Bank of America Corp. and Chevron Corp. will replace Altria Group, Inc., and Honeywell International, Inc., in the Dow Jones Industrial Average

Bank of America Corp. and Chevron Corp. will replace Altria Group, Inc., and Honeywell International, Inc., in the Dow Jones Industrial Average, effective with the opening of trading on February 19, Dow Jones & Company announced.
These changes are the first in the 111-year-old stock index since April 8, 2004, when three stocks out of 30 were replaced.

"The catalyst for these changes is the restructuring in progress at Altria, which will result in a much smaller and more narrowly focused company," said Marcus W. Brauchli, managing editor of The Wall Street Journal. The Journal's top news editor oversees the makeup of "The Dow," which Charles H. Dow created as a 12-stock index in May 1896 and today is the best-known stock-market barometer in the world.

"As usual when we make any change we review all the stocks," Mr. Brauchli said. "In doing so, we saw that the financials industry was under-represented – notwithstanding the current turbulence – and that the oil and gas industry’s growing importance to the world economy called for another representative to join ExxonMobil Corp," he said.

John A. Prestbo, editor of Dow Jones Indexes, said, "There are no pre-determined criteria for a stock to be added or deleted, though we intend that all components be established U.S. companies that are leaders in their industries." For the sake of continuity, composition changes are intentionally rare, Mr. Prestbo said.

Altria, formerly Philip Morris Cos., has been in the industrial average since Oct. 30, 1985. It adopted its current name in 2003. Last year it spun off Kraft Foods, Inc. It has announced the spin-off next month of Philip Morris International, Inc., which will leave it as a purely domestic tobacco company.

Honeywell is being dropped because it is the smallest of the industrials in terms of revenue and earnings. Additionally, the role of industrial companies relative to the overall stock market has been shrinking in recent years, Mr. Brauchli said. AlliedSignal acquired Honeywell in late 1999 and adopted that name for the new entity. The predecessor of AlliedSignal was Allied Chemical & Dye Corp., formed in 1920 and added to The Dow on Dec. 7, 1925.

Chevron has been in the industrial average twice before. The first time, as Standard Oil Co. of California, was from February 1924 to August 1925. The company re-joined The Dow in 1930, but was replaced on Nov. 1, 1999. The Chevron name was adopted in 1984.
The changes won't cause any disruption in the level of the index. The divisor used to calculate The Dow from its components' prices on their respective home exchanges will be changed prior to the opening on February 19. This procedure prevents any distortion in The Dow's reflection of the U.S. stock market.

For more information, see the web site of Dow Jones Indexes at http://www.djindexes.com. The Dow Jones Transportation Average, Dow Jones Utilities Average and Dow Jones Composite Average also are members of the Dow Jones Averages family.

Chevron to Pay $30 Million to Settle Charges For Improper Payments to Iraq Under U.N. Oil For Food Program

The Securities and Exchange Commission today charged Chevron Corporation for its role in illegal kickback payments that were made to Iraq in 2001 and 2002 in connection with the company's purchases of crude oil under the U.N. Oil for Food Program.

Chevron, based in San Ramon, Calif., agreed to pay $30 million to settle the charges brought under the Foreign Corrupt Practices Act (FCPA) without admitting or denying the SEC's allegations.

The U.N. Oil for Food Program was intended to provide humanitarian relief to the Iraqi people while Iraq was subject to international trade sanctions. According to the Commission's complaint, third parties under contract with Chevron made approximately $20 million in illicit payments that bypassed the Oil for Food escrow account and were paid directly to Iraqi-controlled bank accounts in Jordan and Lebanon. The SEC alleged that Chevron knew, or should have known, that third parties were using portions of the premiums they received from Chevron's oil purchases to pay illegal surcharges to Iraq. The SEC also alleged that Chevron failed to devise and maintain a system of internal accounting controls to detect and prevent such illicit payments, and Chevron's accounting for its Oil for Food transactions failed to properly record the true nature of the company's payments to third parties.

"This is the Commission's fifth action against a company for participating in the Oil for Food kickback scheme and demonstrates our continuing commitment to combating violations of the Foreign Corrupt Practices Act," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement.

Cheryl Scarboro, an Associate Director in the Division of Enforcement, added, "The Commission will continue to vigorously enforce the books and records and internal controls provisions of the Foreign Corrupt Practices Act to combat illicit kickbacks."

According to the Commission's complaint, filed in the U.S. District Court for the Southern District of New York, Chevron learned of surcharge demands by Iraq's State Oil Marketing Organization (SOMO) in January 2001 and adopted a company-wide policy prohibiting their payment. The policy required traders to obtain prior written approval for all proposed Iraqi oil purchases and charged management with reviewing each proposed Iraqi oil deal.

Chevron subsequently purchased approximately 78 million barrels of crude oil from Iraq pursuant to 36 contracts with third parties from April 17, 2001, through May 6, 2002. In doing so, the Commission alleges, Chevron's traders failed to follow the company-wide policy and Chevron's management did not ensure compliance. Despite being required to consider the identity, experience and reputation of a third-party seller prior to approving a proposed Iraqi oil purchase, Chevron's management relied on its traders' representations.

In one instance, a credit check by Chevron of a proposed third-party seller revealed that the seller was a "brass plate company." This meant that the company had no experience in the oil business, no real business operations, and no known assets. Despite concerns on the part of Chevron's management, Chevron entered into two transactions to purchase three million barrels of oil from the third party in January 2002. Illegal surcharges were paid on both of these transactions and passed back to Chevron in inflated premiums that Chevron paid to the third party.

Also according to the SEC's complaint, a third-party seller whose company occasionally sold oil to Chevron stated that the trader he dealt with at Chevron and the trader's bosses always knew about the illegal surcharge demands by Iraq. The Chevron trader asked the third-party seller to persuade Iraq to reduce the amount of its surcharges. Despite Chevron's premium payments to third parties increasing after Iraq's surcharge demands began, Chevron's management routinely approved the Iraqi oil purchases proposed by its traders.

Chevron consented to the entry of a final judgment permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, and ordering it to disgorge $25 million in profits and pay a $3 million civil penalty. Chevron also will pay the Office of Foreign Asset Controls of the U.S. Department of Treasury a penalty of $2 million. Chevron will satisfy its disgorgement obligation by forfeiting $20 million pursuant to an agreement with the U.S. Attorney's Office for the Southern District of New York and paying disgorgement of $5 million pursuant to an agreement with the Manhattan District Attorney's Office.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York, the Manhattan District Attorney's Office, the Office of Foreign Asset Controls at the U.S. Department of Treasury, and the United Nations Independent Inquiry Committee. The Commission also acknowledges Chevron's cooperation in the investigation. The SEC's Oil for Food investigation is continuing.