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Cgevron Texaco Examination

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Letter to Employees


The ChevronTexaco Corporation combines companies with long and

proud histories and worldwide reputations for honesty and integrity – two key

values of The ChevronTexaco Way. These well-deserved reputations not only

underlie our past accomplishments but also will be critical to our future success.

The ChevronTexaco Manual of Compliance Procedures and Guidelines

(the Manual) describes our policies both on the way we conduct ourselves and

on the way we do business around the world. We ask each of you whose jobs

require more detailed guidance than is contained in the companion

ChevronTexaco Business Conduct and Ethics Code to read the Manual and

become familiar with how the various policies relate to your job.

In brief, ChevronTexaco’s policy is always to comply fully with both the

spirit and the letter of the law. But beyond that, we should conduct our business

with the highest standards of honesty and integrity -- wherever we operate.

Wherever the law is unclear or seems conflicting or we are in one of those gray

areas, we should conduct our business in such a way that we would be proud to

have all the facts disclosed.

No matter what our jobs may be, each of us may face ethical questions --

in our dealings with supervisors, peers and subordinates; with customers and

suppliers; with unions and governments; and with the communities in which we

live and work. These situations continually test our judgment and integrity in

the face of changing cultural values and increasing competitive pressures.

Often the test is not just what is illegal, but what is proper. Shortcuts, halftruths,

compromises and the expedient never should be allowed to replace what

is ethical and legal. These convenient or perhaps seemingly harmless acts can

hurt our business and harm our reputation, which is one of the cornerstones of

our success. That is why ChevronTexaco will not tolerate any unethical

behavior by employees.

In the final analysis, ChevronTexaco’s success will continue to depend on

its ethical business conduct. We count on each of you to continue to conduct

yourselves following the highest standards of The ChevronTexaco Way.

Dave O’Reilly

Chairman of the Board and Chief Executive Officer



October 2001

This manual brings together the procedures and guidelines concerning compliance with

particularly complex U.S. laws and regulations (federal, state and local) that call for special

attention. There are, of course, many others that have an impact on ChevronTexaco. For all

these laws, the long-standing policy of unequivocal compliance applies. The potentially

severe civil and criminal penalties resulting for both the employee and ChevronTexaco for

violating these laws underscore the importance of knowing and following the procedures and

guidelines in this manual.

The management of every Corporation department and operating company is responsible for

implementing and enforcing the applicable procedures and guidelines. It is vital that each

employee whose work is affected by these procedures and guidelines have access to the

relevant sections of this manual.

Employees should be aware that violation of the law and of the procedures and guidelines in

this manual may lead not only to legal penalties but also to disciplinary action by the

company, up to and including termination of employment. Each employee is responsible to

make sure that he or she acts in compliance with the letter and spirit of applicable laws, as

well as the procedures and guidelines in this manual. All ChevronTexaco managers and

supervisors have the additional responsibility of making sure that everyone who works for

them understands and fulfills all their compliance obligations.

The ChevronTexaco Corporation Law Department has responsibility for updating and

distributing this manual. Employees with questions or changes may call the Law Department

Compliance Manual Administrator at (925) or CTN 973-4582 or send an e-mail to







General Instructions


Revised October 2001


ChevronTexaco's standards and procedures for compliance by its employees or agents with

applicable laws and regulations are stated in these instructions and in the following specific

sections of this Manual as they may be revised and as they have been or may be

supplemented in other documents from time to time. These standards and procedures are

referred to collectively as "guidelines."

In any case in which an agent, as distinguished from an employee, is used to conduct

ChevronTexaco business that must conform to legal standards, those in ChevronTexaco

engaging the services of the agent are responsible for assuring that he or she is properly

instructed concerning ChevronTexaco's applicable guidelines.


Each of the following sections of this Manual assigns responsibility for compliance

supervision to one or more individuals or staff organizations. The manager of each

Corporation department and the President of each operating company will oversee such

compliance to assure that all affected employees of that department or operating company

have been informed and have acknowledged that they will comply with the guidelines

applicable to their particular employment.

In addition, all officers, managers, supervisors and employees are individually responsible

not only for their own compliance with the guidelines but for assuring that those working

under their supervision are in compliance with them.


ChevronTexaco will not knowingly employ anyone whose prior conduct has demonstrated a

propensity to engage in criminal activities. Appropriate inquiries of applicants for

employment will be made on this subject by the Human Resources Department of the

Corporation or of the operating company, as the case may be. Any ChevronTexaco employee

whose conduct demonstrates a propensity to engage in illegal activities should expect to be

discharged. If in extraordinary circumstances the employment were continued, the employee

would not be given discretionary authority that might be used in any area of

ChevronTexaco's operations to violate the law.

General Instructions


All affected employees will be given a copy of this Manual, or of those particular parts of it

applicable to their employment, and must state in writing that they have read and will comply

with the guidelines. This is to be documented by each employee's execution of a Form GO

260-ACK acknowledgment or on-line equivalent. The original of this document will be

placed in the employee's personnel file and the employee will be given a duplicate copy. The

same procedure will be followed with new employees and with those transferred to a new

position affected by the guidelines.

This written instruction will be regularly supplemented as appropriate by training programs

in which the meaning and practical application of the guidelines will be discussed and

questions answered. Whenever changes in the law require additional instruction, it will be

promptly given.

As it is not practical in written guidelines to cover all possible issues, or to anticipate all

possible questions, employees are urged to consult with those responsible for compliance as

provided in this Manual.


ChevronTexaco's program is designed to achieve compliance with, and seek to detect

violations of, the guidelines through:

A. Periodic training programs on the meaning and application of the guidelines (see IV,


B. Periodic audits of pertinent files and records; and

C. Requiring every employee to report any conduct that he or she believes may be in

violation of the law or the guidelines.


