In 1994, six African American employees of Texaco filed suit for racial discrimination. The suit languished in court until 1996 when the New York Times published damaging reports of a secretly recorded conversation in which three senior Texaco executives discussed the destruction of documents and ridiculed diversity efforts at the company. In the wake of the resulting uproar, Texaco settled the suit by agreeing to pay $141 million in compensation and set aside $35 million to improve the diversity program. The employees’ suit was based on both incidents of apparent discrimination and statistics that showed Texaco to lag behind other companies in the industry in hiring and promoting members of racial minorities. The discrimination occurred despite an explicit company policy and an affirmative action plan. The problem, according to critics, was the lack of oversight and implementation.Did Texaco discriminate against African American employees, or were these employees simply less qualified than others? What kind of evidence could Texaco use to show that the company’s practices were not discriminatory? What kind of evidence could the employees use to support their position?Could discrimination exist if there were no overt racist incidents at Texaco, that is, if the only evidence were statistical? Must the plaintiffs show an intent to discriminate?Who has the burden of proof in this case? That is, should the employees be required to show that they were discriminated against, or should the company be required to justify the statistical disparities?How could discrimination occur at a company with an explicit policy and an active diversity program? What steps could Texaco take to avoid a repetition of the problem? Specifically, how should Texaco spend the $35 million set aside for the diversity program?