Oxy’s expenditures and earnings.
  - Hooker’s possible liability arising from operating waste-disposal sites in New York state.
  - The facts and circumstances around Oxy’s decision to halt construction of a refinery in England.
  - Matters concerning Oxy’s negotiations with the Libyan government about operations in Libya.
  - A practice in which Oxy’s board chairman, Dr. Armand Hammer, asked certain board nominees to submit undated resignation letters to be kept in Oxy’s files.
- During the SEC’s investigation, Oxy submitted an offer of settlement that included undertakings to address environmental disclosure and to change the undated-resignation-letter practice, including designating a director to prepare an environmental report containing specified information.

## Issues

1. Whether, in an SEC administrative proceeding, a public company’s filings must include material information about environmental proceedings, environmental compliance effects, and potential waste-site liabilities.
2. Whether Oxy’s disclosures about halting the English refinery project and about negotiations affecting its Libyan operations could be material to investors and therefore required in SEC filings.
3. Whether a board practice of collecting undated director resignation letters may be material information and a proper subject of remedial undertakings in an SEC settlement.

## Decision

- The SEC accepted Oxy’s offer of settlement and resolved the administrative matter without a contested hearing.
- Oxy consented to the settlement terms, typically without admitting or denying the SEC’s findings.
- Oxy agreed to designate a director to prepare an environmental report addressing required environmental disclosures, including environmental proceedings, compliance costs and effects, and possible civil penalties.
- Oxy agreed to change its policy and practices concerning requests for undated resignation letters from certain director nominees.
- The settlement reflected the SEC’s view that Oxy needed to correct disclosure practices regarding environmental, project-related, international-operations, and governance-related matters raised in the investigation.

## Legal Principles

- Federal securities reporting duties require disclosure of material information needed to make required statements in periodic reports not misleading, including information about significant legal and regulatory proceedings.
- Environmental proceedings and potential liabilities, including those tied to pollutant discharges and waste-disposal sites, can be material and may require specific disclosure in SEC filings.
- The financial effects of compliance with environmental-protection regulations—on expenditures, earnings, and financial condition—can be material and may require disclosure when meaningful to investors.
- Events and negotiations affecting major revenue sources, including dealings with a foreign government where a large share of revenues is generated, can be material and require disclosure when necessary to avoid misleading filings.
- Governance practices that bear on board independence or management influence, such as collecting undated director resignation letters, may be material to investors and can be addressed through settlement undertakings in an SEC administrative proceeding.

## Conclusion

In *In the Matter of Occidental Petroleum Corp.*, the SEC resolved an administrative investigation through an accepted settlement requiring Oxy to provide fuller disclosure on environmental proceedings and compliance effects, Hooker’s potential waste-site liabilities, the halted English refinery project, and matters tied to Libya negotiations, and to end the practice of requesting undated resignation letters from certain director nominees.


In the Matter of Occidental Petroleum Corp., [1980 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 82622 (1980)