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: An explosion damaged several cars at a residential area in the national capital on Monday, but there were no injuries, police said.A spokesman for the Riyadh regional police told Saudi Press Agency (SPA) that security patrols received a tip f...
ABHA: Gov. Faisal bin Khalid bin Abdulaziz, Asir region, ordered the formation of a working team in Bisha to address the status of the battered woman who recently shared her suffering on social networking sites.Mohammed bin Sabrah will head the team,...
MADINAH: Madinah Gov. Prince Faisal bin Salman launched a series of charity and developmental projects during his recent visit to Khaibar Province at costs exceeding SR100 million.They included municipal projects at Khaibar, Al-Salsah and Al-Ashash M...
MADINAH: Pilgrims spend the most beautiful moments in the Prophet’s Mosque, where they pray in Riyazul Jannah (garden from the gardens of paradise) and get to greet the Prophet, peace be upon him, said the Omani pilgrim, Ahmed Nasser. “Such deeds giv...
MADINAH: A member of the Senior Scholars Council, Dr. Abdullah Al-Manieh, has called for the establishment of women’s departments at the Islamic University in Madinah in line with other universities in the Kingdom.“The Muslim woman has had her own st...
JEDDAH: The euphoria over the sudden resumption of call facility on WhatsApp in the Kingdom on Saturday was short-lived as the service was not widely available the following day. A large number of users of the popular messaging service, barring a few...
JEDDAH: Work on developing and modernizing the Kingdom’s 27 airports is ongoing and is expected to be completed within the next five years, according to Sulaiman Al-Hamdan, president of the General Authority for Civil Aviation (GACA).“Our goal is tha...
RIYADH: Saudi Arabia and South Korea are set to widen cooperation in the health care sector following a joint road show which underlined potential areas of cooperation and showcased world-class health facilities of that country. The event, titled “Ko...
RIYADH: The Saudi Green Building Forum (SBGF) believe that about fifty percent of the ongoing eco-friendly green building projects across the Kingdom are facing delays for not fulfilling criteria.Faisal Alfadl, secretary-general of the forum, on Satu...
AL-UQAIR: The low-quality of education in the Kingdom arises from many factors. Included among these are the complexity of the system itself, unclear educational vision, non-professional education development programs, and instability due to changing...
JEDDAH: Security authorities in Jeddah called a citizen and his wife for interrogating with them on the charges of beating their Eritrean housemaid.Makkah Police media spokesman, Col. Dr. Atti bin Attiah Al-Quraishi, said: “The Safety Center of Jedda...
AL-UQAIR: The Saudi Commission for Tourism and National Heritage (SCTNH) has deposited SR600 million with local banks for the Al-Uqair Development Company in Al-Ahsa, SCTNH President Prince Sultan bin Salman has said.“Saudi citizens have some equitie...
JEDDAH: A number of preachers have been arrested for using sermons to promote political ideologies, said Fahad Sulaiman Al-Khalifa of the Ministry of Islamic Affairs.He said the issue was not widespread, and the ministry reiterated that the sermon sh...
JEDDAH: A Saudi military analyst and retired brigadier, Ibrahim Al-Marie, has called for the compulsory drafting of young Saudis into the military.This is, he said, not only because the Kingdom is facing regional threats, but because of its benefits...
RIYADH: Advertisement campaigns for fake TOFEL and ILET certificates are being monitored on social media websites in an effort to halt this illegal practice. The certificates originate from Jordan and can be obtained by clients for a sum of SR2,000,...

Stay Connected

Facebook