Case 6:10-cv-00818-RTH-CMH Document 1 Filed 05/21/10 Page 1 of 64
UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE-OPELOUSAS DIVISION
ROBERT LUDLOW, * CIVIL ACTION NO. individually and on behalf of all others similarly situated
VERSUS * JUDGE
BP, PLC; BP AMERICA, INC.; ANTHONY HAYWARD; * MAG. JUDGE ANDY INGLIS; CARL-HENRIC SVANBERG; H. LAMAR MCKAY; WILLIAM CASTELL; PAUL ANDERSON; ANTONY BURGMANS; CYNTHIA CARROLL; and ERROLL B. DAVIS, JR.
CLASS ACTION COMPLAINT
FOR VIOLATIONS OF FEDERAL SECURITIES LAWS
JURY TRIAL DEMANDED Case 6:10-cv-00818-RTH-CMH Document 1 Filed 05/21/10 Page 2 of 64
TABLE OF CONTENTS
Page
I. INTRODUCTION, I
If. THE PARTIES. 10
A. Plaintiff 10
B. Defendants, 11
1. Corporate Defendant. 11
2. Individual. Defendants. 12
C. Unnamed Participants. 19
Ill. JURISDICTION AND VENUE. 19
A. Jurisdiction and Venue 19
B. Cause and Effect in the United States 21
IV. CLASS ACTION ALLEGATIONS 22
V. FACTUAL ALLEGATIONS 25
A. BP Responds to Environmental Disasters by Promising Change 25
B. 2005-2008: BP Represents That Past Mistakes Have Been Corrected. 27
L 2005: Texas City Disaster 27
a. Background of the Texas City Disaster. 27
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b. The US Chemical Safety and Hazard Investigation Board Issues a Report on the Texas City Disaster 28
C. BP Issues Incident Investigation Report 34
d. BP Makes False Statements and Omits Material Facts after the Texas City Disaster Regarding Safety Improvements 35
e. Costs and Consequences to BP of the Texas City Disaster 44
2. 2006: Oil. Leakage in Prudhoe Bay, Alaska 45
3. BP's Annual Filings on Form 20-F Tout Safety Measures Taken in Response to Past Incidents 46
4. BP's Other Safety Lapses. 52
C. BP Abuses Its Relationship With MMS 53
D. The Misrepresentations and Omissions During the Class Period. . 57
1. 2008 Form 20-F Annual Report 57
2. March 10, 2009 Initial Exploration Plan 64
3. November 19, 2009: Statements to the Senate Energy and Natural Resources Committee 64
4. 2009 Annual Review. 71
5. Strategy Presentation. 75
6. 2009 Form 20-F Annual Report. 82
7. Code of Conduct 88
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E. Defendants Concealed repeated Warnings Associated With Its Drilling Operations 90
1 The Deepwater Horizon Operations 90
'?. Earlier Incidents Provided Warnings of Identical Risks 98
F. The Explosion and Sinking of the Deepwater Horizon ...... 100
G. BP ADR Prices Plunge III
H. Scienter Allegations III
VI. FRAUD-ON-THE MARKET DOCTRINE 116
VII. INAPPLICABILITY OF THE STATUTORY SAFE HARBOR 117
VIII. CLAIMS FOR RELIEF 119
COUNT 1. VIOLATION OF SEC'11ON 10(b) OF THE EXCHANGE ACT AND RULE I Ob-5 PROMULGATED THEREUNDER (Against the BP Defendants McKay, Hayward, Svanberg and Inglis) . jig
COUNT 11. VIOLATION OF SECTION 20(a) OF THE EXCHANGE ACT (Against the Individual Defendants) 122
PRAYER FOR RELIEF 124
JURY TRIAL DEMAND 125
ii] Case 6:10-cv-00818-RTH-CMH Document 1 Filed 05/21/10 Page 5 of 64
Plaintiff Robert H. Ludlow, individually and on behalf of the Class described below (the Plaintiff and the Class are hereinafter referred to as
"Plaintiffs"), brings this action for damages against Defendants BP, plc, BP
America, Inc. (hereinafter referred to jointly as "BP"), Anthony Hayward, Andy
Inglis, Carl-Henric Svanberg, H. Lamar McKay, William Castell, Paul Anderson,
Antony Burgmans, Cynthia Carroll, and Erroll B. Davis, Jr. for violation of the
United States federal securities laws. Plaintiffs allege the following based upon the investigation of plaintiff and his counsel, including a review of regulatory investigations, regulatory filings, reports, press releases and media reports.
I.
INTRODUCTION
1. "No activity is so important that it cannot be done safely ... Simply obeying safety rules is not enough."
- BP (2005)
"The current procedures are out of date ... Currently there are hundreds if not thousands of Subsea documents that have never been finalized, yet the facilities have been turned over ... to Operations."
