BP's other victims are its shareholders



Alison Frankel

Published — Sunday 18 November 2012

Last update 18 November 2012 5:58 am

| نسخة PDF Print News | A A

NEW YORK: As part of BP's historic $4.5 billion deal Thursday to resolve criminal and civil charges related to the Deepwater Horizon oil spill in 2010, the British oil company agreed to pay a $525 million penalty to the Securities and Exchange Commission for defrauding its own investors.
The settlement, which is the third-largest in SEC history, is based on the agency's claims that BP violated US securities laws when company executives filed false reports with the SEC and made false public statements about how much oil was flowing out of BP's well and into the Gulf of Mexico. The SEC announced that the money would be used to compensate investors for their losses by way of a Fair Fund.
I'm glad the SEC plans to get some money back to the BP investors who lost billions after the Deepwater Horizon spill because, at least for the vast majority of holders of BP common stock, that's their only hope of recovery from BP's (alleged) violation of federal securities laws. The oil spill took place in April 2010 and shareholder class actions followed quickly thereafter. But by the time the BP securities litigation was consolidated before US District Judge Keith Ellison of Houston in August 2010, you know what had happened: The US Supreme Court issued Morrison v. National Australia Bank, which held that investors have no cause of action under US securities laws for losses on foreign-traded shares.
In effect, the BP securities class action, at least for holders of BP common shares, was over before it started. Around 30 percent of BP shares are traded on US exchanges as American Depository Receipts. ADR holders, whose claims remain alive after Morrison, are still litigating their class action against
BP in Houston. They've survived BP's motion to dismiss and have been granted access to the evidence emerging in the consolidated personal injury litigation against BP in federal court in New Orleans.
According to co-lead counsel Steven Toll of Cohen Milstein Sellers & Toll, the ADR holders are fighting with BP's lawyers at Sullivan & Cromwell over whether investors can add some more potentially actionable alleged misstatements to their latest complaint, which already goes way beyond the SEC's assertions about oil flow rate misrepresentations.
But despite the best efforts of class counsel from Cohen Milstein, Berman DeValerio and Yetter & Coleman, holders of BP common shares have no viable federal claims against BP. The lead plaintiffs in the class action, state pension funds of New York and Ohio, lost almost $200 million in their investment in BP common shares, yet they won't recover any of it in the federal case.
Some of the common stockholders still have alternative routes to BP's wallet. They can't bring classwide claims based on state fraud laws, but several individual state pension funds with sizable losses have sued on their own, asserting state securities and fraud claims. BP has removed those cases to Ellison's federal courtroom in Houston, where they've just begun to be litigated. And according to class Toll of Cohen Milstein and Glen DeValerio of Berman DeValerio, a German law firm is soliciting BP shareholders for a potential case in the Netherlands, which permits a form of group litigation by shareholders. It's way too early to predict whether anything will come of that effort.
DeValerio and Toll were more resigned than angry when I spoke with them Thursday about BP's settlement with the SEC and what might have been in the shareholder class action. "It's encouraging from the point of view that the SEC's case developed the way we expected it to. This supports everything that we've said," DeValerio told me. Toll said that BP's admissions can only help in the ADR holders' ongoing class action. "I guess it makes me annoyed in general that Morrison is the law," Toll said. "It's just terrible for investors."
And just think: If it hadn't been for the drafters of Dodd-Frank, the SEC wouldn't have a case against BP either.
Morrison knocked out enforcement actions against foreign companies, but Congress restored the extraterritorial reach of the SEC and the Justice Department for securities violations when it passed Dodd-Frank reforms in July 2010, a month after the Morrison ruling. Dodd-Frank also included a provision requiring the SEC to present a report on Morrison's impact to Congress. You may recall that when the SEC issued that report in April, the commissioners declined to make recommendations about passing a law to roll back the Supreme Court's ruling.
DeValerio and Toll said no one should expect the BP example to change minds in Congress — and they're probably right. But it should.
— Alison Frankel writes On the Case blog for Thomson Reuters News & Insight.
The views expressed are her own.

What's happening around Saudi Arabia

RIYADH: The Saudi Commission for Tourism and National Heritage (SCTNH) has encouraged businessmen to invest in tourism villages in Asir region.“Tourism villages are considered to be one of the most attractive options in the province,” said Mohammad A...
RIYADH: The General Presidency for Youth Welfare (GPYW) has taken part in serving pilgrims and visitors to the Two Holy Mosques as part of the organization’s voluntary and humanitarian work. In his statement, the head of the Riyadh office, Abdulrahma...
RIYADH: Prince Faisal bin Bandar, governor of Riyadh, opened on Wednesday 20 environmentally friendly entertainment projects with a total area of more than 270,000 sq. meters. Among interesting features of these new parks are replicas of the Eiffel T...
JEDDAH: Children and youths afflicted with cancer in the Eastern Province have launched a campaign against terrorist attacks. The patients, their families and doctors have slammed the attacks, which saw many killed and injured, a local publication re...
JEDDAH: Failing to report what one knows about the presence or plans of terrorists and extremists is a “grave sin” and makes the person who fails to do so an accomplice to the resulting actions, according to Abdullah bin Suleiman Al-Manae, a member o...
RIYADH: The World Assembly of Muslim Youth (WAMY) is a major player when it comes to relief work in countries wrecked by human tragedies, Secretary-General Saleh Al-Wohaibi said on Tuesday.He was addressing some 700 guests at the 13th annual iftar pa...
JEDDAH: The General Committee for the Municipal Elections has issued new regulations to oversee the polls, which will be taking place on Dec. 12, 2015.The rules released on Monday spelled out requirements for council members, list of violations and a...
JEDDAH: The Martyrs Fund has announced that it disburses 75 percent of its annual revenues to helping the needy families of martyrs, the wounded, prisoners of war and missing persons.Approximately 25 percent of the revenues is allocated for further i...
MADINAH: Custodian of the Two Holy Mosques King Salman arrived in Madinah on Tuesday accompanied by several princes and senior officials for his first visit since ascending the throne. He was met at the airport by Madinah Gov. Prince Faisal bin Salma...
JEDDAH: The Council of Ministers has condemned the terrorist attacks in Kuwait, France, Tunisia and Egypt over the past few days.At its weekly meeting chaired by Custodian of the Two Holy Mosques King Salman on Monday night, the Cabinet said that the...
JEDDAH: The father of the suicide bomber who blew himself up in a mosque in Kuwait has blamed “evil” forces for his son’s behavior.Sounding confused and sad, Sulaiman Al-Gabbaa, the father of Fahad Al-Gabbaa, said: “An evil hand has sent my son to hi...
JEDDAH: The Saudi Traffic Department has denied that it is introducing new license plates for cars.It said hackers posted pictures of the supposedly new license plates on its Twitter account on Sunday. The department said the news, which went viral,...
JEDDAH: The Al-Haramain Train project is described as the largest public transportation project in the Middle East. This vital and strategic project is one of the implementation schemes of the mass expansion of the Saudi railway across the country.Th...
JEDDAH: The number of marriages between expatriates and Saudis has dropped 84 percent to 1,928 since the start of this Islamic year that began on Oct. 24, compared to the same period the previous year.The Ministry of Justice said that there were 12,0...
JEDDAH: The General Authority for Civil Aviation (GACA) launched the idea of a project called Watani to link all parts of the Kingdom by air by beefing up activities at important provincial airports.Capt. Abdul Hakim Badar, assistant vice president a...

Stay Connected

Facebook