Company Name: ConocoPhillips
Public Availability Date: February 23, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 22, 2005
001349.0165
BY HAND
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Shareholder Proposal of Mr. Roger K. ParsonsSecurities Exchange Act of
1934Rule 14a-8
Ladies and Gentlemen:
On behalf of ConocoPhillips, a Delaware corporation (the "Company"), and in
accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), we are filing six copies of (1) this letter, (2)
the proposal in the form of a proposed shareholder resolution and statement in
support thereof (the "Proposal") submitted to the Company by Mr. Roger K.
Parsons (the "Proponent") and (3) all correspondence between the Company and the
Proponent relating to the Proposal. On November 29, 2005, the Company received a
facsimile from the Proponent transmitting the Proposal and requesting its
inclusion in the Company's proxy statement and form of proxy for the 2006 Annual
Meeting of Stockholders (the "Proxy Materials"). For the Staff's convenience, we
have also enclosed a copy of each of the no-action letters referred to herein.
One copy of this letter, with copies of all enclosures, is being simultaneously
sent to the Proponent.
On behalf of the Company, we hereby respectfully request your advice that the
Division of Corporation Finance will not recommend any enforcement action to the
United States Securities and Exchange Commission (the "Commission") if, in
reliance on certain provisions of Rule 14a-8, the Company excludes the Proposal
from the Proxy Materials.
Description of the Proposal
The Proposal requests that "The Board shall investigate, independent of in-house
legal counsel, all potential legal liabilities that ConocoPhillips has inherited
from Conoco but omitted from the February 2002 prospectus titled `Proposed
Merger of Conoco and Phillips.' The Board shall report to shareholders all
potential legal liabilities omitted from the prospectus that would have a
material impact on future financial statements or share value when these
liabilities are realized or made public."
In addition, the Proposal contains the following statement in support:
"The Board relies upon in-house legal counsel for information on the potential
legal liabilities reported to shareholders. However, in-house legal counsel have
inherent conflicts in their role as lawyers who manage company legal defenses in
lawsuits against the company, and in their role as the sole provider of
information to the Board on the magnitude of potential legal liabilities the
company faces.
The conflict has led in-house legal counsel to overestimate the strength of
their defenses and underestimate the magnitude of the legal liabilities reported
to the Board. This proposal seeks to have the Board, as the fiduciary of the
shareholders, begin independently evaluating all potential legal liabilities
against the company starting with the legal liabilities inherited from Conoco
that were unreported by in-house legal counsel in the 2002 prospectus."
Bases for Exclusion
The Proposal May Be Excluded Pursuant to Rule
14a-8(i)(4).
Rule 14a-8(i)(4) permits a company to omit a proposal from its proxy materials
if it "relates to the redress of a personal claim or grievance against a company
or any other person, or if it is designed to result in a benefit to [the
proposal], or to further a personal interest, which is not shared by other
shareholders at large." Under Rule 14a-8(c)(4), the predecessor to Rule
14a-8(i)(4), the Commission noted that even proposals presented in broad terms
in an effort to suggest that they are of general interest to all shareholders
may nevertheless be omitted from a proxy statement when prompted by personal
concerns. Exchange Act Release No. 34-19135 (October 14, 1982). The Proposal,
though not evident on its face, is designed solely for the benefit of the
Proponent and relates to a long-standing and well-documented dispute with the
Company, its predecessors and affiliates.
As discussed in detail below, the Proponent's personal grievance arises from a
1991 plane crash that killed his wife (the "1991 Plane Crash") and the
litigation that followed. In 1991, E.I. du Pont de Nemours and Company
("DuPont") was the sole shareholder of Conoco Inc., the Company's predecessor.
Since that time, the entities against which the Proponent bears a personal
grievance have undergone changes in their corporate structures. In 1998, DuPont
sold its stake in Conoco Inc. in a public offering. In 2002, Conoco Inc. and
Phillips Petroleum Company ("Phillips") merged, forming the Company. Although
the entities have changed, the grievance is the same, as demonstrated below.
Litigation
As described in Parsons v. Turley, 109 S.W.3d 804 (Tex. AppDallas 2003), the
plane that crashed in 1991, killing the Proponent's wife, herself an employee of
Conoco Inc., was owned by DuPont, and Conoco Inc. was allegedly responsible for
overseeing the health and physical competency of DuPont's pilots. Believing that
the 1991 Plane Crash was a result of negligence by DuPont and Conoco Inc., the
Proponent, represented by Mr. Windle Turley, filed suit against DuPont in Texas
state court. Subsequently, that case was removed to federal court. In a separate
action, the Proponent filed suit against Conoco Inc. in Texas state court and
then attempted, unsuccessfully, to join both suits in federal court. Id.
In the federal court suit against DuPont, a jury entered a verdict in favor of
the Proponent on his negligence and gross negligence claims, and awarded
$4,750,000 in actual damages to the Proponent and $1 million to his wife's
parents. However, the federal court sustained DuPont's motion for judgment as a
matter of law on the jury's gross negligence findings, holding that the evidence
was legally insufficient to support such a finding. In 1994, the federal court
entered judgment awarding the Proponent only the actual damages found by the
jury along with prejudgment interest, postjudgment interest and court costs. The
Proponent appealed the court's gross negligence ruling, this time hiring a new
lawyer to represent his case on appeal. Id. In 1996, the Fifth Circuit Court of
Appeals affirmed the lower court's judgment. When DuPont refused to compound
prejudgment interest in calculating damages as the Proponent had requested, the
federal court again sided against the Proponent. The Proponent again appealed,
and the Fifth Circuit again affirmed the lower court. Id.
