Bids Rigged

Like the oil industry as a whole, the multibillion-dollar business of building offshore drilling platforms and pipelines is a highly profitable, as well as risky venture in which many dwarfs live in the shadow of a handful of titans. Of them all, the two largest are J. Ray McDermott & Co. of New Orleans (1977 sales: $1.3 billion) and Houston's Brown & Root Inc. ($1 billion).

For the past two years, a federal grand jury in New Orleans has been investigating just how it could be that the two firms, which together control some 75% of the world market for offshore drill rigs, maintain their lopsided shares even though the business has been going through an unprecedented boom. Last week the grand jury handed down an eleven-count indictment charging the companies and seven of their high executives with conspiring to rig bids for contracts. Their aim, said the indictment, was to guarantee that one or the other of the companies would always be the lowest bidder on a job--whether it be building a platform in the North Sea or, as J. Ray McDermott lately has done for Shell Oil in the Gulf of Mexico, constructing and installing a $275 million rig that from the ocean floor stands 15 ft. taller than the Empire State Building.

The companies in effect admitted guilt by pleading "no contest" in a New Orleans federal district court. They were promptly socked with fines of $1 million each, the largest penalties ever levied in a federal price-fixing case. The indicted executives include Charles Graves, 62, the soft-spoken chairman of McDermott; Robert Richie, 47, McDermott's president; three top vice presidents of Brown & Root Inc. and two vice presidents of McDermott. Each faces charges of antitrust violations as well as additional allegations of mail fraud. If convicted on the antitrust indictments, the men will be subject to maximum three-year prison terms and $100,000 fines each.

Just two weeks after the grand jury began its investigation in January 1977, Foster Parker, a prominent Houstonian who was then Brown & Root's president, committed suicide. Earlier this year, McDermott & Co. was fined nearly $1 million for a whole range of offenses, including making illegal campaign contributions and offering kickback bribes to a former top executive at Tenneco.

Will the indictments break the two companies' hold on the industry? Houston oilmen have their doubts. Says the president of a competing firm: "This won't change a thing. They're too powerful, too well entrenched."

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