- August 15, 2008 e-mail by Barry C. Duff, BP Atlantis Subsea Team Project Manager relating to the Atlantis oil rig which, along with the Deepwater Horizon, operates in the Gulf of Mexico
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2. This is a class action on behalf of all. investors who purchased
American Depository Receipts ("ADRs") in BP, plc ("BF) between March 4,
2009 and April 20, 2010 (the "Class Period"), who suffered losses following the catastrophic explosion to BP's oil drilling rig in the Gulf of Mexico. Class members, who purchased ADRs based on Defendants' repeated assurances of
BP's safe operations, reflected in the ADR price, have seen the value of their shares plummet 20% overnight — representing about $30 billion in market capitalization — as the truth about BP's operations has emerged.
3. Section 10(b) of the Securities Exchange Act states that it is illegal
"[flo use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device."
Rule lOb-5states that:
"[flt shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances
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under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
4. By touting the growth potential of its Gulf of Mexico operations, beginning in March of 2009, and highlighting the safety of the operations, BP convinced investors, including Plaintiffs, that BP would be able to generate tremendous growth with minimal risk. BP was misleading the investing public.
The truth was that BP was cutting comers and reducing its spending on safety measures in an effort to maximize profits in the Gulf of Mexico. Indeed, it was not until April 20, 2010, after the explosion, that material information began to emerge about BP's safety measures.
5. On April 20, 2010, there was a massive explosion on a mobile offshore drilling unit in the Gulf of Mexico operated by BP known as the
Deepwater Horizon, caused by inadequate safety protocols. As the lessee and owner of the federal permit to drill., BP was the primary operator of the Deepwater
Horizon at the time of the incident and the party responsible to make sure that all safety protocols were followed and disaster plans in place. Immediately after the incident, BP was deemed the "responsible party" under the Oil Pollution Act
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("OPA"). Adequate backup safety mechanisms, such as a back-up blowout
preventer or an acoustically activated remote-control shut-off valve were not
installed on the Deepwater Horizon. Such devices would have, at a minimum,
greatly reduced the damage caused by the sinking of the Deepwater Horizon.. The
resulting fire was described by one of the rescue boat captains as being hot enough
to melt the paint off the boats. The fire raged for over a day before causing the
Deepwater Horizon to sink into the Gulf of Mexico on April 22, 2010.
6. On May 3, 2010, BP stated that it was "absolutely responsible" for
the spill, and for stopping the leak, cleaning up the oil, and any resulting
environmental damage. BP Chief Executive Tony Hayward reiterated BP's
acceptance of responsibility for the Deepwater Horizon oil. spill. According to
experts, the explosion resulted from inadequate safety mechanisms and faulty cementing over the drilling well.
7. The accident was a predictable otucome, at least within BP's offices.
For years, Defendant BP has been engaged in systematic and draconian cost- cutting maneuvers in order to improve profits. In making those cuts, BP sacrificed safety, choosing to cut corners instead of ensuring that its oil exploration and production business did not cause injury or harm to their own employees, the public, and the fragile Gulf Coast environment. In 2007, BP represented it was
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implementing major changes to improve its dismal safety record. In 2009, in violation of United States securities laws, BP represented that it had successfully implemented top quality safety mechanisms to prevent catastrophic accidents and was actively monitoring and managing operational risk. Moreover, BP misled investors saying that their efforts at cutting costs were successful without having an impact on BP's safety. Investors in the Class Period, like the class representative, purchased shares and ADRs of BP based on these representations.
8. Indeed, BP repeatedly touted its safety measures and risk management for public markets. For example, BP's Code of Conduct, which is available publically on its website, in a section entitled, "Health, safety, security and the environment" states:
At BP our aspirations are - no accidents, no harm to people and no damage to the environment.
We are committed to the protection of the natural environment, to the safety of the communities in which we operate, and to the health, safety and security of our people.
Everyone who works for BP, everywhere, has a responsibility for getting HSSE right,
9. In its 2009 Annual Report on Form 20-F, which was issued on
March 5, 2010, a month prior to the Deepwater Horizon disaster, BP stated that:
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"Safety, people and performance are BP's top priorities. We constantly seek to improve our safety perforniance through the procedures, processes and training programmes that we implement in pursuit of our goal of 'no accidents, no harm to people and no damage to the environment."'
10. Given BP's historical safety issues, Defendants' assurances were
highly material to investors, since BP's primary exposure was from oil exploration
accidents and spills. Catastrophic incidents, such as the Texas oil refinery
explosion in Texas City in 2005, had previously made a huge impact on BP's
finances and share price. The Texas City disaster cost BP approximately $1.5
billion. Similarly, to date, BP has spent approximately $350 million in clean up
costs and attempts to stop the oil leak in the Gulf of Mexico, or approximately $6
million a day. This does not begin to include the costs of dealing with federal and
state regulators, and paying the claims of those who live and work on the Gulf
Coast whose livelihoods have been destroyed by the Deepwater Horizon disaster.