If any employee believes that another employee or any agent, consultant or contract worker

or a ChevronTexaco business unit is violating the law or these guidelines or is engaging in

activities on ChevronTexaco's behalf that could damage ChevronTexaco's reputation, this

information must be brought to the attention of the employee's management, or, in the

alternative, to the attention of one or more of the following:

A. The head of the employee's organization, department or business unit.

B. Legal counsel responsible for the employee's organization, department or business unit.

C. Any person designated in these guidelines as a person responsible for compliance in the

specified area involved.

D. ChevronTexaco Corporation Auditing Department.

E. Corporate Security.

General Instructions

Employees who report possible misconduct to any of the above will not be subject to

retribution or suffer any adverse ChevronTexaco action as a consequence of making such a

report. The person to whom the information is reported shall ensure that the report is

promptly investigated to determine if any possible misconduct has occurred.

A toll-free 24-hour ChevronTexaco Hotline has been set up for employees to report possible

violations of law or ChevronTexaco policy in the event that an employee is reluctant to

contact any of the above. The number is 1-800-284-3015. Employees in Bermuda, Canada

or the United States can normally access the Hotline directly. Employees in other countries

may need to call the local AT&T access number for their country or city to reach the Hotline.

AT&T local access numbers can be found on the Internet at

Employees who are not fluent in English may use the Hotline’s translation service.

(Employees may also call 1-704-556-7046 collect and ask the telephone operator to charge

the call to ChevronTexaco). Calls received by the Hotline will be referred to the appropriate

organization for investigation and follow-up. All calls are strictly confidential. No employee

who reports possible misconduct will suffer retribution or any adverse ChevronTexaco action

because of his or her report.


Failure to comply with the law or the applicable guidelines will result in disciplinary action

including, in appropriate circumstances, termination of employment. Disciplinary action, as

appropriate, may also be taken against any employee who fails to report misconduct, or who

negligently fails to detect misconduct by someone working under his or her supervision, or

who fails to take appropriate steps to deal with misconduct once discovered.


When a violation of the law or the guidelines has been detected, ChevronTexaco will take

appropriate action to stop the violation and to prevent further violations. This action will

include making modifications to its compliance program when deemed desirable to enhance

its goals of preventing and detecting violations.


This Manual is available on ChevronTexaco's Intranet. The Corporation Law Department is

responsible for incorporating and distributing all changes and additions to the Manual.

Changes effected by new or substitute pages should be brought promptly to the personal

attention of all employees whose work or responsibilities may thus be affected. Employees

who do not have access to the Intranet may contact the Compliance Manual Administrator to

obtain a paper copy.

* As used herein, "Corporation" means ChevronTexaco Corporation, its departments and their staffs;

"ChevronTexaco" means ChevronTexaco Corporation and/or any and all of its operating companies.

Section 1. Internal Controls



ChevronTexaco has maintained, since its inception, an internal accounting control

system designed to ensure that its books and records are maintained correctly. However,

with the passage of the Foreign Corrupt Practices Act (FCPA) in December 1977

(amended in August 1988 and November 1998), the evaluation and documentation of

internal accounting control systems took on increased importance.

The FCPA amends the Securities Exchange Act of 1934 and has two parts. One part,

which is entitled “Foreign Corrupt Practices,” makes it unlawful to make “corrupt”

payments or gifts to foreign government officials. Guidelines and procedures for

compliance with this part of the FCPA and penalties for violations thereof are contained

in Section 3 of this Manual.

The other part of the FCPA is entitled “Accounting Standards” and prescribes rules

governing the books and records and the systems of internal accounting controls, and

penalties for violations thereof, for all corporations registered with the U.S. Securities

and Exchange Commission (SEC). A general explanation of the accounting standards

provisions of the FCPA as they affect the corporation and its subsidiaries and joint

ventures is set forth in these guidelines.


The FCPA mandates that publicly held companies (a) keep books and records which in

reasonable detail “accurately and fairly reflect the transactions and dispositions of the

assets” of such companies and (b) devise and maintain systems of internal accounting

controls which are “sufficient to provide reasonable assurances that:

A. transactions are executed in accordance with management’s general or specific


B. transactions are recorded as necessary (1) to permit preparation of financial

statements in conformity with generally accepted accounting principles or any

other criteria applicable to such statements, and (2) to maintain accountability for


C. access to assets is permitted only in accordance with management’s general or

specific authorizations; and

Section 1. Internal Controls

D. the recorded accountability for assets is compared with the existing assets at

reasonable intervals and appropriate action is taken with respect to any


The stated purpose of the accounting standards provisions was to prevent the use of “offthe-

book” bank accounts and slush funds in making questionable payments to United

States and foreign government officials. It is apparent, however, that these provisions

have an impact on both domestic and foreign operations far beyond preventing “corrupt

payments.” Indeed, the SEC has interpreted the accounting standards provisions so as to

enlarge management’s legal responsibility for all aspects of corporate operations.

Civil penalties for violating the accounting standards provisions of the FCPA include

substantial monetary penalties and mandatory injunctions applicable to corporations and

individuals as well as public disclosure of such violations. Criminal penalties for

knowingly circumventing or knowingly failing to implement a system of internal

accounting controls or knowingly falsifying any book, record, or account include a

significant fine and/or imprisonment for individuals and a fine for corporations.

Mandatory injunctions obtained against U.S. corporations and individuals have, for

example, required the:

A. appointment of an independent task force to study the company’s internal control


B. appointment of new directors, and

C. appointment of a receiver to run the company.

The accounting standards provisions of the FCPA apply equally to ChevronTexaco

Corporation and its 100 percent-owned subsidiaries. With regard to subsidiaries or

affiliates where ChevronTexaco has a controlling interest (i.e., ChevronTexaco owns

more than 50 percent) or is the operatorthe company, the company has responsibility to

ensure compliance with the accounting standards Also, we must use our influence in an

effort to cause our 50 percent or less owned affiliates and those joint ventures in which

we are associated—but not as operator—to devise and maintain adequate accounting

control systems.