Meanwhile, the Proponent's case against Conoco Inc. in Texas state court was far
less successful. The trial court granted Conoco Inc.'s motion for summary
judgment in 1994 and entered final judgment dismissing the Proponent's remaining
claims the following year. The Proponent's motion for new trial was denied, and
his appeal was dismissed for lack of jurisdiction. Id.
Following the seeming conclusion of these suits, the Proponent came to believe
that Conoco Inc. had foreknowledge that the pilot of the plane had an alcohol
problem. In 1998, based on this new belief, the Proponent sued Mr. Turley, his
trial attorney, alleging, among other things, that Mr. Turley negligently failed
(1) to discover and use the evidence of the pilot's alcohol problem and (2) to
bring suit originally against both DuPont and Conoco Inc. in state court. The
trial court granted Mr. Turley's motion for summary judgment in 1999, but as
recently as 2004, the Proponent has been appealing this judgment without
success. See Petition for Review, Parsons v. Turley (Tex. No. 03-0911, 2003)
(pet. denied May 28, 2004).
Having failed in his attempts to resolve his claim against DuPont and Conoco
Inc. through lawsuits, all of which arise from the 1991 Plane Crash, the
Proponent has attempted to air this personal grievance through at least four
shareholder proposals, countless correspondence, and other such actions, which
are as set forth in greater detail in E.I. du Pont de Nemours and Company
(January 31, 1995) (the "1995 No-Action Letter") and E.I. du Pont de Nemours and
Company (January 22, 2002) (the "2002 No-Action Letter"):
Proponent's prior shareholder actions
Shareholder Proposal #1. On February 28, 1992, the Proponent sent by facsimile
transmission a letter to DuPont's Director of Stockholder Relations advising
that he would introduce a proposal ("Proposal #1") at DuPont's 1992 Annual
Meeting. DuPont's Corporate Secretary contacted the Proponent by phone to advise
him that the proposal had not been timely filed and the Proponent agreed to
treat the proposal as being submitted for the 1993 Annual Meeting. The Proponent
also indicated his intent to speak at the 1992 Annual Meeting concerning
management of DuPont's aviation operations.
1992 Letter to Directors. On March 16, 1992, the Proponent sent a letter to
individual members of DuPont's Board of Directors with Proposal #1 attached. In
his letter, the Proponent refers to "management problems in the aviation
operation," his "great personal interest in seeing these problems resolved" and
reiterates his intent to raise his concerns at the 1992 Annual Meeting.
1992 Letter to Shareholders. On April 29, 1992, the day of DuPont's 1992
Annual Meeting, without DuPont's prior knowledge, the Proponent distributed a
printed letter addressed to "Fellow Shareholders," explaining his "great
personal interest" in "safety problems in the management of DuPont's aviation
operation" with an attached pre-addressed card that could be torn off and mailed
to DuPont's Chairman and CEO. The same material was distributed at the National
Business Aircraft Association Meeting in Dallas during the week of September 14,
1992.
1992 Annual Meeting. The Proponent addressed DuPont's 1992 Annual Meeting
concerning "a serious safety problem in the management of our company's aviation
operations" and acknowledged his "great interest in this matter."
1993 Letter to Directors. On March 12, 1993, the Proponent sent a detailed
letter to individual members of DuPont's Board of Directors relating to the 1991
Plane Crash involvement in the investigation of the 1991 Plane Crash: "Ann
Parsons, my wife, was killed in the DuPont crash; therefore, I am committed to a
thorough investigation."
1993 Annual Meeting. The Proponent addressed DuPont's 1993 Annual Meeting
concerning his desire for a thorough investigation of the 1991 Plane Crash and
acknowledged his personal interest in the matter. The Proponent also made
repeated efforts to inject comments concerning the related litigation and
investigation.
1993 Letter to Shareholders. The Proponent distributed a printed letter to
shareholders containing allegations about DuPont and Conoco Inc. and their role
in the 1991 Plane Crash. This letter included a pre-addressed response card that
could be torn off and mailed to DuPont's directors. The same material was
distributed at the National Business Aircraft Association convention in Atlanta
during the week of September 20, 1993.
Shareholder Proposal #2. On November 4, 1993, the Proponent sent by facsimile
transmission a proposal ("Proposal #2") relating to the investigation of the
1991 Plane Crash and the election to office of two members of DuPont's Board of
Directors for consideration at DuPont's 1994 Annual Meeting. DuPont requested a
no-action letter regarding Proposal #2. The Staff concurred that Proposal #2
related to a personal claim and could be omitted pursuant to Rule 14a-8(c)(4).
E.I. du Pont de Nemours and Company (available February 9, 1994).
1994 Annual Meeting. The Proponent addressed DuPont's 1994 Annual Meeting on
April 27, 1994, concerning alleged "threatening" practices in DuPont's aviations
operations and referenced the 1991 Plane Crash.