Analysts estimate the cost of the Deepwater Horizon disaster could rise to the tens of billions of dollars. Thus, having strong safety protocols in place is highly material to BP's investors, who relied on statements about the importance of deepwater oil operations in the Gulf of Mexico and BP's commitment to safety and readiness for any oil spill,
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11. At the same time Defendants were reassuring the market, BP knew of
widespread safety problems in its Gulf of Mexico operations. E-mails and other
documents presented to BP senior management discussed serious problems at
Deepwater Horizon's sister oil. rig, the Atlantis. BP managers on the Deepwater
Horizon itself were issuing orders at that time to move faster at the expense of
safety, including ignoring the fact that the blowout preventer on the Deepwater
Horizon was defective. These facts are one example of the many
misrepresentations and omissions of material fact made by BP regarding its safety
protocols. BP's profit-over-safety mentality finally came to light in the aftermath
of the Deepwater Horizon disaster, which will likely be known as the worst oil
spill in United States history.
12. As of mid-May 2010, the ever increasing oil spill was measured at
46,000 square feet, 19% of federal waters and larger than the size of the State of
Delaware. According to the National Oceanic and Atmospheric Administration
("NOAA"), the oil spill has the potential to threaten four states: Louisiana,
Mississippi, Alabama and Florida.
13. It has now been reported widely by experts and government officials that a blowout preventer that could have prevented the blowout on the Deepwater
Horizon had been having serious problems on another oil rig that was similarly
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built and maintained by Transocean. Transocean has been conducting an internal investigation of other failures and problems relating to its oil drilling and exploration equipment. In addition, according to one of the workers on the
Deepwater Horizon, BP had conducted drilling beyond 22,000 feet even though the federal permit only allowed BP to drill from between 18,000 to 20,000 feet.
14. BP bid the fact that its safety procedures were deficient, both overall and specific to operations in the Gulf of Mexico. For example, the Deepwater
Horizon had been the site of numerous spills and accidents even before the disaster on April 20, 2010. During one incident in 2008, 77 people had to be evacuated from. the oil rig after it listed and began to sink after a section of pipe was accidentally removed from its ballast system. In addition, the U.S. Coast
Guard had cited the Deepwater Horizon for being an "acknowledged pollution source" 18 times in the past I I years. BP did not disclose any of these facts and indeed, concealed them from the investing public. Plaintiffs believe that additional information about BP's safety protocols, both in general and relating specifically to its Gulf Coast operations were concealed and not disclosed to the public.
15. This lawsuit is brought on behalf of those shareholders who invested in BP based on Defendants' assurances that BP had enforced strong safety
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measures, had actively managed its risk exposure, and had achieved significant
growth from its Gulf of Mexico operations without increasing the risk of a
catastrophic disaster. The impact of these assurances on BP's ADR price is readily reflected by the market's reaction following the explosion, when the truth became known.
16. As the following chart demonstrates, BP's share price grew rapidly after the March 4, 2009 Annual Report was issued by BP, touting the growth potential of oil operations in the Gulf of Mexico and BP's supposed "top priority" of safety to protect the company's exposure to risk,
n Lag A-kaN-V n6.87 T High (r, 01,19/10 6232 Aww SIA34 I Uw on .03/05 IN 34
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40
35
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17. On April 20, 2010, the day of the Deepwater Horizon explosion, BP
shares closed at $59.49 a share. Since April 20, BP has lost 20% of its market
capitalization as its shares have plummeted, on by far the most active trading days
in the company's history.
THE PARTIES
A. Plaintiff
18. Plaintiff Robert H. Ludlow, Jr. is a citizen of California. Ludlow
purchased BP ADRs on January 4, 2010 in reliance on BP's statements as set forth
herein. He and other Class members similarly situated have been damaged as a
result of Defendants' securities fraud.
19. Plaintiff and other Class members purchased BP ADR shares in the open market, unaware that Defendants' statements and omissions regarding BP's safety records were false and/or misleading and were causing BP's stock price to be artificially inflated. Plaintiff and the Class relied upon Defendants' statements and omissions in BP's public reports, press releases, and SEC filings when they purchased BP ADRs and were thus injured by the Defendants' actions. Plaintiff and the Class further relied on the integrity of the market for BP securities and the
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fact that BP securites were fairly priced. As a result, Plaintiff and each Class
member has been injured.
B. Defendants
1. Corporate Defendant
20, Defendant BP, plc ("BP") is a public limited company formed under
the laws of the United Kingdom with its principal place of business in the United
Kingdom. During the Class Period, BP had a little under 19 billion shares
outstanding. Shares of BP and BP ADRs trade in an efficient market.
21. Defendant BP America, Inc. ("BP America") is a Delaware
corporation with its principal place of business in Warrenville, Illinois. BP
America is a subsidiary of BP, plc and conducts substantial business in the State of
Louisiana, including leasing and operating the Deepwater Horizon.