To ensure that all transactions are “accurately and fairly reflected” in ChevronTexaco’s

books and records, the Comptroller maintains company-wide accounting and internal

accounting control systems. In very general terms, the accounting system provides:

Section 1. Internal Controls

A. Common definitions and standardized accounting procedures throughout


B. Uniform reporting of similar transactions throughout ChevronTexaco.

C. A basis for the preparation of financial statements in accordance with generally

accepted accounting principles and other applicable methods of reporting financial

and operating information.

D. Accurate and timely data for management use.

The basic ground rules for ChevronTexaco’s accounting system are contained in

its Guide to Corporate Accounting. All employees, both inside and outside the

financial organizations, involved in recording ChevronTexaco’s transactions are

expected to adhere to these procedures. Any questions on the correct recording of

a transaction not answered in the Guide to Corporate Accounting should be

referred to the Corporation’s Comptroller.

It is essential to note that attainment of a high degree of integrity in

ChevronTexaco’s accounting system necessitates that all entries in

ChevronTexaco’s books be prepared with care and honesty and be supported by

adequate documentation to provide complete, auditable records. Recording false or

misleading entries or assisting others in making such entries is prohibited both by

company policy and by law. No asset, liability, revenue or expense of

ChevronTexaco shall, under any circumstances, be willfully concealed or

incompletely or inaccurately recorded.

The goal of our internal accounting control system is to ensure that the abovelisted

objectives are achieved. The primary objectives of ChevronTexaco’s internal

accounting control system are to provide management with reasonable assurance


1. Transactions are executed in conformity with general or specific

management authorization.

2. Access to assets are safeguarded.

3. All transactions are recorded at the correct amounts, in the proper time

period, and in the appropriate accounts.

Section 1. Internal Controls


The successful operation of an internal accounting control system is based in large

measure on the existence of a comprehensive control environment. Specific accounting

controls cannot operate in a vacuum and the “control consciousness” established by

management will dictate to a great extent the overall organization’s adherence to

controls. ChevronTexaco’s internal control environment, which provides a positive

setting for the accounting control system, includes:

A. An appropriate organization structure

Management has established clear delegation of authority and communication of

responsibility within ChevronTexaco. ChevronTexaco has also recognized the

need for a strong Board Audit Committee and a competent and independent

internal audit staff as a foundation for a company-wide system of controls.

B. A systematic communication of corporate policies

Information pertaining to corporate policies and procedures has been

communicated to employees through the Corporate Policy Manual, the Manual of

Compliance Procedures and Guidelines, the “ChevronTexaco Business Conduct

and Ethics Code,” and general letters issued by management.

C. Appropriate personnel policies

ChevronTexaco has promoted the development of its employees through training

programs and systems designed to identify and reward performance.

D. Establishment of company objectives

A systematic company planning process has been maintained to ensure effective

development of company objectives and strategies.

Working in conjunction with this control environment is ChevronTexaco’s established

network of specific accounting controls. This system consists of all the means devised

by ChevronTexaco to direct, govern, measure, and verify its various activities. Examples

of these accounting controls are:

A. An appropriate segregation of duties

- e.g., responsibility for the safeguarding of material in a company warehouse and

responsibility for maintaining the inventory records for this material are not

assigned to the same person.

Section 1. Internal Controls

B. Duties are executed within authorized scope and limits

- e.g., purchase orders are checked to ensure the individual authorizing the

expenditure of funds is authorized by management to do so.

C. Transactions are recorded promptly and accurately

- e.g., monthly reconciliation of total products shipped from a terminal is made

with invoices sent to the terminal’s customers.

D. Access to assets is limited to authorized personnel

- e.g., petty cash funds are kept in a locked container accessible only to the fund’s


E. Comparison of recorded amounts with physical assets

- e.g., a monthly inventory of mogas at a terminal is compared with the inventory

reflected on the accounting statements.

While these guidelines are specifically directed to internal accounting controls—those

bearing directly on the reliability of the financial statements and the broad objectives of

transaction authorization, accounting and asset safeguarding—it must be kept in mind

that internal controls concerned with administrative and operational control over the

company’s activities are also part of the internal control environment. Controls of this

type usually concentrate on operational effectiveness and efficiency, adherence to

managerial policies, and compliance with applicable laws and regulations, but they are

also important to accounting control procedures and may impact the company’s

financial records. Thus, it is essential that these non-accounting controls be adhered to as

strictly as the accounting controls discussed above. A summary of ChevronTexaco’s

internal controls is contained in Corporate Policy 130.

It is recognized that, as with all systems, adequacy and effectiveness must be based on

the recognition that the cost of any control normally should not exceed the benefits to be

derived. Balancing these risk factors requires economic analysis and management

judgment. Of similar importance is the dynamic environment within which

ChevronTexaco’s recordkeeping functions operate. Systems must be designed with

necessary flexibility to recognize and react to environmental changes. Accordingly, the

Comptroller directs a monitoring process sufficient to ensure that cost/benefit

considerations are appropriately reviewed, systems are revised and updated consistent

with operational and environmental evolution, and the corporation and its subsidiaries

are in compliance with the guidelines and procedures set forth herein. Compliance is

also documented through an annual letter of representation submitted by the

Section 1. Internal Controls

management of each operating company to the appropriate Reporting Officer,which

includes a description of the adequacy of its internal accounting control systems. These

letters are also reviewed by the Comptroller, who has functional responsibility for the

Internal Controls compliance subject.

Employees should report any suspected FCPA problems or accounting control

weaknesses to the Corporation Comptroller, the Corporation’s Auditing Department or

to Corporate Security which will promptly notify the Corporation Comptroller and the

General Manager, Auditing. No retaliatory action will be taken against any employee

who in good faith reports any suspected problem. Alternatively, an employee may

contact the ChevronTexaco Hotline at 1- 800 -284 -3015. Calls may be made

anonymously and will be referred to the appropriate organization for investigation and



In addition to the accounting standards requirements of the FCPA, employees should

also be aware of two supplemental regulations. These rules, issued by the SEC in March

1979, provide as follows:

A. No person shall, directly or indirectly, falsify or cause to be falsified, any corporate

book, record or account.

