Company Name: Texaco Inc. (Recon.)
Public Availability Date: 03-31-1992

Document Sections:

INQUIRY LETTER
STAFF REPLY LETTER

TEXACO INC.
2000 WESTCHESTER AVENUE
WHITE PLAINS, NY 10650
TELEPHONE(914) 253-4060

February 26, 1992

BY FEDERAL EXPRESS

Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington D.C. 20549

PETITION FOR REVIEW

Ladies and Gentlemen:

On December 17, 1991 Texaco Inc. (the "Company") requested, pursuant to Rule 14a-8(d), that the Division of Corporation Finance affirm that it would recommend no action against the Company as a result of the Company's determination to omit a shareholder proposed resolution described in the enclosed correspondence. In its letter of February 5, 1992, the Division denied the Company's request. Copies of both the Company's request and the Division's denial are enclosed.

The proposal requests that the Company reject taxpayer-guaranteed loans or subsidies in the context of any overseas business activities initiated by the Company.

The Company believes that the Division's letter of February 5, 1992 involves matters of substantial importance that warrant review by the Commission. We submit that the Commission should provide the Company with the informal statement that no action would be taken against the Company if it were to omit the shareholder-proposed resolution in question.

The Division's letter of February 5, 1992 states:

"In the Staff's view the proposal, which requests the Company to reject all `taxpayer-guaranteed loans, credits or subsidies in connection with its overseas business, involves issues that are beyond matters of the Company's ordinary business operations. Under these circumstances the staff does not believe that the Company may rely on Rule 14a-8(c)(7) as a basis to exclude the proposal from its proxy materials."

The Company submits that the Division of Corporation Finance is in error and that its position represents a significant and unjustified reversal of a long line of decisions under Rule 14a-8(c)(7). In essence, the proposal requests the company to eliminate one potential avenue of financing its operations. As set forth in the Company's letter of December 17, 1991, and previous "no action" letters cited therein, decisions as to the appropriate source of financing Texaco's activities are at the very heart of its "ordinary business operations." Furthermore, the issue of taxpayer-guaranteed loans has certainly not reached the level of public awareness that golden parachutes, executive compensation and tobacco production have so as to warrant a departure from the Staff's often-cited decisions.

Not only is the requirement that Texaco include the proposal contrary to precedent, but it is contrary to sound economic policy. The proposal seeks to stop business activities which are clearly beneficial to the economy and would instead retard new investment by imposing higher borrowing costs on U.S. companies. In the midst of the longest recession since World War II, when the economy requires the creation of more jobs and more investment, implementation of this proposal would clearly be counterproductive.

The Division's letter of February 5, 1992 also states:

"The Division does not concur in your position that the proposal and the accompanying supporting statement may be excluded entirely pursuant to Rule 14a-8(c)(3)."

The Company's belief that the proposal is excludable under Rule 14a-8(c)(3) goes beyond its confusion as to the meaning of particular words in the proposal and supporting statement. Rather, the Company is totally at a loss to understand even generally what types of conduct would be prohibited were the proposal to be adopted. This confusion stems from the obvious vagueness of the proposal. And, if the Company is confused as to the meaning to be given the proposal, the Company's shareholders, likewise, will be unable to make a reasoned judgment whether to support or reject the proposal.

One example will illustrate the vagueness of the proposal. Texaco Trinidad Inc., an indirect wholly-owned subsidiary of Texaco Inc., has a loan facility of $20 million with Bank of Nova Scotia, Puerto Rico, under which $4 million is currently borrowed. Texaco Trinidad Inc. pays a below-market interest rate for that loan, because Bank of Nova Scotia is able to pay its depositors lower interest rates on their deposits. They pay lower interest rates on their deposits, because, under U.S. Internal Revenue Code Section 936, certain deposits are free of U.S. income taxes. Would this loan facility be permitted or prohibited if the proposal were to be adopted? The Company is not sure, because of the following elements of the proposal:

- The proposal refers to loans by the "Company." If "Company" refers to Texaco Inc. only, the borrowing by its subsidiary might be permitted, but if "Company" refers to Texaco Inc. and all of its subsidiaries, the borrowing by Texaco Trinidad Inc. might be prohibited.

- The loan is from a Puerto Rican bank. The proposal's supporting statement refers to "American," "U.S.," and "federal agencies." Are loans from banks in the Commonwealth of Puerto Rico within the proposal's restrictions?

- Is this a "taxpayer-guaranteed loan, credit or subsidy?" Residents of Puerto Rico pay U.S. income taxes. Therefore, if Bank of Nova Scotia's depositors are relieved of their obligations to pay U.S. income taxes, they are receiving, in effect, a U.S. subsidy. However, is this also a subsidy to Texaco Trinidad Inc., which is merely borrowing those funds from Bank of Nova Scotia at a lower-than-market interest rate?

None of these questions can be answered with certainty, because of the vagueness of the proposal.

Because the Division's letter of March 7, 1991 (i) is a significant and unjustified change in the staff's previous interpretations of "ordinary business operations" under Rule 14a-8(c)(7) and (ii) fails to recognize that the vagueness which permeates the proposal makes it patently excludable under Rule 14a-8(c)(3), the Company submits that these are matters of substantial importance which warrant review by the Commission.

The Company respectfully requests that the Division of Corporation Finance forward to the Commission this petition for review.

The Company's Annual Meeting of Stockholders is currently scheduled for May 12, 1992, and the Company currently plans to mail its proxy materials on March 27, 1992. Therefore, a response by March 20, 1992 is respectfully requested.

Very truly yours,

Michael H. Rudy

Enc.

cc: Carl L. Shipley, Esquire
The Conservative Caucus Research, Analysis and Education Foundation, Inc.
1575 Eye Street, N.W., Suite 325
Washington, D.C. 20005

William E. Morley, Esquire
Chief Counsel and Associate Director (Legal)
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

MAR 31 1992

Michael H. Rudy
Texaco Inc.
2000 Westchester Ave.
White Plains, New York 10650

Dear Mr. Rudy:

This is in response to your letter of February 26, 1992 requesting that the Commission review the Division's February 5, 1992 denial of the Company's request for a no-action letter in connection with a shareholder proposal.

Upon review, the Commission has reversed the Division's position concerning the proposal. It has been determined that the proposal may be omitted from the Company's proxy material in reliance upon Rule 14a-8(c)(7) because it appears to deal with a matter relating to the conduct of the Company's ordinary business operations. In this regard, it is the view of the Commission that the proposal, which would urge that the Company's management reject taxpayer-guaranteed loans, credits or subsidies in connection with its overseas business activities, is a matter of ordinary business because it would involve day-to-day management decisions in connection with the Company's multinational operations. It is further noted that, although the Company did not raise Rule 14a-8(c)(5) as a possible ground for omitting the proposal, it might well be an additional ground justifying omission.

Sincerely,

Jonathan G. Katz
Secretary

cc: Carl L. Shipley
The Conservative Caucus
Research, Analysis & Education Foundation, Inc.
1575 Eye St., N.W.
Suite 329
Washington, D.C.