Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Energy and Environmental Protection and Consumer Protection and Commerce and Judiciary, to which was referred S.C.R. No. 33, S.D. 1, entitled:

beg leave to report as follows:

The purpose of this concurrent resolution is to urge the State to pursue litigation against ChevronTexaco for its participation in a tax fraud scheme that allowed it to evade millions of dollars in state and federal taxes for more than 20 years, and that at the same time involved the sale of overpriced Indonesian oil to Hawaii's consumers.

Several concerned individuals testified in support of this concurrent resolution. The Attorney General (AG) commented on the measure.

Your Committees find that there is compelling evidence based on the report of this matter by professors Jeffrey Gramlich and James Wheeler, and the related 1994 settlement between Chevron and the IRS, to support the AG's ongoing investigation. If the allegations are true, the citizens of Hawaii may have been defrauded of hundreds of millions of dollars. Given this, your Committees believe the State has a duty to press forward toward possible litigation of this matter.

Your Committees further find that the State has been fortunate in arriving at its retainer agreement with Winston and Strawn, a prominent and highly-regarded Chicago-based law firm that specializes in litigation of the type involved in this case. The firm is currently engaged in the difficult and time-consuming process of reviewing documents provided by ChevronTexaco to determine whether there is a solid basis for legal action. For this purpose, the State's short-term agreement with the firm has been extended for the fourth time, to May 19, 2003.

Under the retainer agreement, the firm carries all costs of its investigation and any further litigation, unless the State for some reason terminates the agreement. As an incentive for the firm to thoroughly investigate and aggressively litigate any case filed, the firm's fee will be 20 percent of the first $100,000,000 awarded, 13 percent of additional amounts up to $200,000,000, and 5 percent of amounts above that.

As affirmed by the records of votes of the members of your Committees on Energy and Environmental Protection and Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees concur with the intent and purpose of S.C.R. No. 33, S.D. 1, and recommends its adoption.