B. No Director or Officer of the corporation shall, directly or indirectly, in connection

with an audit or examination:

1. Make or cause to be made a materially false or misleading statement.

2. Omit or cause to omit to state any material fact necessary to not mislead an


The penalties for violation of these regulations are the same as for violating the

accounting standards section of the FCPA.

It is important to note that even though the second rule is addressed to Directors and

Officers, the conduct of other employees is covered under various other anti-fraud laws.

They, therefore, are also prohibited from “misleading an accountant.”

Section 2. Conflicts of Interest


Revised October 1, 2001


ChevronTexaco respects the privacy and individual rights of its employees in the conduct of

their personal affairs. However, circumstances may arise in which the activities of an

employee conflict with the best interests of ChevronTexaco, adversely affect

ChevronTexaco's reputation or relations with others, or interfere with fulfillment of the

employee's job responsibilities. It is management's responsibility to ensure that employees

are made aware that such activities must be avoided—both on the job and off. It is each

employee's responsibility to avoid such activities, any activity, association, or interest which

interferes with, or potentially interferes with, the employee's exercise of independent

judgment in the performance of his or her responsibilities with ChevronTexaco and any

activity which has the appearance of a conflict of interest, regardless of whether an actual

conflict exists. . For the purposes of conflict of interest, the activities of immediate family

members of the employee are considered the actions of the employee; therefore, care should

be taken to insure that appropriate precautions are taken.

Employees may not use their position in ChevronTexaco or their influence in or as a

representative of ChevronTexaco for personal advantage or for the improper advantage of

others. Employees also should not allow themselves to become personally obligated to any

person or business enterprise, which has or is seeking to have any dealings or relations with

ChevronTexaco. Moreover, ChevronTexaco's assets may not be used directly or indirectly

for an employee's personal use or advantage or for the improper advantage of others.

It is not possible to list every circumstance that may give rise to a conflict of interest. These

guidelines discuss only a few of the activities of employees, which may conflict with the best

interests of ChevronTexaco. Employees are expected to exercise good judgment in dealing

with other situations as may arise. Additional details are contained in Corporate Policy 282

(Conflict of Interests). Should any doubt exist regarding an actual or potential conflict of

interest, employees should seek guidance from their management. Counsel may also be

obtained from the Corporation Comptroller. Employees should report any suspected conflict

of interest to the Corporation Comptroller, Corporation's General Manager, Auditing or to

Corporate Security. Corporation's General Manager, Auditing or to Corporate Security will

promptly notify the Corporation Comptroller of any suspected conflict of interest. Retaliatory

action will not be taken against an employee because that employee in good faith has

reported a suspected conflict of interest.

Section 2. Conflicts of Interest

Potential conflicts of interest in four areas are discussed below: Gifts and Entertainment;

Employee Outside Activities; Use of Company Information; and Employee Personal

Financial Affairs.


Gifts of more than a nominal value, travel, loans, cash in any amount, excessive

entertainment, services, favored treatment, or substantial or unusual accommodations of any

nature may not be accepted by employees when to do so could possibly place them in a

position prejudicial or embarrassing to ChevronTexaco, interfere in any way with the

impartial discharge of their duties, reflect adversely on their integrity or that of

ChevronTexaco, or create an appearance of impropriety. Subject to this restriction,

employees may accept gifts, meals, entertainment and other normal social amenities from

customers, suppliers or other persons or concerns who do, or are seeking to do, business with

ChevronTexaco, and from a competitor of ChevronTexaco, so long as what is received has

nominal value, is not extravagant under the circumstances and conforms to the laws and

customs of the country in which it is received. Cash in any amount may not be accepted.

Employees may not make or promise to make any payment or gift to any individual or

concern, if the making of such payment or gift violates any law, regulation or governmental

decree or is made for the purpose of attempting to improperly influence an officer or

employee of any customer, supplier, competitor or other person or concern, or an officer of

any federal, state, local or foreign government, to take action in favor of ChevronTexaco.

Meals, gifts, tickets to athletic or cultural events, entertainment, etc. may be extended to

customers, suppliers and other persons only as social amenities and only so long as they

conform to the laws and customs of the country in which the expenditure is incurred.

ChevronTexaco will not under any circumstances tolerate the solicitation, receipt or payment

of kickbacks or unauthorized rebates.

ChevronTexaco requires the inclusion of conflict of interest clauses in its contracts.

ChevronTexaco also retains the right to audit the contracting party for compliance with these

clauses. The Corporation Comptroller must approve any exception.


Outside activities which may involve the inappropriate or unauthorized use of company time,

equipment or information, which detract from job performance, which may adversely affect

ChevronTexaco's reputation or public or government relations, or which might conflict in

any material way with ChevronTexaco's best interests, require careful attention.

Section 2. Conflicts of Interest

A. Employees are encouraged to participate in civic and political activities. However, these

activities should not be allowed to adversely affect job performance or ChevronTexaco's

reputation or public or government relations. In such activities, including those where

participation is on company time or by company accommodation, an employee is not

considered to be a representative of, or in any manner acting for, ChevronTexaco. In

addition, employees should avoid becoming a party to actions, which could in any way be

interpreted as being in conflict with the best interests of ChevronTexaco.

B. Self-employment or employment by others is permissible only if it does not adversely

affect or conflict with job performance with ChevronTexaco. Except as otherwise provided

for in this Section, no employee may have an interest in an organization dealing or seeking to

deal with ChevronTexaco as a supplier or customer without the approval in writing of the

head of the employing organization.