Shareholder Proposal #3. On November 18, 1994, the Proponent sent by facsimile
transmission to DuPont a proposal ("Proposal #3"), that called for DuPont to
issue a report on its activities in Malaysia in connection with the 1991 Plane
Crash. DuPont requested a no-action letter regarding Proposal #3. The Staff
concurred that Proposal #3 related to a personal claim and could be omitted
pursuant to Rule 14a-8(c)(4). See 1995 No-Action Letter. Moreover, the Staff
granted forward-looking relief relating to any subsequent proposals by the
Proponent relating to this personal grievance: "This response shall also apply
to any future submissions to the Company of a same or similar proposal by the
same proponent. The Company's statement under rule 14a-8(d) shall be deemed by
the staff to satisfy the Company's future obligations under rule 14a-8(d) with
respect to the same or similar proposals submitted by the same proponent." Id.
(emphasis added).
Shareholder Proposal #4. On February 1, 2001, the Proponent sent by facsimile
transmission to DuPont a proposal ("Proposal #4") that called for DuPont to
contract "an independent safety auditing firm to investigate the deaths of all
DuPont employees killed while working on company business during the past ten
years." DuPont requested a no-action letter regarding Proposal #4, and the Staff
responded: "Noting that the proposal appears to be similar to the same
proponent's proposal in E.I. DuPont de Nemours and Company (available January
31, 1995), we believe that the forward-looking relief that we provided in that
earlier response is sufficient to address his recent proposal. Accordingly, we
believe that a specific no-action response is unnecessary." See 2002 No-Action
Letter.
It is apparent, given the numerous similar proposals, lawsuits, correspondence
and other actions taken by the Proponent, that the "potential liabilities
inherited from Conoco" refer to the alleged liability arising from the 1991
Plane Crash. As result of his failure to resolve his personal grievance either
in court or through his actions against the Company's former parent, predecessor
and affiliate, which have been prospectively precluded by the Staff, it seems
clear that the Proponent is now seeking satisfaction by way of the Proposal. It
is no coincidence that the Proponent calls for the Board to investigate
unreported liabilities in the 2002 prospectus, as this is the first filing of
the Company that would have included information related to the 1991 Plane
Crash, had any such information been material to the merger proposed therein.
The Staff has consistently taken the position that shareowner proposals relating
to litigation in which a proponent holds a personal interest may be omitted from
a company's proxy statement under Rule 14a-8(i)(4). See, e.g., Schlumberger Ltd.
(available August 27, 1999) (proposal followed conclusion of litigation on the
same subject as the proposal); Unocal Corp. (March 15, 1999) (same); Burlington
Northern Santa Fe Corp. (available February 5, 1999) (proposals followed
litigation, grievances and harassment by former employee); General Electric
Company (available January 20, 1995) (proposal by a group of former GE employees
seeking discontinuance of company's opposition to a pending lawsuit in which
they had an interest); Xerox Corp. (available November 17, 1988 and March 2,
1990) (proposals seeking appointment of an outside consultant to investigate
Xerox's conduct in an EEOC investigation and related litigation arising out of
the proponent's termination of employment).
Although the Proponent attempts to conceal this personally beneficial nature of
the Proposal by reference to the issue of the proper role of in-house counsel (a
false and misleading reference, as discussed below), the Proponent's true
motive, given the overwhelming body of documentation cited above, is a personal
grievance, designed to result in a benefit to the proponent and to further a
personal interest, which benefit or interest is not shared with the other
security holders at large, and is therefore excludable under Rule 14a-8(i)(4).
See Southern Company (available March 19, 1990) (allowing the exclusion of a
proposal requiring the company to form a shareholder committee to investigate
complaints against management, the proponent of which was a disgruntled former
employee who had raised numerous claims during the prior seven years and had
sent the company more than 40 letters, faxes, requests, and proposals seeking
redress for his personal grievance); International Business Machines Corp.
(available December 12, 2005) (allowing the exclusion of a proposal and
affirming prospective relief after the same proponent, who after unsuccessfully
litigating his wrongful termination claim, submitted stockholder proposals 12
times in as many years relating to the same personal grievance over his
termination).
In this case, just as the Staff noted in the 2002 No-Action Letter, the same
Proponent is submitting a similar proposal based on the same personal grievance.
Given the relatedness of DuPont and the Company as corporate entities, not to
mention the Proponent's attempt to make them co-defendants, there is no valid
reason to disapply the forward-looking relief granted in the 1995 No-Action
Letter. Regardless of the applicability of any prior relief, however, for the
foregoing reasons, the Company believes that the Proposal may be excluded from
the Proxy Materials in accordance with Rule 14a-8(i)(4) because the Proposal
relates to a personal grievance against the Company.
The Proposal May Be Excluded Pursuant to Rule
14a-8(i)(10).
Under Rule 14a-8(i)(10), a shareholder proposal may be excluded if a company has
already substantially implemented the proposal. According to the Commission,
this provision "is designed to avoid the possibility of shareholders having to
consider matters which already have been favorably acted upon by the
management." Exchange Act Release No. 34-12598 (July 7, 1976) (the "1976
Release"). The Staff has stated that "a determination that the company has
substantially implemented the proposal depends upon whether its particular
policies, practices and procedures compare favorably with the guidelines of the
proposal." Texaco, Inc. (available March 28, 1991). Consequently, a shareholder
proposal does not have to be implemented exactly as proposed; it merely needs to
be "substantially implemented." Id.
