Merger Misdeeds?

Nancy Esselman didn't trust her husband of 14 years. They had reached the end game of an ugly, two-year divorce. After she filed for divorce, he charged her with assault with a deadly weapon (her car).

A year ago, the couple went into mediation to divide their financial assets. At the time, Nancy's attorneys say, she did not know that the Montgomery County grand jury had no-billed her in the criminal case -- so her divorce attorney advised her to settle.

During the mediation process, Mark Esselman, then Pennzoil's senior vice president of human resources, produced a September monthly stock report. Nancy asked him to have Pennzoil's CEO confirm in a letter to her that Esselman hadn't received any form of bonus.

"I waited and waited for the letter," Nancy says.

That evening, confirmation came across the fax machine. Linda Condit, Pennzoil's vice president and corporate secretary, sent Nancy a statement on company letterhead saying that because Pennzoil did not meet performance objectives in 2001, Mark and other executives had not received a bonus "in any form or fashion."

So Nancy signed the confidential settlement agreement.

She later filed a lawsuit that alleged that on the day before Condit's letter was written, Mark had received 27,000 shares of Pennzoil stock valued at $183,465, in addition to the 7,500 units of restricted stock valued at $165,000 he received in January.

"This is fraud," says John Zavitsanos, one of Nancy's Houston attorneys. "Who would do this? Who, one day after giving a bonus to an employee, would send the wife a letter saying he didn't get any bonus?"

According to the suit, Pennzoil executives conspired with Mark and falsified documents in order to cheat Nancy out of hundreds of thousands of dollars. Zavitsanos says that if Pennzoil hadn't committed "deliberate, intentional fraud," his client would not have signed the settlement agreement.

"In the Enron mess they were screwing nameless and faceless shareholders that they don't know. This man is screwing over the mother of his children," says Nancy's attorney Dean Blumrosen.

In February 2002, two years after Nancy filed for divorce, Pennzoil and Shell began discussing a merger, the suit says. The original severance package that Shell submitted to the U.S. Securities & Exchange Commission for Pennzoil executives was approximately $20 million, the petition says. Mark allegedly helped revise the package to include executives' unvested stock options, which more than tripled the final payout.

"The value of the golden parachute spikes from $20 million to $60 million, and some believe it's well over $100 million," Zavitsanos says. "They were just lining their pockets."

Nancy's attorneys allege that because Mark helped make Pennzoil executives richer, they did him a favor by helping defraud his wife. Nancy's attorneys also believe Mark pushed for his financial settlement with Nancy to be finalized a week before the merger between Shell and Pennzoil was publicly announced, to keep Nancy from getting any of his jackpot.

"He has said under oath that he did not know about the merger -- but it's an odd coincidence that he was pushing for the mediation on the day that he did," Zavitsanos says. "It was very hastily put together."

When the divorce decree was entered, Blumrosen says, both sides agreed that Nancy would receive half of the benefits derived from the merger. "That's all she wanted," the attorney says.

Two days after the October 1 merger, Blumrosen received a letter from Mark's attorney listing Mark's $5.8 million total severance package, which included mysterious bonus stocks that had not been mentioned in the divorce settlement.

"They said of the $5.8 million, the vast majority of it was not derived from the merger -- even though it says 'merger benefits' up at the top of the document," Zavitsanos says. " 'I get it all, you get nothing.' That's basically what their letter said."

Nancy sued Mark for fraud and breach of contract. That case was settled in February for an undisclosed sum. "Now we're going after Pennzoil," Blumrosen says.

"The people who deceived her were Pennzoil," Zavitsanos says. "Although Mark solicited it, it was Pennzoil's actions that led to the fraud."

When asked to comment on his ex-wife's suit against Pennzoil, Mark said he thought the lawsuit was "a good advertisement for tort reform." He said he could not comment further before consulting with his attorney.

"There's gonna be other action taken," Mark says. "Trust me."

Mark's attorney left a telephone message saying the petition is a "bogus claim." He was away on vacation and not available for comment before deadline for this article.

As for Pennzoil and Shell's side of the story, Shell doesn't comment on pending litigation, says Shell attorney Jim Maloney, a partner at Baker & Botts.

Shell spokesperson Helen Bow repeats the same statement, adding: "This is particularly appropriate here, as the events that allegedly took place predated our acquisition of Pennzoil-Quaker State."