Oil Embargo

 It was Friday afternoon in early October 1973.  I graduated from law school in June, passed the bar in August, and just started work as a corporate attorney at Monsanto Company headquarters in St. Louis at the time. I had no real practical law or business experience- a fresh, beginning lawyer.  My work was predominantly legal research in our law library although I had started doing legal reviews of routine chemical raw material purchase contracts.  On that Friday afternoon, a secretary in our area handed me a phone saying there was someone on the line wanting to get a contract to sell Monsanto benzene.  I took the phone call in my office and my most bizarre corporate legal experience ever began- an experience that felt like a dream.

As background, on October 6, 1973, Egypt and Syria launched a coordinated surprise attack on Israel, nearly defeating Israel by the end of the week.  The U.S. then launched a massive resupply effort to Israel which turned the tide of war in Israel’s favor.  Arab OPEC members immediately imposed an oil embargo against the U.S. in retaliation, stopping oil shipments to and quadrupling oil prices in the U.S. as well as turbocharging inflation.  Monsanto depended on an oil derivative benzene for its products and the embargo and resulting benzene shortage threatened to shut down plants.

Back to the call- the person on the other end of the line said he was frustrated being transferred around the company and would take his benzene offer elsewhere if no one listened to him.  I introduced myself, said I would listen, and asked him to tell me what he wanted.  He said he was an Israeli citizen, a former tank commander in Israel’s 1967 war against the Arabs, and that he had developed a middleman business relationship with a Saudi Arabian prince who could supply Monsanto benzene.  He gave few details but did say he needed to meet Monsanto decision makers in person in NYC ASAP and he would not discuss the offer further.  He gave me his phone number and told me to call him by day’s end with Monsanto’s decision.

I hung up feeling perplexed, skeptical, and wondering why he had talked to me.  I knew of our benzene shortage so my next reaction was immediately to brief my boss who had me brief our general counsel and the company Vice President of purchasing over the next few hours.  Our general counsel had been a wartime aide to General Wild Bill Donovan, who founded the OSS spy group in WWII, so maybe he had experience with a call like that.  Everyone, to my surprise, was extremely interested and gave the telephone call credibility. I soon felt like I was in a whirlwind with no idea where I was going.  I was designated the Monsanto contact person, given a list of questions to verify the caller’s identity and background, and told to call him back and convince him to meet on Monday at the international Shearman and Sterling law firm offices in Manhattan.  I had no clue what the stakes were or the risks involved. 

I called the guy back and offered a Monday meeting at the law firm if we verified his background.  He gave me references who were Jewish businessmen in the Manhattan garment district, saying he would only meet in the garment district.  I had never been to NYC, and the law firm, the garment district, the businessmen there, the shadowy former Israeli soldier, the Saudi prince, the war, the embargo, and the desperation of our benzene supply all seemed like some WWII Hollywood spy movie to me. The law firm confirmed his references and background, although the references did not vouch for his Saudi contact.  After back-and-forth calls the Israeli guy agreed late Friday to the law firm meeting on Monday.

I took my first business trip on a  Saturday morning flight to NYC with our team of 2 experienced lawyers and me and three businessmen.  I felt excited, and unprepared but showed calm in a fake it till I make mode.  We went directly to the law firm’s offices and began meeting with experts in Saudi business practices, including the embargo, benzene, import law, and in logistic practices, including quality control.  Later I talked to the Israeli and he insisted we sign a contract before he would talk to us.  We prepared a 2-page finders fee agreement which was noncommittal but an agreement.  After telling him we would sign an agreement, he agreed to the law firm meeting at noon on Monday.

Monday we were joined at 11:30 am by 2 Sherman and Sterling attorneys in a 40th-floor Manhattan conference room, all of us in conservative business suits.  I felt surreal but also like I was part of a powerful team.  We waited, waited, and waited some more until finally about 2 pm a secretary came in announcing the Israeli had arrived.  She brought him in and the air went out of office.  He was 35 or 40, dressed in a t-shirt and old baggy khaki pants, with a scruffy look, no papers or notebook.  As agreed, I introduced myself and he immediately demanded the contract, hardly read it, and signed it.  He took the floor and described his Saudi prince relationship and how the benzene sale would skirt the embargo, saying if the Saudi contact didn’t perform, we paid nothing.  He concluded by saying time was of the essence so send the final purchase agreement to his garment district contact.  Our businessmen asked to meet his garment district contact which he agreed to for Tuesday morning.  

The dream continued Tuesday when our team went to a designated Manhattan garment district building.  It was an old, dirty, rundown, noisy place- a combined garment factory and office building.  It felt like stepping into another world from the sanitized decorum law firm office.  As we were leaving the meeting room, I remember one of the Jewish businessmen telling me I should plan to stay over and pick one.  I was puzzled and just responded I was returning with the team.  One of our businessmen later told me the offer was for one of the secretaries.  So much for innocence.

We flew back to St. Louis and one of the experienced contract attorneys stayed up all night drafting the purchase agreement and activating a shell corporation he used for certain risky purchases.  The corporation was called Philotex which he told me was his dog’s name.  We signed the contract by the end of the week.  My role was over but not the anticipation of wanting to see the deal work out.  As the next week and the next week came the Saudi prince never delivered the benzene.  I went from adrenaline high to emotional disappointment and learned a lesson that reality is sometimes just a dream.