The Company has implemented controls and other procedures that are designed to
ensure that information required to be disclosed in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. These
disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Company's management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required
disclosure. These controls and procedures are designed to ensure that any
material "omission" in the Company's periodic reports of the type referred to in
the Proposal does not occur.
The subject matter of the Proposalthe Company's evaluation and disclosure of
material liabilitiesis monitored by the Company's senior management and the
Audit Committee of the Board of Directors. The Company maintains accounting
systems and internal accounting controls designed to provide reasonable
assurance that assets are safeguarded and transactions are executed in
accordance with the Company's authorizations, and that transactions are recorded
as necessary to permit the preparation of financial statements in conformity
with generally accepted accounting principles. The accounting systems and
internal accounting controls are supported by written policies and procedures,
by the selection and training of qualified personnel and by an internal audit
program. In addition, the Company's code of business conduct requires employees
to discharge their responsibilities in conformity with the law and a high
standard of business conduct. The Company's independent registered public
accounting firm audits the Company's financial statements in accordance with
generally accepted auditing standards and would be required to call to the
Company's attention any material undisclosed liabilities of the type referred to
in the Proposal.
Accordingly, through the operation of the Company's disclosure controls and
procedures and its internal controls, the "investigation" the Proponent seeks
into the Company's assessment and disclosure practices has already been
substantially implemented. For these reasons, the Company believes that the
Proposal may be excluded from the Proxy Materials in accordance with Rule
14a-8(i)(10). See, e.g., Columbia/HCA Healthcare Corp. (available February 18,
1998) (proposal substantially implemented because company had in place a
committee charged with investigating fraud); The Limited, Inc. (available March
15, 1996) (proposal substantially implemented because company had compliance
program for foreign supplier standards); Louisiana-Pacific Corp. (available
March 18, 1994) (proposal to conduct internal investigation on potential
environmental violations substantially implemented because company had
established committee to investigate environmental law compliance).
The Proposal May Be Excluded Pursuant to Rule
14a-8(i)(7).
Rule 14a-8(i)(7) allows a company to omit a shareholder proposal that relates to
the ordinary business operations of the company. One of the key policy
considerations underlying the Rule is the "degree to which the proposal seeks to
`micro-manage' the company by probing too deeply into matters of a complex
nature upon which shareholders, as a group, would not be in a position to make
an informed judgment. This consideration may come into play in a number of
circumstances, such as where the proposal involves intricate detail, or seeks to
impose specific time-frames or methods for implementing complex policies."
Exchange Act Release No. 34-40018 (May 28, 1998) (the "1998 Release").
While recent high-profile corporate scandals have raised public consciousness of
the financial accounting and disclosure process, the responsibility for
overseeing this process is a complex task, which shareowners, as a group, are
not in a position to make an informed judgment, having left the implementation
of these complex procedures to their elected Board. Indeed, the Staff has
repeatedly held that proposals relating to accounting and disclosure decisions
and presentations are excludable under Rule 14a-8(i)(7) as matters involving the
ordinary business operations of a company. See, e.g., Johnson Controls, Inc.
(available October 26, 1999); The Travelers Group, Inc. (available March 13,
1998); LTV Corp. (available November 25, 1998); General Electric Company
(available January 28, 1997); American Telephone & Telegraph Company (available
January 29, 1993); American Stores Company (available April 7, 1992); Pacific
Gas & Electric Co. (available December 13, 1989); General Motors Corp.
(available March 10, 1989); Minnesota Mining & Manufacturing Co. (available
March 23, 1988).
The fact that the Proposal does not seek to discard existing disclosure
requirements does not save it from the exclusionary reach of Rule 14a-8(i)(7).
Although the Proposal seeks what appears to be a simple request to merely
"investigate" any potential liabilities inherited from Conoco rather than
demanding the implementation of an entirely new process of disclosure, Rule
14a-8(i)(7) has long been interpreted to exclude proposals seeking special
investigations, reviews or reports on a given matter. In its 1983 release, the
Commission stated that, henceforth, "the staff will consider whether the subject
matter of the special report ... involves a matter of ordinary business; where
it does, the proposal will be excludable under Rule 14a-8(c)(7)." Exchange Act
Release No. 34-20091 (August 16, 1983); see also Kmart Corp. (available February
24, 1999); Johnson Controls, Inc. (available October 26, 1999). This Rule
continues to apply following the publication of Staff Legal Bulletin No. 14C
(CF) (June 28, 2005), which did not significantly alter the analysis of ordinary
business exclusions not involving important social concerns.
Moreover, as an independent ground for exclusion under Rule 14a-8(i)(7), the
Staff has consistently permitted companies to exclude proposals related to the
"general conduct of a legal compliance program." See, e.g., Monsanto Corp.