22. BP, plc and BP America, Inc. acted as one company referenced from comments by BP, plc Chief Executive Officer Tony Hayward, in response to
Robert Malone retiring as BP America, Ins.'s Cbain-nan and President: "Bob
Malone has made an extraordinary difference during his tenure at BP America and during his long career at BP. We are a better company because of his ability to connect with the men and women who operate and maintain our facilities and his
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unflagging commitment to safe operations. All of us at BP appreciate what he has done and wish him well in his next endeavors,"
23. There is a unity of interest and ownership between BP and BP
America such that the acts of the one are for the benefit and can be imputed as the acts of the other. Hereinafter, BP, plc and BP America, Inc. are hereinafter jointly referred to as "13P.11
2. Individual Defendants
24. Defendant Anthonv B. Hayward ("Hayward") is the Chief
Executive Officer and a member of the Board of Directors. He has served as Chief
Executive Officer since 2007 and as an Executive Director since 2003. Before becoming Chief Executive Officer, Hayward, who joined BP in 1982, served as the Chief Executive Officer of Exploration and Production from 2002 to 2007.
Hayward received a salary, performance bonus, and other benefits in the amounts of £2,509,000 in 2008 and £3,158,000 in 2009. Hayward is a citizen of the United
Kingdom. Hayward made statements, including the following:
• After Defendant Hayward took over as CEO of BP in 2007, he represented that his first priority was "focusing like a laser on safe and reliable operations." In an interview before his announcement as CEO, he described how the death of a worker who was on an operation he was leading in Venezuela shaped his opinion. Defendant Hayward stated that, "I went to the funeral to pay my respects. At the end of the service his mother came upon and beat me
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on the chest. 'Why did you let it happen?' she asked. It changed the way I think about safety. Leaders must make the safety of all who work them their top priority."
• In the 2009 Annual Review, Defendant Hayward wrote, "Despite these difficult conditions, a revitalized BP kept up its momentum and delivered strong operating and financial results while continuing to focus on safe and reliable operations. Replacement cost profit for the year was $14 billion, with a return on average capital employed of 11 %."
• Defendant Hay-ward acknowledged that BP was operating on the frontiers of the energy industry, which meant that there were higher risks that BP assured investors were being handled appropriately, "BP has always operated at the frontiers of the energy industry and our core strengths are more relevant and valuable than ever. BP's experience, skills, capability, technology and access to markets enable resource holders to maximize returns over the long term. We continue to show our ability to take on and manage risk, doing the difficult things that others either can't do or choose not to do. This is why we are able to form such strong relationships with governments and national oil companies and why we continue to have a critical role to play in supplying the world with its future energy needs."
25. At a March 22, 2010 Howard Weil Conference in New Orleans,
Defendant Hayward stated that:
"We are currently planning to make final investment decisions for 24 new major projects in the next two years. Each project has been high- graded through our project selection and progression process. They are concentrated in the Gulf of Mexico, the North Sea, Azerbaijan and Angola - high-margin production areas that improve the portfolio and enable profitable growth."
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"Safety and operational integrity underpins everything we do, and we are now in the final phase of rolling out our operating management system that provides a single, consistent framework for our operations, covering all areas from personal and process safety to environmental performance. And I am pleased to say that in 2009 we saw continuing improvement in all. aspects."
26. These statements, as discussed below, were false and misleading.
While touting the huge growth potential of the Gulf of Mexico, Defendant
Hayward, on behalf of BP, concealed the fact that there were rampant safety problems in the Gulf of Mexico, which were known to BP. BP's representation that it could deliver huge profits in a safe and reliable manner, while concealing known dangers in that area, was intended to and did induce investors such as the
Plaintiffs to invest in BP securities.
27. Defendant Andy G. Inglis ("Inglis") is an Executive Director and
Chief Executive of Exploration and Production. He has worked for BP in various capacities since 1980 and has held his current positions since 2007. Inglis received a salary and performance bonus for the purported success of BP's exploration and production operations. Inglis Is a citizen of the United Kingdom and travels to and from the United States.
28. Defendant Carl-Henric Svanberg ("Svanberg") is the Chairman of the Board of Directors. He was appointed a Non-Executive Director of BP in
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September 2009 and became Chairman in January 2010. Svanberg also heads the
Chairman's Committee and is a member of BP's Nomination Committee.
Svanberg is a citizen of Sweden and travels to and from the United States. By
virtue of his position and operational and management control of the committee
and systematic involvement in the fraudulent scheme, he had the power to
influence and control, and did influence and control, directly and indirectly, the
decision-making and actions of BP, including the content and dissemination of the
various statements which Plaintiffs contend are misleading.
29. A letter from Chairman of the Board Carl-Henric Svanberg states that
"Risk remains a key issue for every business, but at BP it is fundamental to what
we do. We operate at the frontiers of the energy industry, in an environment
where attitude to risk is key. The countries we work in, the technical and physical
challenges we take on and the investments we make - these all demand a sharp
focus on how we manage risk. We must never shrink from taking on difficult
challenges, but the board will strive to set expectations of how risk is managed
and remain vigilant on oversight."
