BP PLC Securities Litigation 10-MD-02185-Third Amended Complaint For Violations Of The

173 Pages·2012·7.98 MB·English

Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 1 of 173
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
)
CONNECTICUT RETIREMENT PLANS AND )

TRUST FUNDS; NORTH CAROLINA�
)
DEPARTMENT OF STATE TREASURER;�
) C.A. No. 4:12-cv-01272
PUBLIC EMPLOYEES’ RETIREMENT
ASSOCIATION OF COLORADO; CITY OF
PHILADELPHIA BOARD OF PENSIONS AND
RETIREMENT; LOS ANGELES COUNTY
EMPLOYEES’ RETIREMENT ASSOCIATION;
and SAN DIEGO CITY EMPLOYEES’
RETIREMENT SYSTEM,
Plaintiffs,
vs.
BP, PLC; BP AMERICA, INC.; BP
EXPLORATION & PRODUCTION, INC.;
ANTHONY B. HAYWARD; ANDREW G.
INGLIS; DOUGLAS J. SUTTLES, H. LAMAR
McKAY, ROBERT MALONE, DAVID RAINEY
Defendants.
MDL NO. 2185
�
IN RE BP SECURITIES LITIGATION C.A. No. 4:10-md-2185
JURY TRIAL DEMANDED
THIRD AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL
SECURITIES LAWS AND TEXAS, CALIFORNIA, COLORADO, CONNECTICUT,
NORTH CAROLINA AND PENNSYLVANIA STATUTORY OR COMMON LAW
Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 2 of 173
TABLE OF CONTENTS
I. �NATURE OF THE ACTION AND OVERVIEW.............................................................2
II. �JURISDICTION AND VENUE ......................................................................................... 7
III. �PARTIES .......................................................................................................................... 11
A. Plaintiffs................................................................................................................ 11
B. Defendants ............................................................................................................ 14
IV.� SUBSTANTIVE ALLEGATIONS ..................................................................................19
A. Prior Incidents of Safety Lapses ...........................................................................19
B. The Baker Report.................................................................................................. 24
C. BP Pledged to Implement OMS and Formed Committees to
Enhance and Monitor Process Safety ...................................................................29
D. OMS Scope and Implementation.......................................................................... 32
E. BP Experienced Well Blowouts During The Relevant Period As
The Result Of Faulty Cementing..........................................................................36
F. The Deepwater Horizon Disaster Establishes That “Process”
Safety Improvements Were Not Implemented During the Relevant
Period....................................................................................................................38
G. BP Had No Legitimate Spill Response Plan, Contrary to
Defendants’ Representations ................................................................................ 45
V. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING
STATEMENTS AND OMISSIONS OF MATERIAL FACTS DURING
THE RELEVANT PERIOD.............................................................................................54
A. January 16, 2007 Statement [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 54
B. May 9, 2007 Statements [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 55
C. May 16, 2007 Statements [Misrep. No. 8 from NY/OH Class
Action Order – Held Materially False and Misleading; No Scienter
Found]................................................................................................................... 56
D. July 24, 2007 Statements [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 57
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E. September 25, 2007 Statements [Misrep. No. 9 from NY/OH Class
Action Order—Not Held Materially False and Misleading; No
ScienterFound]..................................................................................................... 57
F. October 25, 2007 Statements [Misrep. No. 10 from NY/OH Class
Action Order – Held Materially False and Misleading; No Scienter
Found]................................................................................................................... 58
G. November 8, 2007 Statements [Misrep. No. 11 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 59
H. February 22, 2008 Statements [Not Pled in NY/OH Consolidated
ClassAction Complaint]....................................................................................... 59
I. February 27, 2008 Statements [Misrep. No. 14 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 59
J. March 4, 2008 Statements [Not Pled in NY/OH Consolidated Class
ActionComplaint] ................................................................................................60
K. April 17, 2008 Statements [Misrep. No. 16 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 61
L. December 17, 2008 Statements [Misrep. No. 18 from NY/OH
Class Action Order—Portions Held Materially False and
Misleading; Scienter Found]................................................................................. 62
M. February 24, 2009 Statements [Misrep. Nos. 21 and 22 from
NY/OH Class Action Order—Not Held Materially False and
Misleading; No Scienter Found]........................................................................... 63
N. March 4, 2009 Statements [Misrep. No. 25 from NY/OH Class
Action Order; Misrep. No. 13 from Ludlow Class Action Order—
Held Materially False and Misleading in Ludlow Order; No
ScienterFound)..................................................................................................... 64
O. March 10, 2009 Statements [Misrep. No. 26 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found; Misrep. No. 16 from Ludlow Order]........................................................67
P. April 16, 2009 Statements [Not Pled in NY/OH Consolidated Class
ActionComplaint] ................................................................................................ 69
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June 30, 2009 Statements [Misrep. No. 30 from NY/OH Class
Q.