(available November 3, 2005) ("There appears to be some basis for your view that
Monsanto may exclude the proposal under rule 14a-8(i)(7) as relating to its
ordinary business operations (i.e., general conduct of a legal compliance
program)."); Associates First Capital Corp. (available February 23, 1999)
(proposal to form a committee to investigate possible improper lending
practices); United HealthCare Corp. (available February 26, 1998) (proposal to
form a committee to investigate potential healthcare fraud). As in the cases
above, the Proponent has requested that the Company take measures that are
inherently related to the general conduct of a legal compliance program. As
such, the Proposal may similarly be excluded under Rule 14a-8(i)(7).
The Proposal May Be Excluded Pursuant to Rule
14a-8(i)(3).
Under Rule 14a-8(i)(3), a shareholder proposal may be excluded if violates any
of the Commission's proxy rules, including Rule 14a-9, which prohibits
materially false or misleading statements. The notes to Rule 14a-9 expressly
prohibit material that directly or indirectly impugns character, integrity or
personal reputation, or directly or indirectly makes charges concerning
improper, illegal or immoral conduct or associations, without factual
foundation.
The Proposal impugns the character of the Company's in-house counsel by
suggesting that they would conceal from the Board material liabilities of the
Company. The Proponent also suggests that in-house counsel are incompetent in
evaluating the merits of litigation involving the Company and the risks
associated therewith. The Proponent has no basis for these derogatory
assertions, rendering the Proposal false and misleading under Rule 14a-9. See
Idacorp, Inc. (available January 9, 2001) (allowing the exclusion of a proposal
stating that potential merger partners were in a conspiracy to deceive
shareholders).
To ensure that shareholders are not misled by these false and misleading
statements into believing that in-house counsel is both inherently conflicted
and incompetent, and to defend the integrity of the Company's employees against
unsubstantiated attack, the Company believes that it may properly exclude the
Proposal under Rule 14a-8(i)(3).
Conclusion
For the foregoing reasons, the Company respectfully requests your advice that
the Division of Corporation Finance will not recommend any enforcement action to
the Commission if the Company excludes the Proposal from the Proxy Materials.
The Company presently intends to file its definitive Proxy Materials for the
2006 Annual Meeting with the Commission on or about March 21, 2006.
If the Staff has any questions with respect to the foregoing, or if additional
information is required in support of the Company's position, please call the
undersigned at (713) 229-1379.
Please acknowledge receipt of this letter and the enclosure by date-stamping the
enclosed copy of this letter and returning it to our waiting messenger.
Very truly yours,
BAKER BOTTS L.L.P.
By: /s/
Tull R. Florey
cc: Mr. Roger K. Parsons (by FedEx) Elizabeth A. Cook ConocoPhillips
[INQUIRY LETTER]
November 29, 2005
E. Julia Lambeth, Corporate Secretary
ConocoPhillips
600 North Dairy Ashford
Houston, Texas 77079
BY FACSIMILE TO: (281) 293-4111
RE: 2006 Shareholder Proposal
Dear Ms Lambeth:
Pursuant to the Securities and Exchange Act of 1934, 240. 14a-8, please publish
the following shareholder proposal and statement in the 2006 Proxy Statement for
ConocoPhillips.
SHAREHOLDER PROPOSAL
The Board shall investigate, independent of inhouse legal counsel, all potential
legal liabilities that ConocoPhillips inherited from Conoco but omitted from the
February 2002 prospectus titled "Proposed Merger of Conoco and Phillips." The
Board shall report to shareholders all potential legal liabilities omitted from
the prospectus that would have a material impact on future financial statements
or share value when the liabilities are realized or made public.
Shareholder Statement
The Board relies upon inhouse legal counsel for information on the potential
legal liabilities reported to shareholders. However, inhouse legal counsel have
inherent conflicts in their role as lawyers who manage company legal defenses in
lawsuits against the company, and in their role as the sole provider of
information to the Board on the magnitude of potential legal liabilities that
the company faces.
The conflict has lead inhouse legal counsel to overestimate the strength of
their defenses and underestimate the magnitude of the legal liabilities reported
to the Board. This proposal seeks to have the Board, as the fiduciary of
shareholders, begin independently evaluating all potential legal liabilities
against the company starting with the legal liabilities inherited from Conoco
that were unreported by inhouse legal counsel in the 2002 prospectus.
Sincerely,
/s/
Roger Parsons
Independent Administrator of the Estate of Ann Kartsotis Parsons
cc James J. Mulva, Chairman of the Board
Norman R. Augustine, Director
Larry D. Horner, Director
Charles C. Krulak, Director
Richard H. Auchinleck, Director
William K. Reilly, Director
Victoria J. Tschinkel, Director
Kathryn C. Turner, Director
James E. Copeland, Jr., Director
Kenneth M. Duberstein, Director
Ruth R. Harkin, Director
William R. Rhodes, Director
J. Stapleton Roy, Director
Frank A. McPherson, Director
[APPENDIX]
CONFIDENTIALITY NOTICE
This communication is intended for the use of the individual or entity to which
it is addressed below, and may contain information that is privileged,
confidential, and/or exempt from disclosure under applicable law. If the reader
of this communication is not the intended recipient or the employee or agent
responsible for delivering the message to the intended recipient, the reader is
hereby notified that any dissemination, distribution, or copying of this
communication is strictly prohibited. If the reader has received this
communication in error, please notify us immedlately by telephone or facsimile
and return the original communication to us at the above address via the U.S.
Postal Service, Thank You!