C. No employee, without the prior approval of the Chairman of the Corporation Board, may

agree to serve as an officer or director of any corporation or other entity organized for profit

which is not affiliated with ChevronTexaco, if any of the following conditions exist:

1. its stock is available for public ownership through any channel;

2. its business pursuits are in competition with ChevronTexaco or a business relationship

exists with ChevronTexaco;

3. the holding of such position can reasonably be presumed to have an adverse effect on

ChevronTexaco—in any manner whatsoever;

4. the employee's job performance with ChevronTexaco could be adversely affected in any

manner or degree.

An employee who is a member of the board of another company in compliance with the

foregoing guidelines may nevertheless be confronted with a business decision, which

involves opportunities that compete with ChevronTexaco's activities. The employee may also

come into possession of information, which could be used by, or be useful to ChevronTexaco

to the detriment of the company on whose board the employee sits. In such situations, the

employee should seek legal advice on the proper way to handle the conflict.


An employee's responsibility to act in the best interests of ChevronTexaco includes the

proper use and protection of ChevronTexaco's confidential, proprietary or sensitive

information, including information designated Classified or Confidential pursuant to

Corporate Policy 575 ("Sensitive Information"). Sensitive Information is the exclusive

Section 2. Conflicts of Interest

property of ChevronTexaco and every employee who has gained knowledge of it is required

to hold the information in trust and must safeguard it. Employees should avoid situations in

which their actions may be interpreted by others as using information of ChevronTexaco's for

personal benefit or for the benefit of others—whether or not such is really the case. In

addition, Sensitive Information discovered or developed by the employee during

employment, whether in the course of employment or as a result of information gained while

with ChevronTexaco, is the property of ChevronTexaco and, subject to applicable law, shall

be held in confidence by the employee and not disclosed without prior permission of


Although management is responsible for assigning the appropriate security classification to

all confidential, proprietary or sensitive material, it is virtually impossible to properly classify

all such material. For this reason, employees are required to exercise caution and good

judgment in discussing any aspect of ChevronTexaco's business with others, including fellow

employees, in order to prevent the release to outsiders, or unnecessary dissemination within

the company, of Sensitive Information. Employees may not use such information or disclose

it to anyone without prior permission of ChevronTexaco, except as is necessary for the

performance of their assigned work.

A. ChevronTexaco does not discourage employees from delivering talks or presenting papers

to outside organizations on subjects pertaining to activities in which ChevronTexaco is

engaged or interested. Refer to Corporate Policy 360—Talks and Papers by Employees—for

additional information and restrictions. However, formal presentations require prior approval

of the employee's management. In preparing papers, employees may quote from all material,

which has been published for general distribution. ChevronTexaco figures or statements not

included in these materials should be used only with a high degree of discretion and with the

approval of the employee's management

B. Employee's obligations regarding use of company information continue following

termination. ChevronTexaco reserves the right to protect its legal rights when any company

information, whether or not confidential, proprietary or sensitive, is used improperly by

current or former employees or others.


Investments or financial transactions by employees, including those involving real property,

should not involve the use of company time or property or the company's confidential,

proprietary or sensitive information. No employee may use any such information obtained

while an employee for the financial gain of the employee or others, both during employment

and after employment ceases. In addition, an employee is prohibited from holding a

substantial financial investment in an organization which deals with ChevronTexaco as a

Section 2. Conflicts of Interest

supplier, contractor, purchaser, or distributor, or in one which competes with


An employee's personal financial activities should also not be of the type or circumstance

where one could reasonably presume that the use of company, time, property, or confidential,

proprietary or sensitive information was used, whether or not that was the case. Employees

should avoid personal investments and financial transactions where it can reasonably be

presumed that an opportunity exists for a conflict of interest to occur.

An employee's personal transactions with ChevronTexaco's suppliers, contractors,

purchasers, distributors, or competitors may not involve the use of company time, property or

information. Such transactions must be on non-preferential terms and independent of any

relationship with ChevronTexaco. Moreover, personal investments and transactions,

including loans, with any company or person doing or seeking to do business with

ChevronTexaco as a supplier or customer, or which is in competition with ChevronTexaco,

are prohibited unless such transactions are clearly non-preferential and independent of any

relationship with ChevronTexaco.

No employee may profit directly or indirectly from a stock or other securities transaction

made on the basis of "material" information about ChevronTexaco or another company,

obtained by the employee in the course of company business but not yet made generally

known. Employees must avoid situations where their actions could reasonably lead one to

believe that they are using "inside" information for their own personal profit or that of their

friends, relatives or others—whether or not such is the basis.

It is often difficult to say what information should be considered "material." While it is not

possible to prepare a definitive or exhaustive list, matters which in other circumstances have

been considered "material" include: dividend increases or decreases, changes in previously

announced earnings estimates or financial results significantly different from those which

were generally anticipated, a significant increase or decline in an important line of business, a

troublesome decline in liquidity, major litigation developments, important new discoveries,

product lines, licenses or patents, major public or private sales of additional debt or equity

securities (but not simply rollovers or replacements of existing debt on expected terms),

changes in normal and expected capital investment plans, major acquisitions or dispositions

of assets or business lines, mergers and top management or control changes.

Employees may own securities of publicly owned corporations which are regularly traded on

the open market if they are not purchased as a result of confidential knowledge about

ChevronTexaco's operations, relations or negotiations with such corporations.

Section 3. Foreign Corrupt Practices Provisions



Updated October, 2001


The Foreign Corrupt Practices Act (FCPA) was enacted in December 1977, and

amended in August 1988 and November 1998. The Act has two parts. One part, entitled

“Accounting Standards,” establishes rules governing the keeping of books and records

and the establishment of internal control systems by all corporations registered with the

Securities and Exchange Commission (SEC). Guidelines and procedures relating to the

Accounting Standards provisions of the FCPA and penalties for violations thereof are

set forth in Section 1 of this Manual. The other part, entitled “Foreign Corrupt

Practices,” deals with payments to foreign officials by any U.S. corporation or U.S.

citizen and penalties for violations of the Act. The guidelines and procedures set forth

below apply to the foreign corrupt practices part of the FCPA and to various related


Virtually all countries have laws prohibiting or regulating payments to political parties,

candidates for public office and government officials. Until very recently, however, in

most countries such laws applied only to payments that relate to political or

governmental activities of the country or to business transactions occurring within its

borders. With the enactment of the FCPA, the United States took the step of attempting

to regulate payments and gifts to government officials and political parties in every

country of the world whenever any participation, however remote, by U.S. citizens or

corporations could be found. This means that dealings with government officials in all

countries must be scrutinized not only under the laws and regulations of the official’s

own country, but also under the foreign corrupt practices provisions of the FCPA.

