Stateroom SceneI continue my exploration of the Marx Brothers’ movies by looking at the famous Stateroom scene from the MGM release A Night at the Opera. In researching this I was somewhat stunned to find that the scene was written and developed with the Brothers by that silent comedy great Buster Keaton, who was at the time a gag writer for MGM. Talk about provenance for a scene, one of the greatest purveyors of gags (Keaton) writing for three of the greatest screen comedians, the Brothers Marx.

The scene starts with Driftwood discovering that Fiorello, Tomasso, and Baroni snuck onto the boat by stowing away in his steamer trunk. Fiorello and Tomasso have to hide out in the room while parades of people walk in to use the cabin or to carry out their duties. Crammed into this little space at the end of the scene are Driftwood, Fiorello, Tomasso, Baroni, two cleaning ladies who make up the bed, a manicurist, a ship’s engineer and his assistant, a girl looking for her aunt, a maid (“I come to mop up.” “You’ll have to start on the ceiling.”), and four waiters with trays of food (prompting Driftwood’s classic line: “Is it my imagination, or is it getting crowded in here?”). Eventually there are 15 people in Driftwood’s tiny cabin. The mass of humanity tumble out into the hallway when Mrs. Claypool opens the door. I particularly like the way they sped up the film for the dénouement.

I thought about the Stateroom scene in the context of an article in the New York Times Magazine, entitled “The Wreck of the Kulluk”, and an article in the New York Times (NYT) by Joe Nocera, entitled “The Moral of the Kulluk.” The Magazine piece was an except from Of Ice and Men to be published later this month by Deca, authored by McKenzie Funk. In his longform piece he detailed the miss-steps that led to the grounding and sinking of the Shell Oil Company drill rig Kulluk after an unsuccessful attempt to drill for oil in the Artic Ocean. It was a tale of greed, high-risk drilling for oil and the attendant potential for a high reward and, at the end of the day, safety and engineering shortcuts that cost Shell the loss of the drill rig and the end of the potential of Artic drilling for the foreseeable future. The tale itself if riveting but for the Chief Compliance Officer (CCO) or compliance practitioner it had many key elements which should be considered for an anti-corruption compliance program under the Foreign Corrupt Practices Act (FCPA), UK Bribery Act or other anti-bribery laws.

The US Geological Service had estimated that the Artic held “nearly a quarter of the world’s undiscovered petroleum.” Moreover, when Shell put its plan in place, it was reeling from an accounting scandal. Funk said that the purchase of the Kulluk and drilling for oil in the Artic “was important not because Shell needed oil in 2005. The company had plenty of oil. It was important because Shell had spent the previous year engulfed in a scandal involving what are known as proved reserves”. This meant that “Shell still had to show to investors that it’s long-term future was as bright as it once looked”, i.e. before the accounting scandal.

For an energy production company such as Shell, drilling in the Artic Ocean is about the most difficult place left on earth in which to try and drill. In 2012, Shell was the world’s largest corporation and clearly thought it was up to the task. Funk wrote, “It was on track to spend $6 billion preparing for Arctic Alaska, and that March the Obama administration approved exploratory drilling. The task that remained was not to tame the frontier so much as to bring it within reach, to bind Arctic Alaska to the rest of the world. Shell imagined a future of new ports, new airports and permanent rigs.”

The journey of the Kulluk up to the Artic Sea was delayed and had several problems that would later haunt the drill rig. However, Shell was able to claim a victory as it actually began drilling in October 2012, but then shortly had to depart due to unanticipated ice floes threatening the drill rig. The Kulluk began the long tow out from the Artic Sea to its homeport in Seattle. However the boat towing it was so badly damaged it had to break off the tow. Shell then made the fateful decision not to leave the Kulluk in port in Dutch Harbor, because as Funk noted “If the Kulluk was in an Alaskan port on New Year’s Day, [Shell] executives believed, it would be subject to a state oil-facilities tax of as much as $6 million. In late December, a spokesman confirmed Shell’s fears in an email to a longtime reporter at a local newspaper, The Dutch Harbor Fisherman, writing, “It’s fair to say the current tax structure related to vessels of this type influenced the timing of our departure.””

This fateful decision, not to spend the winter in Dutch Harbor, Alaska, led to the beaching of the drill rig after it had broken free from its tow cables in stormy weather and hit the Alaskan coast. Funk concluded, “In the early hours of New Year’s Day [2013], the Coast Guard flew over the wreck. In aerial photos published around the world, the rig was dwarfed by the auburn, grass-covered hills of the uninhabited island where it had finally come to a rest.”

In his article Nocera wrote of some of the highlights he took away from Funk’s piece. He said, “Despite spending $6 billion preparing to explore for oil in this remote part of the world, it didn’t plan adequately, and it cut too many corners. According to the Coast Guard, which investigated the Kulluk disaster, not only had Shell’s risk management been “inadequate,” but there also had been a significant number of “potential violations of law and regulations.”” Nocera identified three key risk factors that were not managed. First was the weather. The second is the US government’s (or any government’s) ability to regulate such a high-risk venture.

Just as there were too many people in the Marx Brothers’ Stateroom, sometimes the risk is so high that a company cannot operate safely. The same is true in compliance. Sometimes a company cannot do business within the parameters of the FCPA. In such a case, a CCO needs to speak up and say so. Mike Volkov, the Two Tough Cookies and Donna Boehme oft-times tell us that part of the job of a compliance practitioner is to say No when it needs to be said. Joe Nocera certainly is not against oil companies drilling in inhospitable locations or their making money. Yet he concluded the lesson in the story of the Kulluk disaster is oil companies are not in position to drill for oil in the Artic safely. It is simply too risky. If a deal is so high-risk, the chances of completing it without engaging in conduct which violates the FCPA cannot be reasonably assured, it is time for compliance to step up and say No. If Shell had understood and managed its risk more prudently, it would not be out $6bn in losses from the Kulluk disaster.

For a YouTube clip of the Stateroom scene, click here.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

0 comments