PLEASE DELIVER TO:
James J. Mulva, Chairman of the Board
Norman R. Augustine, Director
Larry D. Horner, Director
Charles C. Krulak, Director
Richard H. Auchinleck, Director
William K. Reilly, Director
Victoria J. Tschinkel, Director
Kathryn C. Turner, Director
James E. Copeland, Jr., Director
Kenneth M. Duberstein, Director
Ruth R. Harkin, Director
William R. Rhodes, Director
J. Stapleton Roy, Director
Frank A. McPherson, Director
c/o E. Julia Lambeth, Corporate Secretary
ConocoPhillips
600 North Dairy Ashford
Houston, Texas 77079
NOTE:
DATE: November 29, 2005
FACSIMILE NUMBER(S): (281) 293-4111
PAGES (INCLUDING COVER SHEET): 3
[INQUIRY LETTER]
November 29, 2005
E. Julia Lambeth, Corporate Secretary
ConocoPhillips
600 North Dairy Ashford
Houston, Texas 77079
BY FACSIMILE TO: (281) 293-4111
RE: 2006 Shareholder Proposal
Dear Ms Lambeth:
Pursuant to the Securities and Exchange Act of 1934, 240.14a-8, please publish
the following shareholder proposal and statement in the 2006 Proxy Statement for
ConocoPhillips.
SHAREHOLDER PROPOSAL
The Board shall investigate, independent of inhouse legal counsel, all potential
legal liabilities that ConocoPhillips inherited from Conoco but omitted from the
February 2002 prospectus titled "Proposed Merger of Conoco and Phillips." The
Board shall report to shareholders all potential legal liabilities omitted from
the prospectus that would have a material impact on future financial statements
or share value when the liabilities are realized or made public.
Shareholder Statement
The Board relies upon inhouse legal counsel for information on the potential
legal liabilities reported to shareholders. However, inhouse legal counsel have
inherent conflicts in their role as lawyers who manage company legal defenses in
lawsuits against the company, and in their role as the sole provider of
information to the Board on the magnitude of potential legal liabilities that
the company faces.
The conflict has lead inhouse legal counsel to overestimate the strength of
their defenses and underestimate the magnitude of the legal liabilities reported
to the Board. This proposal seeks to have the Board, as the fiduciary of
shareholders, begin independently evaluating all potential legal liabilities
against the company starting with the legal liabilities inherited from Conoco
that were unreported by inhouse legal counsel in the 2002 prospectus.
Sincerely,
/s/
Roger Parsons
Independent Administrator of the Estate of Ann Kartsotis Parsons
cc James J. Mulva, Chairman of the Board
Norman R. Augustine, Director
Larry D, Horner, Director
Charles C. Krulak, Director
Richard H. Auchinleck, Director
William K. Reilly, Director
Victoria J. Tschinkel, Director
Kathryn C. Turner, Director
James E. Copeland, Jr., Director
Kenneth M. Duberstein, Director
Ruth R. Harkin, Director
William R. Rhodes, Director
J. Stapleton Roy, Director
Frank A. McPherson, Director
[INQUIRY LETTER]
December 7, 2005
Mr. Roger K. Parsons
Suite K-188
6850 North Shiloh Road
Garland, TX 75044
Re: Proposal for 2006 Annual Meeting of Shareholders of ConocoPhillips
Dear ConocoPhillips Shareholder:
We received your proposal on November 28, 2005, and we appreciate your interest
as a shareholder in ConocoPhillips.
The securities laws of the United States require that we notify you, within 14
calendar days of receiving your proposal, of any procedural defects in your
shareholder proposal prior to including such proposal in our Proxy Statement for
the 2006 Annual Meeting of Shareholders of ConocoPhillips. Therefore, please be
advised that your proposal does not contain one or more of the following as
required by the Securities Exchange Act of 1934:
If you are a registered shareholder*, a written statement that you intend to
continue to hold at least $2,000 in market value, or 1%, of our common stock
through the date of the 2006 Annual Meeting of Shareholders.
If you are not a registered shareholder, a written statement from the "record"
holder of your shares (usually a broker or bank) verifying that, at the time you
submitted your proposal, you own and have continuously held at least $2,000 in
market value, or 1%, of our common stock for at least one year as well as your
own written statement that you intend to continue to hold the securities through
the date of the 2006 Annual Meeting of Shareholders.
In order for your proposal to be deemed properly submitted under the United
States securities laws, your response containing the items identified above must
be postmarked, or transmitted electronically, no later than 14 days from the
date you receive this notification.
If you have any questions or would like to speak with a representative from
ConocoPhillips about your proposal, please feel free to contact Elizabeth A.
Cook at (281) 293-4966.
Sincerely,
/s/
Elizabeth A. Cook
-----FOOTNOTES-----
* A "registered" shareholder means your shares are registered in your name on
the books of ConocoPhillips. If you are unsure if you are a registered
shareholder, you should consult with your bank or broker to determine your
status.
[INQUIRY LETTER]
January 3, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: ConocoPhillips Shareholder Proposal for 2006
Ladies and Gentlemen:
I write in opposition to the December 22, 2005, request from attorney Mr. Tull
R. Florey with Baker Botts LLP to recommend that the Securities and Exchange
Commission (the "Commission") take no enforcement action if ConocoPhillips (the
"Company") excludes my shareholder proposal from the Company's 2006 Proxy
Materials.