For many years, the United States has pressed the international community of nations

through diplomatic channels to adopt laws that are comparable to the FCPA. This

effort recently began to bear fruit, most notably through the adoption by the

Organization for Economic Cooperation and Development (OECD) of the

“Convention on Combating Bribery of Foreign Public Officials in International

Business Transactions” (the “OECD Convention”). The purpose of the OECD

Convention is to create a standard code of ethical conduct that is applicable to all

companies, of whatever nationality, competing for international business.

Section 3. Foreign Corrupt Practices Provisions

Thirty-four countries have signed the OECD Convention, including all 29 OECD

member countries and five countries that are not members of the OECD. The

countries that are parties to the Convention as of May 1, 2001, are listed in Exhibit 1.

Each country that ratifies the OECD Convention obligates itself to enact and enforce

implementing legislation to criminalize bribery of foreign public officials in

international business transactions. Generally speaking, such laws will apply to the

actions of all businesses organized in those countries and to any action that is taken in

those countries in connection with the bribery of an official of another country. One or

more of these laws may apply in any particular situation, and in that event it is necessary

to comply with such other laws, in addition to the FCPA.

The November 1998 amendment of the FCPA that is mentioned in the first paragraph,

above, was required to conform the FCPA to the requirements of the OECD

Convention. In particular, the amendment expanded the definition of the officials who

are covered by the prohibition on payments and it expanded the basis for jurisdiction

over both U.S. and non-U.S. persons and entities. The Guidelines below reflect the

1998 amendment.

ChevronTexaco Corporation (the “Company”) has a long-established policy prohibiting

all improper or unethical payments to government officials anywhere in the world, and

has established an exemplary record in carrying out this policy. Nevertheless, detailed

guidelines for complying with the foreign corrupt practices provisions of the FCPA are

required because of the many complexities and uncertainties in the Act and because of

its extremely far-reaching effect. Thus, the purpose of these guidelines is to ensure full

compliance with the FCPA and continuation of the Company’s fine record in

maintaining lawful and ethical dealings with governments throughout the world.


The foreign corrupt practices provisions of the FCPA apply to the following persons and


A. All persons who are citizens of the United States;

B. All other persons who reside in the United States;

C. All U.S. corporations, partnerships or other business organizations; and

D. All other corporations, partnerships and business organizations that have their

principal place of business in the United States.

Section 3. Foreign Corrupt Practices Provisions

In addition, individuals who are neither citizens nor residents of the United States may

become covered by the Act if they participate in a prohibited activity as an officer,

director, employee or agent of any U.S. corporation; and such persons and foreign

business organizations may become covered by the Act if they engage in any prohibited

activity within the territory of the United States.

In general, the foreign corrupt practices provisions of the FCPA prohibit any payment to

a “foreign official” for the purpose of influencing him to assist in obtaining or retaining

business for any person, including any business organization. Some important points to

note about the FCPA are set forth below.

A. The Act applies to any act or event which is “in furtherance of” a payment to a

foreign official.

B. The “payment” clause of the FCPA is broadly phrased. It covers not only the

actual payment of money but also an offer, promise or authorization of the

payment of money and an offer, gift, promise or authorization of the giving of

“anything of value.” Thus, an offer, promise or authorization to pay money or give

something of value can violate the FCPA, whether or not any payment or gift is

actually made.

C. The Act applies to payments to foreign officials, foreign political parties, officials

of foreign political parties and candidates for foreign political office.

• The term “foreign official” is defined to mean an officer, employee or other

person acting in an official capacity for a foreign government or any

department, agency or instrumentality thereof or for a “public international


• The term “instrumentality” includes business corporations owned or

controlled by a foreign government.

• The term “public international organization” means any organization that

has been, or is hereafter, designated in an Executive Order issued by the

President. Dozens of organizations have been so designated, including the

United Nations and many of its agencies, international financial institutions

(such as the European Bank for Reconstruction and Development and the

International Monetary Fund), the International Committee of the Red Cross

and many others. A list of “public international organizations,” current as of

June 30, 2001, is attached hereto as Exhibit 2.

D. The Act applies to any payment to any person while knowing or believing there is

a high probability that at least a portion of the money or thing of value “will be

Section 3. Foreign Corrupt Practices Provisions

offered, given, or promised, directly or indirectly” to a foreign official, foreign

political party, party official or candidate for public office in a foreign country.

Thus, normal payments to independent third parties such as agents, lawyers,

distributors, contractors, consultants, suppliers, et al., or to joint venture

participants or noncontrolled joint venture entities, may be deemed to violate the

FCPA if it appears likely that the recipient will make improper payments to

foreign officials in connection with its business arrangements with the Company.

E. Payments to foreign officials are illegal under the Act if made for either of the

following purposes in order “to obtaining or retaining business for or

with, or directing business to, any person”:

1. Influencing any act or decision of the foreign official in his official capacity,

or inducing such foreign official to do or omit to do any act in violation of

the lawful duty of such official;

2. Inducing the foreign official to use his influence to affect or influence an act or

decision of his government; or

3. Securing any improper advantage.

The “retaining business” clause has a broad reading and includes a prohibition

against corrupt payments relating to the execution or performance of contracts or

the carrying on of existing business, such as a payment to a foreign official for the

purpose of obtaining more favorable tax treatment.

