[SOLVED] In March 1994, six African Americans employed

In March 1994, six African Americans employed at Texaco Inc.1 filed a class action lawsuit on behalf of 1,400 current and former African American employees. They alleged that Texaco had systematically discriminated against them in terms of promotions and had fostered a hos- tile corporate environment for minority employees.2
Richard Lundwall was the senior coordinator of personnel services in the Finance Department at Texaco’s office in Harrison, New York. During an August 5, 1994, deposition,3 he testified that he and other officials in Texaco’s Finance Department retained records relating to the promotion of minority employees. He was asked to produce these documents. On August 14, 1994, Lundwall attended a meeting with other members of the Texaco Finance Department to discuss the production of these requested documents. Among the officers attending this meeting were Robert Ulrich, treasurer; David Keough, senior assistant treasurer; and various division heads, such as Peter Meade, Brian Ashley, Pete Wissel, and Steve Carlson.4 Prior to entering the meeting, Lundwall placed a small tape recorder in his pocket and turned it on. When later asked why he had taken such action, he stated that “over the years I’ve seen a number of people thrown to the wolves when something went wrong, and I didn’t want to be fodder for the wolves.”5 On a more practical level, however, Lund- wall was also in charge of taking minutes of the meeting and found that recording the meetings ensured the accuracy of the minutes.6 He stated that after the meeting, he placed the tapes in his desk and forgot about them.7
In the spring of 1996, Lundwall was informed that he was being downsized out of his job and had to leave Texaco by the end of August 1996. After thirty-one years of loyal service to Texaco, he expected more; he had seen other employees being pushed out when they reached fifty-five years of age and realized that the same thing was now happening to him.8 It was not until he was in the hospital recovering from surgery in March 1996 that he remembered the tapes and had time to listen to them.9 Lundwall maintains, on an interview on 60 Minutes, that he had only to mention his possession of the tapes to a senior executive, and his job would have been secure. When asked why he did not take such an action, he responded, “It’s not the right thing to do. That’s called extortion and that’s illegal. And … the world’s a crummy enough place without adding to it.”10
By July 1996, Lundwall realized that there would be no job at Texaco. On his last day of work, he approached one of the employees who had launched the suit and informed her that “depending on how my situation turns out, you might have an ally.”11 Lundwall’s reasoning was that, if a job did surface, then he would not have been able to come forward with the tapes, not for a while, anyway.12 On August 1, 1996, Lundwall contacted Cyrus Mehri at the law firm of Cohen, Milstein, Hausfield, and Toll, lawyers for the plaintiffs. He informed Mehri that he had in his possession information that would be useful in the lawsuit against Texaco. In subsequent conversa- tions, Lundwall informed Mehri that such information included tape recordings. On August 12, 1996, Lundwall met with Mehri and informed him that the tape recordings, created after the litigation began, revealed himself and other senior officials in the Finance Department discussing the destruction of documents relevant to the plaintiffs’ case.13 After this meeting, Lund- wall retained a lawyer and in September 1996 handed over copies of two tapes to attorneys for the plaintiffs. On October 25, 1996, Lundwall met again with Mehri and listened to the tapes. He confirmed that the tapes were the same ones he had provided to his counsel to hand over.14 He admitted that one of the purposes for the meeting of August 14, 1994, was to review the mate- rials requested by the plaintiffs after the deposition and to hide documents from the plaintiffs. He admitted that he and oth- ers had shredded portions of the requested evidence, that handwritten comments were deleted from certain documents, and that certain finance officials were told to say that they did not retain their own copies of such information.15 In one part of the tape, the following was revealed:
Ulrich: You know, there is no point in even keeping the restricted version any more. All it could do is to get us in trouble. That’s the way I feel. I would not keep anything.
Lundwall: Let me shred this thing and any other restricted version like it.
In another segment:
Keough: They’ll find it when they look through it.
Lundwall: Not if I take it out they won’t.
Matters did not end here. The tape recording of the August 14, 1994, meet- ing contained other interesting bits of conversation. The initial transcript of the recordings, which hit the New York Times on November 4, 1996, indicated the use of expletives and racist terms, such as niggers and black jelly beans. Accord- ing to the Times, at one point in the tape the treasurer states, “It’s this diversity thing. You know how black jelly beans agree…,” to which Lundwall responds, “That’s funny. All the black jelly beans seem to be glued to the bottom of the bag.” At another point in the tape, Lundwall states, “I’m still having trouble with Hanuk- kah. Now we have Kwanzaa. These f—ing niggers, they s—all over us with this.”16
Texaco was quick to act over the revelation of these tapes. At a news conference held on November 4, 1996, Texaco chair- man Peter Bijur apologized for the remarks on the tape, stating that such remarks repre- sent not only a profound contempt for the law but also a contempt for Texaco’s values and policies. Bijur indicated that the com- pany was taking six steps to reinforce com- pany policy and its code of conduct. Such measures included visits by senior execu- tives to company locations to apologize to employees, the expansion of Texaco’s “diver- sity learning experience,” and a renewed emphasis on the company’s core values. Two current employees were suspended with pay, and the benefits of Lundwall and former treasurer Robert Ulrich (who had retired in March 1995) were cut off. Texaco retained the services of Peter Armstrong, former assistant U.S. attorney for the South- ern District of New York, to conduct an independent investigation into the matter. In his report released November 11, 1996, Mr. Armstrong notes that by using digital processing techniques, he was able to obtain a clearer version of the recording.17 After listening to this version, he concluded that the word nigger was never used, as initially alleged in the plaintiffs’ transcript:
Ulrich: “I’ve heard that diversity thing, we don’t have black jelly beans or green…”
Lundwall: “… that’s funny, all the black jelly beans seem to be glued to the bot- tom of the bag.”