30. Defendant H. Lamar McKay ("McKay") is Chairman and President of BP America, Inc. In 1980, McKay started with Amoco, which was acquired by
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BP in 1998, occupying a variety of positions until. being appointed to his current roles in 2009. McKay is a citizen of Texas.
31. At a March 25, 2009 Howard Weil Conference in New Orleans,
Defendant McKay stated:
"You are investing in your future."
"There's no better example of what technology can do than the deep waters of the Gulf of Mexico."
"By the way, let me add that managing costs down does not mean BP will be skimping when it comes to ensuring our operations remain safe, reliable and compliant in the years ahead.
"Safety will continue to have first call on the company resources."
32. These statements were false and misleading because Defendant
McKay, in his position as the CEO of BP America, knew about serious safety problems throughout BP's Gulf of Mexico operations. At the time that statement was made, there were systemic safety problems at BP that were known to
Defendant McKay and directives had been issued by senior BP managers to put profit before safety.
33. Defendant William Castell ("Castell") is the chairman of BP's
Safety, Ethics and Environment Assurance Comi-nittee which is responsible for ensuring that BP's safety protocols are implemented and followed. Castell joined
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BP's Board of Directors in 2006. By virtue of his position and operational and
management control of the committee and systematic involvement in the
fraudulent scheme, he had the power to influence and control, and did influence
and control, directly and indirectly, the decision-making and actions of BP,
including the content and dissemination of the various statements which Plaintiffs
contend are misleading.
34. Defendant Paul Anderson ("Anderson") is a member of BP's
Safety, Ethics and Environment Assurance Committee which is responsible for
ensuring that BP's safety protocols are implemented and followed. Anderson joined BP's Board of Directors on February 1, 2010. By virtue of his position and
operational and management control of the committee and systematic involvement
in the fraudulent scheme, he had the power to influence and control, and did
influence and control, directly and indirectly, the decision-making and actions of
BP, including the content and dissemination of the various statements which
Plaintiffs contend are misleading.
35. Defendant Antony Burgmans ("Burgmans") is a member of BP's
Safety, Ethics and Environment Assurance Committee which is responsible for ensuring that BP's safety protocols are implemented and followed. Burgmans joined BP's Board of Directors in 2004. By virtue of his position and operational
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and management control of the committee and systematic involvement in the fraudulent scheme, he had the power to influence and control, and did influence and control, directly and indirectly, the decision-making and actions of BP, including the content and dissemination of the various statements which Plaintiffs contend are misleading.
36. Defendant Cynthia Carroll ("Caroll") is a member of BP's Safety,
Ethics and Environment Assurance Committee which is responsible for ensuring that BP's safety protocols are implemented and followed. Carroll joined BP's
Board of Directors in 2007. By virtue of her position and operational and management control of the committee and systematic involvement in the fraudulent scheme, she had the power to influence and control, and did influence and control, directly and indirectly, the decision-making and actions of BP, including the content and dissemination of the various statements which Plaintiffs contend are misleading.
37. Defendant Erroll B. Davis, Jr. ("Davis") is a member of BP's
Safety, Ethics and Environment Assurance Committee which is responsible for ensuring that BP's safety protocols are implemented and followed. Davis Joined
BP's Board of Directors in 1998. By virtue of his position and operational and management control of the committee and systematic involvement in the
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fraudulent scheme, he had the power to influence and control, and did influence
and control, directly and indirectly, the decision-making and actions of BP,
including the content and dissemination of the various statements which Plaintiffs
contend are misleading.
38. The individuals identified above are hereinafter collectively referred
to as the "Individual Defendants."
C. Unnamed Participants
39. Numerous individuals and entities participated actively during the
course of and in furtherance of the scheme described herein. The individuals and
entities acted in concert by joint ventures and by acting as agents for principals, in
order to advance the objectives of the scheme to benefit Defendants and
themselves to the detriment of Plaintiffs and the Class.
III.
JURISDICTION AND VENUE
A. Jurisdiction and Venue
40, Plaintiffs assert claims under § 20(a) of the Securities Act, 15 U.S.C.
§78t(a), under § 10(b) of the Securities Exchange Act, 15 U.S.C. §10(b) and Rule
I Ob-5, 17 C.F.R. § 240.1 Ob-5, promulgated thereunder, and under the common law. Federal subject matter jurisdiction exists pursuant to § 22(a) of the Securities
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Act, 15 U.S.C. § 77v(a), § 27 of the Securities Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. § 1331 (federal question). Venue of this action in this Court is proper pursuant to Section 27 of the 1934 Act, 15 U.S.C. § 78aa and 28 U.S.C.
§ 1391. Many of the collateral acts and transactions occurred in this district. The explosion of the Deepwater Horizon, which revealed the poor safety record of BP that had not been disclosed to the public, occurred right off the shore of Louisiana and this District.
