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

173 Pages·2012·7.98 MB·English
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Preview BP PLC Securities Litigation 10-MD-02185-Third Amended Complaint For Violations Of The

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 i Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 3 of 173 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 ii Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 4 of 173 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 iii Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 5 of 173 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 iv Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 6 of 173 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 v Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 7 of 173 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. 1 Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 8 of 173 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 2 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 Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 9 of 173 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. 3 Case 4:10-md-02185 Document 494 Filed in TXSD on 12/06/12 Page 10 of 173 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, 4 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. 4

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