Arguments opened last week in a $7.5 billion lawsuit brought byTransAmerican Natural Gas Corp. and its founder, Jack Stanley,accusing Coastal Corp. and its founder Oscar Wyatt Jr., El PasoNatural Gas, and William Wise, CEO of parent El Paso Energy, ofvarious illegal acts aimed at financially underminingTransAmerican.

TransAmerican’s suit accuses the defendants of fraud, tortuousinterference, antitrust violations and conspiracy. The companyclaims the acts were carried out as part of an “Armageddonstrategy” developed by the defendants with the help of then-currentand former employees of TransAmerican. The trial, which is expectedto take about three weeks, is being heard by a jury in the 101stState District Court in Dallas. Last Thursday, two days after itopened, the judge clamped a gag order on participants, ruling outany further comments while the trial goes on. Prior to the gagorder, however, TransAmerican, through an independent publicrelations firm, released extensive background to the news mediaabout the case, which was initiated in 1993.

TransAmerican claims the defendants met and drew up the strategyon a flip chart listing financial attack measures that could bedirected at the company, which was then in bankruptcyreorganization proceedings. A lead item in this strategy was toundermine TransAmerican’s ability to continue prosecuting andcollecting a $500 million take-or-pay judgment it had won againstEl Paso in 1988, the lawsuit claims. El Paso settled the judgmentin 1989 for $300 million.

The defendants also are alleged to have planned measures toprevent TransAmerican from refinancing and paying off outstandingdebt and completing its reorganization plan; to obtain ownership orcontrol of TransAmerican’s outstanding indebtedness to its securedlenders; acquire valuable mineral leases owned by TransAmerican, orcause TransAmerican to lose title to those leases; acquireownership and control of TransAmerican Refining Co., and preventthe company from bringing its Louisiana refinery on line; acquireownership interest or control over litigation claims againstTransAmerican; and precipitate defaults under existing contracts.

TransAmerican claims to have documented evidence and testimonyfrom some participants at the alleged meeting outlining thestrategy. Two former TransAmerican employees and an outsideattorney, who allegedly were involved in the planning, have settledwith TransAmerican.

The lawsuit has been billed by some as the latest battle in along-running feud between two giants of the early development ofthe Texas oil and gas industry, Wyatt and Stanley. While Wyatt’sCoastal Corp. is currently being sold to El Paso for $17.5 billionStanley’s ventures have suffered repeated financial setbacks on alarge scale.

If the trial results in a conviction and damage award — andTexas juries are known for large awards — it could affect thefinancial underpinnings of the sale of Coastal to El Paso Energy.A spokesman for El Paso said last week the case involved “a veryold issue that has been settled for a long time.” The company hadno comment on whether the merger agreement provided for the outcomeof the trial.

Ellen Beswick

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