41. Defendants, directly and/or indirectly, used the means and instrumentalities of interstate commerce, the United States mails, and the facilities or the national securities markets in connection with the acts, conduct, and other wrongs complained of herein.
42. Each Defendant has sufficient minimum contacts within Louisiana to make the exercise of jurisdiction over each Defendant by the federal courts in
Louisiana consistent with traditional notions of fair play and substantial justice.
The Corporate Defendants participated, or during the relevant period did participate, in the Louisiana markets by conducting oil exploration and production operations in the Gulf of Mexico immediately off the coast of Louisiana, or by having or using a facility located in Louisiana to conduct its oil operations. Each
Corporate Defendant transacts business, has an agent, and/or is found within the
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State of Louisiana and the unlawful conduct alleged in this complaint was carried out and had effects in the State of Louisiana. Each Individual Defendant made statements which were directed at the United States, including Louisiana, were control persons who approved the filing and/or dissemination of forms required by the Securities & Exchange Commission, and/or performed other acts which were directed towards the United States, including Louisiana, and which they knew would have a cause and effect on the price of BP Securities.
B. Cause and Effect in the United States
43. BP has extensive U.S. and Louisiana operations, many of BP's shareholders are in the United States, and the site of the wrongdoing occurred in substantial part in this District. BP's relationship to the U.S. is highlighted by the following:
• 39 percent of BP's worldwide shareholders reside in the U.S.
• BP has approximately 34,000 employees in the U.S., one third of its total worldwide employees and more than in any other country.
• BP produces more crude oil in. the U.S. than in any other country.
• BP produces more natural gas in the U.S. than in any other country.
• BP's capital expenditures in the U.S. are larger than in any other country, and BP has more operating capital employed in the U.S. than in any other country.
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IV.
CLASS ACTION ALLEGATIONS
44, This action is brought by Plaintiffs, individually, and on behalf of all others similarly situated, for the allegedly wrongful acts of the Defendants.
Plaintiffs bring this action pursuant to Federal Rule of Civil Procedure 23. The
Class is defined as followed:
All persons and entities who, during the Class Period from March 4, 2009 (the date of BP's 2008 Annual Form 20-F) through April 20, 2010, purchased shares in BP American Depository Receipts ("ADR"). Excluded from the Class are Defendants herein, members of their immediate families and their legal representatives, parents, affiliates, heirs, successors or assigns and any other person who engaged in the improper conduct described herein (the "Excluded Persons").
45. Plaintiffs seek to recover damages for themselves and the Class under the federal securities laws.
46. Numerosity of the Class - Federal. Rule of Civil Procedure 23(a)(1).
The Class is so numerous that joinder of all members is impracticable. BP is a publically traded security with a little under 19 billion outstanding shares. Nearly half of the shareholders of BP are American citizens. While the exact number of
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Class members is unknown at this time, Plaintiffs are informed and believe that the number is in the hundreds of thousands, at a minimum.
47. Existence and Predominance of Common Questions of Law and Fact
- Federal Rule of Civil Procedure 23(a)(2) and 23(b)(3). Common questions of law and fact exist as to all Class members and predominate over questions affecting only individual Class members. These common questions include:
(a) Whether Defendants' acts alleged herein violated federal securities
laws; and
(b) Whether Plaintiffs and members of the Class were damaged, and the
appropriate measure of damages.
48. Typicality - Federal Rule of Civil Procedure 23(a)(3). Plaintiffs' claims are typical of the claims of other members of the Class in that Plaintiffs and other Class members were all injured as a result of the misconduct of the
Defendants. Plaintiffs are members of the Class they seeks to represent and have suffered harm due to the misleading and fraudulent statements and omissions of material facts by Defendants.
49. Adequacy of Representation - Federal Rule of Civil Procedure
23(a)(4) and 23(g)(1). Plaintiffs will fairly and adequately represent the interests of the Class; their interests are coincident with, and not antagonistic to those of the
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Class they seek to represent. Plaintiffs are represented by experienced and able attorneys, who intend to prosecute this action vigorously for the benefit of
Plaintiffs and all Class members. Plaintiffs and their counsel will fairly and adequately protect the interests of the Class members.
50. Proper Maintenance of Class - Federal Rule of Civil Procedure
23(b)(2) and (c). Defendants have acted or refused to act, with respect to some or all issues presented in this Complaint, on grounds generally applicable to the
Class, thereby making it appropriate to provide relief with respect to the Class as a whole.
51. Superiority - Federal Rule of Civil Procedure 23(b)(3) and (c). A class action is the best available method for the efficient adjudication of this litigation because individual litigation of Class members' claims would be impracticable and unduly burdensome to the courts, and have the potential to result in inconsistent or contradictory judgments. There are no unusual difficulties likely to be encountered in the management of this litigation as a class action. A class action presents fewer management problems and provides the benefits of single adjudication, economies of scale and comprehensive supervision by a single court.