F. The FCPA uses the word “corruptly” in defining the act or event that is defined to

be unlawful. The legislative history of the FCPA indicates that “corruptly”

connotes an intentional wrongdoing or evil motive.

G. The criminal penalties for violating the foreign corrupt practices provisions of the

FCPA are very severe. Corporations are subject to fines upon conviction of up to

$2 million. Individuals who violate the Act are subject to prison sentences of up to

five years and fines of up to $100,000. These fines may be increased under other

provisions of law if the harm caused or benefit received as a result of the violation

exceeds the specified fines or if aggravating circumstances are found to exist. Civil

penalties of up to $10,000 may also be imposed against corporations and

individuals. The FCPA states that fines and penalties imposed upon individuals

may not be paid directly or indirectly by any corporation for which they may have


Section 3. Foreign Corrupt Practices Provisions


In addition to the FCPA, a number of other U.S. criminal statutes have been used to

prosecute corporations and individuals for questionable payments abroad. The mail and

wire fraud statutes have been used to prosecute overseas payments to foreign officials

made by U.S. companies to obtain contract approvals and work permits. The False

Statements Act, which prohibits making false statements or representations in any

matter within the jurisdiction of any department or agency of the U.S. government, has

been invoked in a number of different cases, including prosecution of a company for

allegedly falsifying its Shipper’s Export Declaration form filed with the Department of

Commerce because payments to foreign officials were not deducted in calculating

export values. Also, criminal charges under U.S. currency reporting laws, income tax

laws, antitrust laws and conspiracy laws have been lodged by the U.S. Department of

Justice against various corporations in connection with payments to foreign government



The principal U.S. laws governing the trading in stock and other securities of

corporations are the Securities Act of 1933 and the Securities Exchange Act of 1934. It

is a major premise of these laws that a fair, honest and efficient system for trading in

corporate securities requires the public disclosure of all financial and other information

needed by investors to make informed judgments about a corporation’s stock or other

security. In addition to routine financial reports, any other “material” matter concerning

a corporation must be publicly disclosed promptly and accurately. Under the SEC

definition, a “material” matter is one as to which an average prudent investor ought

reasonably to be informed before buying or selling a corporate security.

Historically, the materiality of any transaction or other matter has been assessed in terms

of its financial significance. However, at about the time the FCPA was enacted, the SEC

took the position that under some circumstances matters that reflect on the quality of

governance of a corporation, may be material regardless of their financial impact. For

example, the SEC charged a number of U.S. corporations with violations of the

disclosure rules for failure to report publicly in a timely fashion on payments to foreign

officials (including payments made by foreign subsidiaries) regardless of their financial


Failure to comply in a timely fashion with disclosure requirements of the U.S. securities

laws can lead to the imposition of severe penalties by the SEC, including injunctions

relating to the way a corporation’s operations are conducted.

Section 3. Foreign Corrupt Practices Provisions


The Corporation Comptroller has the primary responsibility for the Company’s

compliance with the FCPA and related laws and regulations. The General Manager,

Auditing, has responsibility for periodic review of such compliance.


In order that employees of the Company may be assured of acting consistently with all

aspects of the FCPA and related laws and regulations, the Corporation has centralized

the handling of all sensitive payments-related matters. The responsibility for receiving

and coordinating the formulation of a response to all questions arising under the FCPA

and related laws and regulations has been assigned to the Corporation Comptroller who

will ensure that they are fully evaluated by the Company’s legal counsel in light of the

Company’s worldwide operations. It is imperative that close and prompt attention be

given to any transaction, no matter how insignificant, that conceivably could give rise to

violations of the FCPA.

The following specific procedures have been established for all employees of the


A. No payment or gift of any kind whatsoever shall be made to any foreign official

(as defined in Part II, above), which violates any law, regulation or decree of the

country in question. In addition, for operating companies that are organized under

the laws of a third country that, pursuant to the OECD Convention, has adopted a

law that is comparable to the FCPA, no payment or gift shall be promised, offered

or given that violates the law of such third country.

B. Expenditures for meals, entertainment and other normal social amenities with

respect to foreign officials must not be extravagant and must conform to the laws

and customs of the country in which the expenditures are incurred. Operating

companies whose employees may have occasion to entertain foreign officials

should formulate policies applicable to their specific circumstances and submit

these policies in advance to the Corporation Comptroller for approval.

C. Gifts may be given to foreign officials only if the gifts are of modest value and

conform to normal social amenities in the official’s country. Operating companies

should obtain advance approval from the Corporation Comptroller for specific

gifts and for seasonal or other routine gift-giving practices.

D. The Company may, of course, pay or provide travel-related expenses of foreign

officials who in the performance of official duties visit Company installations or

otherwise incur reasonable and bona fide expenses in connection with the

Section 3. Foreign Corrupt Practices Provisions

Company’s business operations. Advance approval of the Corporation

Comptroller must be obtained for the payment of travel-related expenses of

foreign officials, including the furnishing of transportation on aircraft owned or

chartered by the Company.

The following matters are particularly sensitive, and requests for approval of such

matters must always be supported by a demonstrably valid business purpose:

1. The payment for travel-related expenses of relatives, friends or associates of

foreign officials;

2. Any proposal under which cash or its equivalent would be provided to

foreign officials, whether by way of reimbursement, per diem allowance,

gift certificate or otherwise; or

3. Any significant or unusual travel-related activities, including, for example,

recreational side trips during business travel.

Any souvenirs given to foreign officials are subject to Procedure C, above,

concerning gifts.

E. In certain parts of the world it is common for government employees to receive

so-called “facilitating” payments to expedite or secure the performance of routine

governmental action by a foreign official. The FCPA contains a narrowly drawn

exception that permits such payments under limited circumstances such as

obtaining documents to qualify to do business in a foreign country or processing

governmental papers. The exception does not cover any action by a foreign official

who is involved in the decision making process for awarding new business or

continuing existing business. Accordingly, each business unit that has any

occasion to make any facilitating payments shall obtain advance approval from the

Corporation Comptroller before making any such payments and shall keep the

Corporation Comptroller fully and currently informed concerning such payments.