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 69
R. November 19, 2009 Statements [Misrep. No. 31 from NY/OH
Class Action Order – Held Materially False and Misleading; No
ScienterFound]..................................................................................................... 71
S. February 26, 2010 Statements [Misrep. No. 18 from Ludlow Class
Action Order—Portions Held Materially False and Misleading; No
ScienterFound]..................................................................................................... 72
T. March 5, 2010 Statements [Misrep. No. 35 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 73
U. March 22, 2010 Statements [Misrep. No. 8 from Ludlow Class
Action Order—Held Materially False and Misleading; No Scienter
Found]................................................................................................................... 74
V. March 23, 2010 Statements [Misrep. No. 38 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 76
W. April 15, 2010 Sustainability Review Statements [Misrep. No. 40
from NY/OH Class Action Order—Not Held Materially False and
Misleading; No Scienter Found; Misrep. No. 5 from Ludlow Class
Action Order—Held Materially False and Misleading; No Scienter
Found]................................................................................................................... 76
X. April 15, 2010 Sustainability Report Statements [Misrep. No. 32
from Ludlow Class Action Order—Held Materially False and
Misleading; No Scienter Found]........................................................................... 78
Y. April 28, 2010 Statements [Misrep. No. 42 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 80
Z. April 29, 2010 Statements [Misrep. No. 43 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 81
AA. April 29, 2010 Statement [Not Pled in NY/OH Consolidated Class
ActionComplaint] ................................................................................................82
BB. April 30, 2010 Statement [Not Pled in NY/OH Consolidated Class
ActionComplaint] ................................................................................................ 83
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CC. May 4, 2010 Statement [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 84
DD. May 5, 2010 Statements [Misrep. No. 45 from NY/OH Class
Action Order—Held Materially False and Misleading; Scienter
Found]................................................................................................................... 85
EE. May 10, 2010 Statements [Not Pled in NY/OH Consolidated Class
ActionComplaint] ................................................................................................86
FF.� May 14, 2010 Statements [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 87
GG. May 17, 2010 Statement [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 89
HH. May 21, 2010 Statements [Not Pled in the NY/OH Consolidated
ClassAction Complaint]....................................................................................... 90
II. �May 22, 2010 Statement [Not Pled in the NY/Ohio Consolidated
ClassAction Complaint]....................................................................................... 92
JJ.
........................ 94
VI. �ADDITIONAL ALLEGATIONS OF DEFENDANTS’ SCIENTER..............................97
A. The Orange Book Reports Disclosed Process Safety Related
Information to GORC and SEEAC Members and Board Members.....................97
B. Minutes Demonstrate that SEEAC and the Board Reviewed and
Discussed the Content of BP’s Safety Related Publications ................................99
C. The Defendants Consciously Limited the Applicability and Scope
of the S&O Audit Function so as to Exclude BP’s Gulf of Mexico
DeepwaterWells................................................................................................. 100
D. Defendants Failed to Disclose and Address Process Safety and
Operational Risk Issues....................................................................................... 101
E. Defendants Were Aware of or Recklessly Disregarded Heightened
Process Safety Risks and Deficiencies With Third-Party Rigs ..........................103
F. BP Received Numerous Safety Warnings for Deficiencies in the
Company’s North Sea Operations ......................................................................104
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G. BP Retaliated Against Workers Who Raised Safety Concerns..........................105
H. The Defendants Falsely Assured Investors That BP Was
Implementing OMS Across All Operations and the Baker Report’s
Recommendations............................................................................................... 106
I. Defendants’ Public Estimates Of Oil Spilling Into The Gulf Were
Contradicted By Contemporaneous Internal BP Documents..............................109
J. The DOJ Has Charged Former BP Engineers for Deleting Text
Messages About the Amount of Oil Spewing Into the Gulf, and is
Investigating Whether BP Representatives Lied to Congress About