The Proposal and Supporting Statement
Attached as Exhibit A is a copy of my correspondence to ConocoPhillips Corporate
Secretary E. Julia Lambeth requesting that the Company shareholder proposal
("Proposal") therein be published in the Company's 2006 Proxy Materials.
Attached as Exhibit B is a copy of my July 16, 2002, correspondence to the
Commission complaining about material omissions from the prospectus entitled
"Proposed Merger of Conoco and Phillips" ("Prospectus"). This correspondence was
copied and delivered to Phillips Chairman, now ConocoPhillips Chairman, James J.
Mulva on the same day. The document is evidence of the Company's guilty
knowledge (scienter) of unreported material legal liabilities that the Company
was inheriting from Conoco if the merger occurred.1
Attached as Exhibit C is a copy of the FACTS section for a fraud upon the court
case2 in which the Company will be a defendant. Because the facts recited here
show at least three instances of criminal fraud against US and Malaysian federal
agencies that investigated the plane crash that Mr. Florey discusses in his
letter, the matter was referred to the US Department of Justice and the Attorney
General Chambers of Malaysia for their review and action.
The conspiracy to violate the US sanctions law discussed in article "The Iran-Conoco
Affair" attached to my July 16, 2002, correspondence to the Commission is one of
many efforts by the Company over the past fifteen years to circumvent
presidential executive orders and federal statutes to profit from the vast oil
reserves of Iran.3 Following the September 11, 2001, terrorist attacks against
the United States, Iran has made public its long-term intentions to develop or
obtain weapons of mass destruction. If Iran or its surrogates ever used one of
these weapon of mass destruction against citizens of the United States, then
legal liabilities that the Company would face for Conoco having financially
enabled an enemy of the United States would be incalculable.
The inclusion of this detailed recitation of facts here is necessary to correct
the errors and omissions in Mr. Florey's recitation of the facts, and to rebut
Mr. Florey's false assertions that the facts demonstrate that the Proposal
relates to my personal interests that are not shared by other shareholders, and
that the Proposal impugns the character, integrity or reputation, or makes
charges concerning improper, illegal or immoral conduct or associations of
in-house legal counsel without factual foundation. To the contrary, the facts
demonstrate that the Proposal relates to the interests of all citizens of the
United States, including Company shareholders.
Bases for Enforcement Action Against ConocoPhillips
The Proposal Is Not Excludable Pursuant to Rule 14a-8(i)(4).
The proposal does not relate to the redress of a personal claim or grievance
against the Company or any other person, nor is it designed to result in a
benefit to me or to further a personal interest, which is not shared by other
shareholders at large.
Because Mr. Florey can not distort the language of the Proposal into any form
that could be construed as the "...same or similar..." to the language of any
proposal referred to in the 1995 No-Action Letter, Mr. Florey designs his
lengthy argument on this issue to begin with an unproven claim that "[t]he
Proposal, although not evident on its face, is designed solely to benefit of the
Proponent..." (See Page 2.). For four pages Mr. Florey fails to provide any
evidence of this claim, because none exists. Then on Page 6, Mr. Florey's
motivation for this design of his argument becomes clear. Mr. Florey claims that
the Company is the beneficiary of the 1995 No-Action Letter that was granted
DuPont and states that the Commission's "...response shall also apply to any
future submissions to the Company of a same or similar proposal by the same
proponent." (emphasis added) However, the "Company" referred to in the 1995
No-Action Letter is not the "Company" that Mr. Florey represents, it is DuPont,
then and now a distinct corporate entity from the Company.4
All shareholders have a personal interest in the money that they invest in the
Company. When both my wife and I were employees of the Company we also had
interests in the day-to-day management of the Company that most shareholders do
not share. Specifically, after the plane crash discussed in Exhibit C, I had a
interest in my own safety flying on planes that the Company operated; and I,
individually and as the administrator of my wife's estate, had a interest and
responsibility to recover all damages allowed under law.
The Company fired me in February 1992, thereby ending my interest in the
day-to-day management of the Company; and all litigation to recover damages
arising from my wife's death were concluded with the Fifth Circuit Court of
Appeals mandate in the second appeal of Parsons v. DuPont on December 31, 1998.5
Consequently there is no foundation for Mr. Florey's claim that the Proposal is
"designed" to benefit me in these long-concluded legal disputes, or that I am
airing a personal grievances in the Proposal.6
The Proposal Is Not Excludable Pursuant to
Rule 14(a)-8(i)(10).
The Company has failed to substantially implement the proposal. Although there
are policies and procedures in place to detect the problems that the Proposal
seeks to expose; Mr. Mulva, apparently motivated by his own job security,
continues to conceal from shareholders the information he was provided on July
16, 2002.
The Company's former sole shareholder, DuPont, also had controls in place to
make sure that material liabilities were reported to shareholders and
prospective shareholders. However, DuPont's Board and in-house lawyers subverted
these controls. When their fraud was eventually uncovered in September 1995,
shareholders successfully prosecuted a securities fraud class action case in a
federal district court in Florida against DuPont and the Board for inflating the
price of DuPont's stock between June 19, 1993, and January 27, 1995, by making
false representations to shareholders and prospective shareholders about the
material legal liabilities that DuPont incurred from incompetent and illegal
tactics designed by inhouse legal counsel for the multi-billion dollar Benlate
litigation.