Through his attorney, Mr. Ulrich indicated that the term jelly bean was not meant to be pejorative and actually was a reference from a speech given by a gentleman later identified as Doctor R. Roosevelt Thomas Jr., who uses a jelly bean analogy as a means of describing diversity.18
Armstrong’s conclusion was that the terms f——ing nigger were never used and that the references to jelly beans do not appear to have been intended as a racial slur. Bijur was quick to indicate that these preliminary findings merely correctly identified what words were actually spo- ken in the conversation but by no means changed the unacceptable context or tone of the conversation. The report’s findings were published in the New York Times on November 11, 1996. Civil rights leaders interviewed on November 12, 1996, felt that the distinction in the transcript made little difference, as the tone of the conversation indicated a clear disdain for both Hanukkah and Kwanzaa and revealed intolerant overtures.19 Bijur spent most of the day meeting with civil rights leaders, such as Kweisi Mfume of the National Association for the Advancement of Colored People and Reverend Jesse Jackson, many of whom called for a national boycott of Texaco.
On November 15, 1996, Texaco announced it had reached an Agreement in Principle to settle the Roberts et al. v. Texaco lawsuit. The terms of the settlement were as follows:
• Provide payment to the plaintiff class in the amount of $ 115 million, in addition to a one-time salary increase of approximately 11% for current employees of the plaintiff class effective January 1, 199720
• Create an Equality and Tolerance Task Force, which will be charged with deter- mining potential improvements to Texaco’s human resources programs and monitor the progress of such programs
• Adopt and implement company-wide diversity and sensitivity, mentoring and ombudsperson programs
• Consider nationwide job posting of more senior positions
• Monitor its performance on the pro- grams and initiatives provided for in the settlement agreement
The total cost of the agreement was said to be $176.1 million, making it the largest settlement for a race discrimination suit in history.21 Texaco’s problems, however, are far from over. On November 13, 1996, two Texaco shareholders launched a shareholder’s derivative action lawsuit, stating that Texaco’s directors and officers breached fiduciary duty and damaged Texaco’s name. Some would say that it was about time Texaco was finally caught. In 1991, Texaco paid a record $17.7 million in compensatory and punitive damages to an employee who sued for sex discrimination after the company denied her a promised promotion and gave her job to a man.22 Others say that Texaco was forced to settle the case not on its legal merits but due to the inaccurate transcript published by the New York Times.23 Some have argued that what the Texaco case proves is that “if you can create enough bad publicity, depicting a company as hopelessly racist, you can win without ever going to trial.”24 This may not be entirely correct. Had this matter gone to trial, damages in the Roberts action were estimated at $71 million in back pay and damages for each plaintiff in the amount of $300,000, resulting in a total liability of $491 million.25 Furthermore, in June 1996, Spencer Lewis Jr., a district direc- tor of the Equal Employment Opportunity Commission (EEOC) for the New York City District, found against Texaco for failing to promote blacks and pursuing a company- wide pattern of racial bias.26 Lewis held that Texaco used an evaluation system to pro- mote employees that did not comply with EEOC guidelines. Questions about Texaco’s corporate culture exist. In a company whose core values state that “each person deserves to be treated with respect and dignity”27 and where it is within the corporate conduct guidelines to report known or suspected violations of company policy to supervisors, some say that such a conversation could not have arisen if it were not prevalent for such written policies to be undermined by the actions of senior executives.
When Lundwall was questioned as to why he turned over the tapes, he indicated that it was not to get back at Texaco but, rather, to maintain a job.28 In retrospect, he admits that he was naive bordering on stupid to think that handing over the tapes would help his cause. If anything, handing over the tapes apparently hurt his cause. On November 19, 1996, Robert Lundwall was arrested and charged with obstruction of justice in that, from July 1994 to August 1994, he corruptibly destroyed, concealed, and withheld documents requested by attorneys for the plaintiffs. As of Decem- ber 17, 1996, Lundwall was involved in discussions with the prosecuting attorneys to possibly resolve the charge with- out going to trial by either pleading to a lesser charge or offering help in exchange for immunity.29 As a result of Lundwall’s criminal subpoena before the grand jury, further questionable actions on the part of Texaco’s executives have come to light. In addition to the documents pertaining to the promotion of minority employees, the grand jury records included a draft memo dated June 24, 1994, summarizing the results of an employee survey in Texaco’s Finance Department. The results were distinctly unfavorable toward the criteria for promotions of employees. The draft results were forwarded by Lundwall to a lawyer in Texaco’s Legal Department on June 30, 1994, requesting advice on publication of the survey results. A handwritten reply on Lundwall’s covering memo from the lawyer dated July 26, 1994, advised delaying publication of the survey results to avoid its becoming part of the discovery process in the class action suit.30 While Texaco lawyers state that this draft memorandum was not subject to discovery, the plaintiffs’ lawyers claim that it did fall within the time frame.
When asked why it appears on certain portions of the tape that he took the initia- tive to shred documents, Lundwall would not comment.31 His attorney indicates that the transcripts of the tape make it clear that Lundwall was directed to shred and destroy the evidence.32
When asked what he would do if he had to do it all over again, Lundwall stated that he would “slip quietly into the night with my benefits and let the system stay as screwed up as it is.”33
Questions
1. In a company as progressive as Texaco, what permitted such discrimination to occur?
2. How could such discrimination have been prevented?
3. Is whistleblowing ethical?
4. Could a protected whistleblowing mechanism or conscientious ombudsperson have helped?

Question: In March 1994, six African Americans employed