theExtent of the Spill .........................................................................................115
K. BP Exploration & Production Inc. Has Pled Guilty to Felony
Manslaughter, Environmental Crimes and Obstruction of Congress .................116
L. BP Has Agreed to Pay $525 Million to Settle the SEC’s Charges
That the Company Misled Investors Regarding the Oil Spill Flow-
Rate..................................................................................................................... 118
M. Defendants Were Motivated to Conceal the Amount of Oil
Spewing Into the Gulf to Reduce Fines and Penalties by Billions of
Dollars................................................................................................................. 119
VII. �LOSS CAUSATION/ECONOMIC LOSS ..................................................................... 119
VIII. �RELIANCE..................................................................................................................... 126
A. Connecticut Retirement Funds............................................................................ 127
B. North Carolina DST............................................................................................ 129
C. Colorado PERA..................................................................................................131
D. City of Philadelphia ............................................................................................ 133
E. LACERA............................................................................................................. 135
F. SDCERS ............................................................................................................. 136
IX. � NO SAFE HARBOR ...................................................................................................... 139
X. �PLAINTIFFS’ CLAIMS ARE TIMELY........................................................................ 139
XI. �CLAIMS FOR RELIEF..................................................................................................140
XII. �PRAYER FOR RELIEF .................................................................................................157
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Plaintiffs Connecticut Retirement Plans and Trust Funds (“Connecticut Retirement
Funds”), North Carolina Department of State Treasurer (“North Carolina DST”), Public
Employees’ Retirement Association of Colorado (“Colorado PERA”), City of Philadelphia
Board of Pensions and Retirement (“City of Philadelphia”), Los Angeles County Employees’
Retirement Association (“LACERA”), and San Diego City Employees’ Retirement System
(“SDCERS”) (collectively, “Plaintiffs”), allege the following based upon the investigation of
1
Plaintiffs’ counsel, which includes, among other things, a review of Defendants’ public
documents, conference calls and announcements, United States Securities and Exchange
Commission (“SEC”) filings, Defendants’ filings and statements to government regulators
including, inter alia, the U.S. Minerals Management Service (“MMS”), wire and press releases
published by and regarding BP p.l.c. and its subsidiaries (collectively, “BP” or the “Company”),
pleadings and filings in In re BP p.l.c. Securities Litigation , No. 10-md-02185 (S.D. Tex.), the
Court’s Order denying in part Defendants’ motion to dismiss claims in In re BP p.l.c. Securities
Litigation, 843 F. Supp. 2d 712 (S.D. Tex. 2012), the Charge of Information and Guilty Plea
Agreement filed by the Department of Justice (“DOJ”) in United States v . BP Exploration and
Production, Inc., No. 2:12-cr-00292-SSV-DEK (E.D. La.) (the “Information and Guilty Plea”),
the Indictment filed by the DOJ against Defendant David Rainey in United States v . Rainey , No.
2:12-cr-00291-KDE-DEK (E.D. La.) (the “Rainey Indictment”), the Complaint filed in Securities
and Exchange Commission v . BP p.l.c., No. 2:12-cv-02774 (E.D. La.) (the “SEC Complaint”),
documents and testimony produced in connection with the oil spill litigation, In re Oil Spill by
the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010 , MDL 2179 (E.D.
La.), investigations and reports issued in connection with the April 20, 2010 explosion aboard
1
As defined below. Unless otherwise noted, all emphasis herein are added.
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the Deepwater Horizon and the subsequent oil spill in the Gulf of Mexico (“Gulf”) ( e.g.,
National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, Report to
the President, “The Gulf Oil Disaster and the Future of Offshore Drilling,” Jan. 2011 (the
“Presidential Commission”)), The Bureau of Ocean Energy Management, Regulation and
Enforcement, “Report Regarding The Causes Of The April 20, 2010 Macondo Well Blowout,”
Sept. 14, 2011 (the “Interior Department Report”)), securities analysts’ reports and advisories
about the Company, and information provided by Plaintiffs and their investment advisers.
Plaintiffs believe that substantial additional evidentiary support will exist for the allegations set
forth herein after a reasonable opportunity for discovery.