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V.
FACTUAL ALLEGATIONS
A. BP Responds to Environmental Disasters by Promising Change
52. Since 2005, and with major changes in 2007, BP aggressively sought to change its public image. Recognizing BP's poor safety history, CEO Anthony
Hayward took over the company in 2007 and launched a campaign to convince the market that the company had changed its ways and was conducting its operations in a safe and reliable manner. This response was critical to BP's survival because it had tarnished its reputation by a string of environmental disasters.
53. At the same time, BP began to tout new areas of oil exploration and production, such as the deepwater Gulf of Mexico and touted the ability of BP to extract and produce that oil in an environmentally friendly and safe manner that posed little risk to the company and its shareholders. Plaintiffs, relying on BP's misstatements and omissions regarding its ability to drive revenue and profits from its operations in a safe and reliable manner, in particular from the Gulf of Mexico, purchased BP securities and were harnied as a result.
54. In its 2009 Annual Form 20-F, filed on March 5, 2010, BP stated in a section entitled "Safety" that "Good progress is being made on underpinning improved safety performance in 2009. Throughout the year, we continued to
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focus on training and enhancing procedures across the organization" and touted the "continued success of our Gulf of Mexico deepwater operations."
55. In that 20-F, while addressing its oil exploration and production operations, including highlighting its deepwater Gulf of Mexico operations, BP stated that, "In Exploration and Production, safety, both personal and process, remains our highest prioritj,."
56. While focusing on marketing itself as being able to achieve substantial revenue growth from new oil exploration in the Gulf of Mexico, BP
in misled investors that it was conducting such operations a safe manner. At a minimum, investors had no reason to believe that BP's approach to safety in its deepwater Gulf of Mexico operations was so below the standard of care that an accident similar to the Deepwater Horizon was inevitable. This is the type of material information that would have materially affected investor decision- making, especially in light of the high costs of a catastrophic disaster.
57. Despite its claims about putting "safety first", BP recklessly failed to implement appropriate safety measures. Safety and maintenance problems were endemic throughout BP, including at the Deepwater Horizon oil rig. Moreover, additional safety mechanisms, technologies, and precautions were known and
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available but 13P, in an effort to reduce costs, chose not to employ them on the
Deepwater Horizon.
B. 2005-2008: BP Represents That Past Mistakes Have Been Corrected
1. 2005: Texas City Disaster
a. Background of the Texas City Disaster
58. On March 23, 2005, at 1:20pm, the BP Texas City Refinery suffered one of the worst industrial disasters in recent US history. The explosions and fires killed 15 people and injured another 180 and resulted in financial losses exceeding
$1.5 billion, The blast occurred during the startup of an isomerization unit
(ISOM) when a raffinate splitter tower was overfilled; pressure relief devices opened, resulting in a geyser like flammable liquid from a blowdown stack that was not equipped with a flare. The release of the flammables caused an explosion and fire. A shelter-in-place order was issued that required 43,000 people to remain indoors and houses were damaged from as far as three-quarters of a mile from the refinery. The BP Texas City facility is the third-largest refinery in the
United States.
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b. The US Chemical Safety and Hazard Investigation Board Issues a Report on the Texas City Disaster
59. After the Texas City refinery disaster, the US Chemical Safety and
Hazard Investigation Board ("CSB") investigated BP's safety performance at
Texas City and also the role played by BP Group management, based in London,
England. CSB also examined the effectiveness of the Occupational Safety and
Health Administration ("OSHA").
60. According to the CSB final report, the Texas City disaster was caused
by organizational and safety deficiencies at all levels of BP. Warning signs of a
possible disaster were present for several years, but company officials did not
intervene to prevent it. The extent of the serious safety deficiencies were further
revealed when the refinery experienced two additional serious incidents just a few
months after the March 2005 disaster. In one, a pipe failure caused approximately
$30 million in damage and in the other, there was approximately $2 million in
property loss. In each of the incidents, community shelter-in-place orders were
issued.
61, The CSB report states, "Simply targeting the mistakes of BP's
operators and supervisors misses the underlying and significant cultural, human factors, and organizational causes of that disaster that have a greater
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preventative impact. One underlying cause was that BP used inadequate methods to measure safety conditions at Texas City. For instance, a very low personal injury rate at Texas City gave BP a misleading indicator of process safety performance. In addition, while most attention was focused on the injury rate, the overall safety culture and process safety management (PSM) program had serious deficiencies. Despite numerous previous fatalities at the Texas City refinery (23 deaths in the 30 years prior to the 2005 disaster) and many hazardous material releases, BP did not take effective steps to stem the growing risk of a catastrophic event."
62. OSHA enforcement at the BP refinery was also examined. In the years prior to the explosion, OSHA conducted many inspections, primarily in response to fatalities at the refinery. OSHA did not identify the likelihood for a catastrophic incident and they did not prioritize inspections of the refinery to enforce process safety regulations despite the warning signs that were present.
