The Agonies of Ashland

Ashland Oil Inc. Chairman Orin E. Atkins recently hung on his office wall a color portrait of Cartoonist Al Capp's renowned detective, Fearless Fosdick, Swiss-cheesed by bullet holes. Says Fosdick: "Fortunately, these are merely flesh wounds."

Atkins' fondness for the painting is easy to understand. During the past two years, Ashland has been convicted twice of violating the Federal Election Campaign Act of 1971 by making illegal corporate political contributions in the U.S., and also had been charged with filing misleading reports to the Securities and Exchange Commission that concealed payoffs to overseas politicos. In January, Ashland even adjourned its annual meeting for fear that the SEC would invalidate the election of directors. Last week, though, the agonies of Ashland finally may have ended. At the meeting reconvened with SEC approval at company headquarters in the river town of Ashland, Ky., stockholders voted 97% in favor of re-electing the entire board and defeated by 93% a proposal that the company formally affirm its political nonpartisanship.

Assets Diverted. Before the meeting, however, Ashland signed a consent decree admitting to no guilt but promising, in effect, not to make illegal political donations in the future. It also bared many secrets. In June the company submitted a 539-page report, prepared by a special committee of the board, containing exhaustive information on how Ashland executives had managed to divert corporate assets into an $800,000 U.S. political slush fund that was kept hidden in a safe. The report also indicated that from 1967 to 1972 a CIA operative was on Ashland's payroll, and that the CIA reimbursed the company for part of his salary.

The SEC was not totally satisfied. Hoping to set a precedent for other corporations that have refused to disclose who got political payments, the agency further insisted that Ashland publicly reveal the recipients of all the payments made between 1967 and 1973, when its illegal contributions first came to light. Reluctantly, Ashland earlier this month made public through the SEC a list of domestic and foreign payments totaling $1.2 million. Democrats received the largest cut in the U.S., but some big Republican names were included. Among the larger payments:

> $100,000 to Richard Nixon in 1968 for his election campaign.

> $50,000 all together to Democratic National Committee Chairman Robert Strauss in 1970 and 1972 for use by the committee.

> $50,000 to Arkansas Democratic Congressman Wilbur Mills hi 1972 to help elect Democratic candidates to Congress.

> $100,000 to Nixon's Committee to Re-Elect the President in 1972.

The company also reported nearly $400,000 in previously disguised and therefore suspect payments, made in countries where the company has had major interests in oil exploration or production. Samples: $100,000 in 1970 to a Libyan consultant, and $150,000 to President Albert-Bernard Bongo of Gabon in 1972 for oil exploration permits.

The disclosures were somewhat surprising in that Ashland had never been renowned for political maneuvering. It is by far the least publicized of the companies that have got in trouble over political payments, even though it operates in 70 countries and had sales of $3.5 billion in the fiscal year ending last September. But the political involvement, if not excusable, is at least understandable. Throughout its 51-year history, Ashland always has been dependent on other producers for most of its crude oil, and thus peculiarly vulnerable to political actions --changes in import regulations, expropriations in foreign countries--that might interfere with the supply. And lately Ashland has been growing fast: in the past year it jumped 25 places on the FORTUNE 500 list to become the 50th largest industrial corporation in the U.S.

The company was organized in 1924 by Paul G. Blazer, a scrappy entrepreneur who foresaw profit in buying oil from major producers and wholesaling it to dealers that the majors did not serve. Today Ashland is the largest independent refiner of petroleum products in the U.S.; but even though it has been exploring aggressively for crude, it pumps only 15% of the oil that it refines. During the Arab oil embargo its reliance on outside sources proved costly: in December 1973 it had to buy 80,000 bbl. of Iranian crude for $17 per bbl., one of the highest prices ever.

Less Dependent. Since the early 1960s, however, the company has been pushing a diversification program that is making it less dependent on petroleum --and thus, as an unintended side effect, perhaps less vulnerable to political pressure. As early as 1962 it bought a major producer of the carbon black used in auto tires; it followed with acquisitions of petrochemical companies and in 1969 of Arch Mineral Corp., a big coal producer. Another of its recent ventures is into road building; over the past two years Ashland has become the lead-big paver of asphalt highways in the U.S.

Last year, for the first time, petroleum accounted for less than 50% of Ashland's earnings, while chemicals rose to 19% from 15% in fiscal 1973. Chairman Atkins predicts that within five years chemical sales will equal those of oil. The diversification is paying off. Ashland would be hurt by sudden decontrol of oil prices--it fears that major producers will boost crude-oil prices sharply while raising refined products much less, thus squeezing the independents--but it expects to weather the blow much better than its independent competitors. Last year its profits rose 34%, to $113 million. In the first six months of 1975, while earnings of other large oil companies dropped on average about 33%, Ashland's were down only 8%--thus supporting Fearless Fosdick's diagnosis.

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