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The following is the text of
letter sent on my personal letterhead. – Richard Knight
April 30, 2002
Securities and Exchange
450 Fifth Street, NW
Washington, DC 20549-0213
Dear Sir or Madam,
I would like to raise an
issue about Kerr-McGee Corporation’s Forum 10-K for the fiscal year ended
December 21, 2001.
In its Form 10-K, Kerr-McGee
lists the Boujdour block under Morocco. In October
2001 Kerr-McGee signed agreement with the government of Morocco granting the company a reconnaissance permit and
geological and geophysical studies are planned for this year. In fact, the Boujdour
block is not off the coast of Morocco but off Western Sahara. Neither the United Nations nor the United States recognizes Western Sahara or
the area in question as part of Morocco. It is
unthinkable that Kerr-McGee was not aware of the legal status of Western Sahara when it signed the agreement with Morocco.
The granting of
reconnaissance rights to Kerr-McGee has been the subject of debate, including a
legal opinion by the United Nations. In
February 2002 United Nations Legal Counsel Hans Corell
determined that Kerr-McGee’s contract and a similar one signed by TotalFinaElf,
were legal but “if, however, further exploration and exploitation activities
were to proceed without respect to the interests and wishes of the people of Western Sahara, the contracts would be in violation of international
legal principles dealing with non-self-governing territories.” However, the next logical steps are further
exploration and exploitation.
The Kerr-McGee filing raises
several issues. I am not a lawyer but
the Form 10-K appears to me that to materially misrepresent the fact that the Boujdour block is in Western Sahara, not in Morocco. This
misrepresentation hides the fact that Kerr-McGee will violate international law
if it proceeds with exploration and exploitation. Even though the UN legal opinion came after
the date of the filing of the Form 10-K, the legal controversy regarding Western Sahara is long standing.
At the time the contract was signed Kerr-McGee must have known that Morocco’s
legal right to sign such contracts covering Western Sahara was in doubt. As the UN legal opinion cited above notes, Morocco does not have sovereignty over Western Sahara and is not the administrative power. Investors are entitled to know the political
and legal risks of Kerr-McGee’s operations in Western Sahara.
I do not expect the
Securities and Exchange Commission to tackle the broader human rights and
policies issues regarding the rights of the people of Western Sahara. But I suggest
that Kerr-McGee be made to report correctly in its filings. Perhaps Kerr-McGee should file an amended
Form 10-K correcting the factual error. I
would suggest also that Kerr-McGee address the legal issues regarding Western Sahara and how it impacts on the company’s ability to
legally carry out its activities in the future.
Without this investors who do not have this information may over value
Kerr McGee stock.