I. NATURE OF THE ACTION AND OVERVIEW
1. �Plaintiffs bring this action for damages sustained in connection with their
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transactions in BP American Depository Shares (“ADS”) and ordinary shares between January
16, 2007 and May 28, 2010, inclusive (the “Relevant Period”). As detailed herein, Plaintiffs
suffered significant losses when events following the April 20, 2010 explosion aboard the
Deepwater Horizon semi-submersible rig and the subsequent historic oil spill from the Macondo
Prospect (“Macondo”), revealed that Defendants’ prior statements regarding, inter alia, BP’s
purported implementation of specific process safety protocols recommended by an independent
panel due to numerous accidents, the progress of BP’s implementation of the Operating
Management System (“OMS”) as well as the scope of the OMS, BP’s ability to respond to oil
spills in the Gulf and BP’s post-spill estimates of the oil flow rate following the Deepwater
Horizon incident, were materially false and misleading when made. 3
2
As used herein, ADS also includes any BP securities designated as “American Depositary Receipts.”
3
For ease of reference, Plaintiffs have indicated which statements were upheld with respect to falsity/materiality and
scienter in the Court’s prior orders on Defendants’ motions to dismiss the NY/OH Consolidated Class Action
2
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2. The April 20, 2010 disaster led to the tragic loss of eleven lives and BP’s inability
to cap millions of barrels of oil leaking into the Gulf for nearly three months and resulted in the
largest recorded offshore oil spill in history. While it is difficult to compare the loss of life and
the devastating impact on the environment to a purely economic injury, the resulting financial
injury suffered by BP investors was nonetheless enormous and is compensable under applicable
laws.
3. BP is one of the world’s largest energy companies, providing its customers with
fuel for transportation, energy for heating and lighting, retail services and petrochemicals
products. Among other things, the Company engages in deepwater drilling for hydrocarbons
around the globe.
4. BP’s dominance in the global energy market aside, the Company had a history of
catastrophic disasters resulting in deaths and environmental crimes leading into the Relevant
Period. These incidents, which included the Prudhoe Bay, Alaska and Texas City, Texas
disasters, among others described herein, led the Company to retain former Secretary of State
James A. Baker to lead an independent panel (the “Baker Panel”) to review and improve the
Company’s safety procedures and to identify root causes of the Texas City disaster. The Baker
Panel’s investigation resulted in a 350 plus page report—the “Baker Report”—which cited
organizational problems as the root cause of BP being plagued by major incidents and repeated
safety lapses.
5. As noted by the Presidential Commission, the Baker Report concluded, among
other things, that “BP management had not distinguished between occupational safety ... and
process safety ” and “ha[d] not adequately established process safety as a core value.” Whereas
Complaint (the “NY/OH Class Action Order”) and the Ludlow Consolidated Class Action Complaint (the “Ludlow
Class Action Order”). Plaintiffs have also attached a table as Appendix A setting forth this information.
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process safety seeks to implement protocols in order to avoid large scale disasters (such as a
deadly explosion), occupational safety seeks to limit injuries to persons (reducing slips and falls).
As the Presidential Commission further noted, “[t]hese incidents and subsequent analyses
indicate that the company does not have consistent and reliable risk management processes – and
thus has been unable to meet its professed commitment to safety.”
6. The Baker Report also included specific recommendations for BP to implement to
improve process safety. The Baker Report was publicly released by Defendants on January 16,
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2007, and was accompanied by statements from BP executives assuring investors that the
recommendations set forth in the Baker Report would be (and were already being) implemented
by the Company.
7. Following the release of the Baker Report, the Company’s public statements
routinely detailed specific steps taken by BP to purportedly reform its risk profile while reducing
the possibility that lapses leading to the pre-Relevant Period disasters would be repeated. For
example, in connection with the release of the Baker Report, John Browne, BP’s then Chief
Executive Officer (“CEO”), stated that “ BP gets it . . . And I get it too . . . I recognise the need
for improvement.” Defendant Anthony B. Hayward (“Hayward”), who was at the time in the
process of taking over for Browne as BP’s CEO, assured investors (in February 2007) about his
commitment to focus “like a laser ” on safety . Subsequent assurances by BP reaffirmed the
Company’s commitment to implement the recommendations in the Baker Report.
8. In response to the Baker Report, BP also pledged to implement the Operating
Management System (“OMS”). BP touted OMS as an integrated and comprehensive system for
4
The Baker Report is available at
http://www.bp.com/liveassets/bp internet/globalbp/globalbp uk english/SP/STAGING/local assets/assets/pdfs/Bak
er panel report.pdf, last accessed Sept. 14, 2012.
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