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ChevronTexaco Corporation press release 4/04/05:

ChevronTexaco Corporation and Unocal Corporation announced today that ChevronTexaco would acquire Unocal in a stock and cash transaction valued at approximately [$16.8 billion], including net debt. The acquisition, which is subject to approvals by Unocal shareholders and certain regulatory agencies, will significantly enhance ChevronTexaco’s position as a leading global energy provider.

China National Offshore Oil Corporation press release 6/23/05:

CNOOC Limited announces today that it has proposed a merger with Unocal Corporation (“Unocal”; NYSE: UCL) offering US$67 in cash per Unocal share. The offer values Unocal at approximately US$18.5 billion and represents a premium for Unocal’s shareholders of approximately $1.5 billion over the value of Chevron Corporation’s (“Chevron”) offer based Chevron’s closing price on NYSE on 21 June 2005.

Chevron dismisses CNOOC’s Unocal offer 6/26/05:

Chevron, despite an ostensibly lower bid, may well hold a stronger position than the Chinese company in the unfolding takeover battle. On Friday Robertson said that Chevron believes it is under no immediate pressure to improve its offer, even though the bid by the Chinese firm is sharply higher than Chevron’s offer and is all cash.

The Chinese offer “is not a knockout blow,” Robertson said. “We are going to win this one. I am convinced of it.”

Interview with ChevronTexaco Vice Chairman Peter Robertson 7/01/05:

“In the environment we’re in, I think Unocal shareholders will say, ‘The Chevron deal looks pretty good.’ “

Unocal suitors make pitches 7/07/05

The House of Representatives, by huge majorities, passed two measures last Thursday that protest the Chinese bid: an amendment to cut off money for any government review that might allow the Chinese offer to proceed, and a nonbinding resolution that lists a litany of objections to the bid and calls on Bush to order an immediate investigation on national security grounds.

US Lawmaker Eyes Energy Bill to Halt CNOOC-Unocal Deal 7/14/05:

Rep. Richard Pombo, R-Calif., will try to add language to a broad energy bill requiring an immediate review of the proposed merger between the Chinese state-owned CNOOC and Unocal Corp., in an effort to derail the bid.

U.S. Trade Representative Rob Portman on the passage of CAFTA 7/28/05:

“This win sends a powerful signal to the region and the world that the United States will continue to lead in opening markets and leveling the playing field,”

Congress Passes Far-Reaching Energy Bill 7/30/05:

…the bill, despite its broad sweep, does nothing to reduce the high cost of energy, especially at the gasoline pumps, and will not reduce the country’s heavy reliance on oil imports.

Reports: CNOOC to drop Unocal bid 7/29/05:

Previously, CNOOC just “anticipated noise in Washington” and a maximum 90-day government review process, but “never expected it would become as strident as it has become,” the source said. Last week Congress introduced legislation that would delay the process as CNOOC battles with bid rival Chevron.

China National Offshore Oil Corporation press release 8/02/05:

CNOOC Limited announces that it has withdrawn its offer for Unocal.

So an undervalued offer wins a bidding war, the conditions that have caused oil reserves to become a national security issue (to the point that CNOOC’s bid was considered a threat) went unanswered in an energy bill deemed a priority by the President, and the swarm of pro-free-trade sentiment that surrounded CAFTA somehow didn’t apply to an all cash offer for a publicly-traded company. VIVA Free Markets!

It goes without saying that any deal of this nature should receive a careful look by governmental agencies and panels responsible for regulation. But the vigor with which some in Congress reacted was truly out of the ordinary. Unless, of course, campaign contributions from UNOCAL suitor Chevron are factored into the equation:

Three leaders in the congressional campaign to discourage Chinese oil company CNOOC Ltd.’s acquisition of Unocal Corp. accepted campaign contributions from rival suitor Chevron Corp. in recent weeks, according to reports filed with the Federal Election Commission.

The lawmakers, Rep. Richard Pombo, R-Calif., Sen. Kent Conrad, D-N.D., and Sen. James Inhofe, R-Okla., have been among the most vocal on Capitol Hill in criticizing CNOOC’s proposed deal as anticompetitive and a threat to national security. The perception that Congress could delay or spike a CNOOC deal is viewed as a major factor in Unocal’s decision to stick with Chevron despite its lower bid.

All three donations were disbursed by Chevron on June 29, about a week after CNOOC announced its bid, according to Chevron’s June report to the FEC. Pombo received a contribution of $2,000, while Conrad and Inhofe each received $1,000.

Pombo, who represents San Ramon, Calif., where Chevron is based, has received $21,500 from Chevron since 1989, according to the Center for Responsive Politics.

It’s clear that these lawmakers sold out their principles and their words for cash. Chevron responded with the usual spin that contributions aren’t a quid pro quo, but that doesn’t even pass the laugh test. Especially when Chevron’s spokesman gave away the timeframe of the contributions:

The San Ramon company says its campaign funding has nothing to do with its pursuit of Unocal. Although some politicians critical of China National received contributions after the bidding war began, Chevron had planned its 2005 political donations two months earlier, in April, spokesman Don Campbell said.

April. The same month Chevron announced their decision to buy UNOCAL.

Real campaign finance reform should be a priority for every American. Until it happens, citizens are at the mercy of those who can buy their very own member of Congress.

**Update: Apparently momentum is moving in the opposite direction.