The Proposal seeks to have the Board demonstrate to shareholders that the
Company has not inherited the bad habits of DuPont's Board and in-house legal
counsel. As the DuPont securities fraud case reveals, directors and lawyers
responsible for overseeing the enforcement of corporate controls do not report
legal liabilities that they have created for the company to shareholders.
The Proposal Is Not Excludable Pursuant to Rule
14(a)-8(i)(7).
The Proposal does not relate to the ordinary business operations of the Company.
The Company is an diversified oil and gas company. Shareholders need to be
immediately advised if the Company is now claiming that the fraud and
malfeasance that the Proposal will have the Board investigate is part of
ordinary business operations.
The Proposal Is Not Excludable Pursuant to Rule
14(a)-8(i)(3).
The Proposal does not make any false or misleading statements. The attached
Facts (Exhibit C) support any suggestions derived from the Proposal that
directly or indirectly impugn the character, integrity or personal reputation,
or directly or indirectly makes charges concerning improper, illegal or immoral
conduct.
The material legal liabilities of the Company must be reported to shareholders,
even if these revelations are embarrassing, or expose gross mismanagement and/or
malfeasance by senior management.
Conclusion
The Proposal gives shareholders an opportunity to direct their Board to
investigate and report on material legal liabilities that Mr. Mulva and in-house
lawyers know about and have withheld from shareholders at large. All
shareholders have a right to read the Proposal and cast an informed vote for or
against it.
I respectfully request that the Division of Corporation Finance recommend that
the Commission take all necessary enforcement action to assure that the Company
publish the Proposal in its filing of the definitive Proxy Materials for the
2006 Annual Meeting that is to take place on or about March 21, 2006.
If the Staff has any questions with respect to the Proposal or this
correspondence, or the Commission's investigation of my complaint filed in July
16, 2002, please call me at (214) 649-8059.
Sincerely,
/s/
Roger Parsons
Attachments
Exhibit ARE: 2006 Shareholder Proposal (2 pages)
Exhibit BRE: "Proposed Merger of Conoco and Philips" (8 pages)
Exhibit CFACTS (35 pages)
-----FOOTNOTES-----
1 Mr. Florey omitted this correspondence in his December 22, 2005, filing.
However, Mr. Florey falsely states in his letter to the Commission that he was
including "...all correspondence between the Company and the Proponent relating
to the Proposal."
2 Pursuant to Federal Rules of Civil Procedure, Rule 60(b).
3 In July 2004, the US Energy Information Agency reported as follows. "In
September 2000, the U.S. Treasury Department announced that it was investigating Conoco to determine whether or not the company had violated U.S. sanctions in
helping to analyze information on the field collected by the National Iranian
Oil Company (NIOC) regarding the enormous, 26-billion-barrel Azadegan oilfield
(the largest oil discovery in Iran in many years)."
4 In the last paragraph of his section on this issue Mr. Florey states that
"...the relatedness of DuPont and the Company as corporate entities..." gives
the Company a claim to the benefits of the 1995 No-Action Letter. If this
relatedness is as this strong as Mr. Florey asserts, then the Company should
also declare the material liabilities for frauds that DuPont incurred in the
shareholder derivative litigation against DuPont for failing to report material
liabilities created by the corporate legal department shared by DuPont and Conoco until 1998, and arising from DuPont/Conoco lawyers' defrauding courts in
the infamous Benlate cases. (See Exhibit C.)
5 As described in Exhibit C and by Mr. Florey in his December 22, 2005 letter to
the Commission, the litigation against the Company ended more than ten years ago
in 1995.
6 In fact, it is Mr. Florey who has used his letter to the Commission as a
vehicle for airing the grievances of the Company's former sole shareholder, E.
I. du Pont de Nemours and Company ("DuPont"). Florey complains about lawsuits
and "...at least four shareholder proposals, countless correspondence, and other
such actions...", including a shareholder with the nerve to actually speak at a
meeting of shareholders'. It appears that the Company hired Mr. Florey, at
shareholder expense, to gain Commission sympathy for the terrible abuses that
the Company has suffered at the hands of one shareholder. Mr. Florey has my
sympathy.
[STAFF REPLY LETTER]
February 23, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: ConocoPhillips Incoming letter dated December 22, 2005
The proposal would require that the board investigate, independent of inhouse
legal counsel, and report to shareholders all potential legal liabilities
alleged by the proponent to have been omitted from the February 2002 prospectus
titled "Proposed Merger of Conoco and Phillips."
There appears to be some basis for your view that
ConocoPhillips may exclude the proposal under rule 14a-8(i)(7), as relating to
ConocoPhillips' ordinary business operations (i.e., general legal compliance
program). Accordingly, we will not recommend enforcement action to the
Commission if ConocoPhillips omits the proposal from its proxy materials in
reliance on rule 14a-8(i)(7). In reaching this position, we have not found it
necessary to address the alternative bases for omission upon which
ConocoPhillips relies.
Sincerely,
/s/
Geoffrey M. Ossias
Attorney-Adviser
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