F. All contributions of money or services to political parties or officials thereof or to

candidates for political office outside the United States must be reviewed for

FCPA compliance by the Company’s legal counsel and approved in advance by

the Corporation’s Vice-President for Public Affairs and the Chairman of the Board

of Directors.

G. Before engaging an agent, consultant, advisor, joint venture participant or other

representative who may have dealings with foreign governments, agencies or

entities thereof on behalf of the Company, a sufficient investigation should be

undertaken to ensure that any such representative does not intend to engage in any

Section 3. Foreign Corrupt Practices Provisions

improper practices. In determining whether to engage a particular representative,

factors such as the representative’s reputation and qualifications, the manner and

reasonableness of compensation, the relationship, if any, between the owners and

employees of the representative and a foreign official, the presence or absence of

any secret partners, the willingness of the representative to fully disclose its

relationship with the Company and the legality of the relationship under local law

will be considered.

H. All new or renewal contracts (whether oral or written) with consultants,

representatives, agents, advisors, or joint venture participants who are expected to

have dealings with foreign governments or agencies thereof or with public

international organizations on behalf of the Company, must be reviewed in

advance by the Corporation Comptroller and the Company’s legal counsel.

Ordinarily, such contracts must contain a provision similar to that included in

Exhibit 3. Also, when a right-to-audit clause is included in a contract (in

accordance with the Company’s policies governing contracts with contractors or

suppliers of goods and services), the right-to-audit clause should be made

applicable to this provision.

I. In many countries it is a common and entirely lawful practice for government

officials to own or operate business enterprises. While the FCPA and related laws

obviously do not prohibit legitimate business relationships between the Company

and business enterprises owned or controlled by foreign officials, great care must

be taken to avoid any employment of or association with any such enterprise in

circumstances that might be deemed to constitute an evasion of the proscriptions

of the FCPA. The Corporation Comptroller must be kept fully and currently

informed of any such relationships.

J. Any payments to, or compensation arrangements with, lawyers, tax agents or

others retained to assist the Company in resolving tax or other disputes with

foreign government instrumentalities must be approved in advance by the

Corporation Comptroller if they involve other than normal hourly charges.

K. The Company may not enter into any transaction with agents, contractors,

consultants, lawyers, distributors or other persons that is designed to permit such

persons to circumvent currency, tax or other laws of a foreign country. Any

transaction to which the Company is a direct or indirect party that may have the

appearance of permitting any person to circumvent such laws must receive the

advance approval of the Corporation Comptroller.

Particular care must be taken with respect to “split payments.” A “split payment”

is any payment for services that is made outside the country in which the services

are performed or in a currency other than the local currency of that country. With

Section 3. Foreign Corrupt Practices Provisions

one exception noted below, the Corporation Comptroller’s advance approval

should be obtained for all split payments. To expedite the review process, the

request for such approval should include (a) a written statement from the service

provider, containing a valid business reason for the payment instructions; and (b) a

statement from the business unit that the proposed payment complies with all local

laws and regulations.

Notwithstanding the foregoing, payment may be made without the Corporation

Comptroller’s advance approval to, and in the currency of, the country in which

the provider is incorporated, if all three of the following conditions are satisfied:

1. The provider’s principal administrative or operational office is also located

in that country (Note that a “registered office” does not qualify for this

purpose unless it is also the provider’s principal administrative or

operational office);

2. The provider is not owned or controlled by nationals of the country in which

the services are performed; and

3. Local law does not require the payment to be made in the country where the

services are performed or in the currency of that country.

L. Complete and accurate records shall be maintained of all transactions, including

transactions that relate in any way, directly or indirectly, to a foreign official. Any

questions on how to record such transactions should be referred to the Corporation


M. The guidelines apply to operations of joint ventures and partnerships of which the

Company is the operator or managing partner. With respect to affiliate

corporations (i.e., corporations in which the Company owns directly or indirectly

not more than 50 per cent of the voting stock) and joint ventures or partnerships in

which another company or person is the operator or managing partner, any

practice or transaction which gives rise to question or doubt under these guidelines

should be reported at once to the Corporation Comptroller. It should be kept in

mind that the FCPA prohibits any act that is “in furtherance” of a prohibited

payment and that all U.S. citizens or residents who serve as directors, officers,

employees or representatives of affiliated corporations are personally subject to the


N. Any transaction, no matter how insignificant, that might give rise to a violation of

the FCPA, as well as any questions that may arise pertaining to matters discussed

in these Guidelines should be referred to the Corporation Comptroller or the

Company’s legal counsel, with a copy to the Corporation Comptroller.

Section 3. Foreign Corrupt Practices Provisions

O. Adherence to these guidelines will be monitored by the internal auditors and

through the Corporation’s regular system of management representation letters on

compliance matters. In addition, employees should report any suspected FCPA

problems or accounting control weaknesses to the Corporation Comptroller, the

Corporation’s Auditing Department or to Corporate Security which will promptly

notify the Corporation Comptroller and the General Manager, Auditing. No

retaliatory action will be taken against any employee who in good faith reports any

suspected problem. Alternatively, an employee may contact the Company’s

Hotline at 1-800-284-3015. Calls may be made anonymously and will be referred

to the appropriate organization for investigation and follow-up.

Section 3. Foreign Corrupt Practices Provisions



(Current as of May 1, 2001)

OECD Member States





Czech Republic











Korea (South)




New Zealand*








United Kingdom

United States

Section 3. Foreign Corrupt Practices Provisions

Non-OECD Member States





Slovak Republic


* Ratification expected mid-2001

** Ratified, but implementing legislation is pending

*** Expected to join Convention by end of 2001

Section 3. Foreign Corrupt Practices Provisions



(As Defined by U.S.)

(Current as of June 30, 2001)

Afridan Development Bank


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