After the explosion at Texas City, OSHA uncovered 301 "egregious willful" violations for which BP paid a $21 million fine, the largest ever issued by OSHA.
Prior to OSHA issuing the citations, the refinery had two additional serious incidents. Despite the large number of violations on the ISOM unit and the two
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additional serious incidents, BP convinced OSHA it did not need to conduct a thorough inspection of any of the other 29 process units at the Texas City refinery.
63. The ISOM startup procedure required that the level control valve on the raffinate splitter tower be used to send the liquid from the tower to the storage.
Findings show that this valve was closed by an operator and the tower was filled for over three hours without any liquid being removed. This led to flooding of the tower and high pressure which in turn activated relief valves that discharged flammable liquid to the blowdown system. Some of the underlying factors involved in overfilling the tower included:
• The tower lever indicator showed that the tower level was declining when in fact it was overfilling. The redundant high level alarm did not activate, and the tower was not equipped with any other type of safety device.
• The control board display did not provide adequate information on the imbalance of flows in and out of the tower to alert the operators to the high levels of danger.
• A lack of supervision during the startup, and especially hazardous period, was an omission contrary to BP's safety guidelines. An extra board operator was not assigned to assist, despite a staffing assessment that recommended an additional board operator for all the ISOM startups.
• Supervisors and operators poorly communicated the critical information regarding the startup during the shift turnover.
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• ISOM operators likely were fatigued from working 12-hour shifts for 29 or more consecutive days.
• The operator training program was inadequate. The central training department staff had been reduced from 28 to 8, and simulators were unavailable for operators to practice handling abnormal situations, including infrequent and high hazard operations such as startups and unit upsets.
• There were outdated and ineffective procedures that did not address the recurring operational problems during the startup which led operators to believe that procedures could be altered or did not have to be followed during the startup process.
64. The process unit was also started despite the previously reported
malfunctions of the tower level indicator, level sight glass, and a pressure control valve. The findings also found that the size of the blowdown drum was
insufficient to contain the liquid sent to it by the pressure relief valves. The blowdown drum overfilled and the stack vented flammable liquid to the
atmosphere, which then fell to the ground and formed a cloud that ignited. BP did not replace the blowdown drums and atmospheric stacks even though a series of
incidents warned that the equipment was unsafe.
65. In 1992, OSHA cited a similar blowdown drum and stack as being unsafe, but the citation was withdrawn as part of a settlement agreement and therefore the drum was not connected to flare as was recommended. BP had safety
standards requiring that blowdown stacks be replaced with equipment such as a
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flare when major modifications were made. In 1997, a major modification replaced the ISOM blowdown drum and stack with similar equipment, but BP still did not connect it to a flare. In 2002, BP engineers proposed connecting the ISOM blowdown system to a flare, but they ended up going with a less expensive option to save money.
66. The occupied trailers were sited too close to a process unit handling highly hazardous materials. All the fatalities occurred in or around the trailers and in the years prior to the incident, eight serious releases of flammable material from the ISOM blowdown stack had occurred, and most of the ISOM startups experienced high liquid levels in the splitter tower. BP did not investigate these events,
67. BP Texas City managers did not effectively implement their pre-startup safety review policy to ensure that nonessential personnel were removed from areas in and around process units during the startups, which again was one of the most dangerous times of the operations.
68. Some of the key organizational findings from the CSB final report found that cost-cutting, failure to invest and production pressures from BP Group executive managers impaired the process safety performance at Texas City. The
BP Board of Directors did not provide effective oversight of BP's safety culture
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and major accident prevention programs. The Board did not have a member responsible for assessing and verifying the performance of BP's major accident hazard prevention programs.
69. Reliance on the low personal injury rate at Texas City as a safety indicator failed to provide a true picture of process safety performance and the health of the safety culture. Deficiencies in BP's mechanical integrity program resulted in the "run to failure" of process equipment at Texas City.
70. The Texas City refinery had a "check the box" mentality meanin Z:Ig the personnel would complete paperwork and check off on the safety policy and procedural requirements without even actually doing the checks and meeting the requirements.
71. BP Texas City lacked a reporting and learning culture. The personnel were not encouraged to report safety problems and some even feared retaliation for doing so. Therefore, the lessons that could have been learned from the incidents were never learned because the incidents were never acted upon. There were important relevant safety lessons from a British government investigation of incidents at BP's Grangemouth, Scotland, refinery that were not incorporated at
Texas City.
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72. There were safety campaigns, goals, and rewards that were more
focused on improving personal safety metrics and worker behaviors rather than on process safety and management safety systems. Even though Texas City was compliant with many safety policies and procedures, the managers did not lead by example regarding safety. There were numerous surveys, studies, and audits that identified deep-seated safety problems at Texas City, but the response of the BP managers at all. the levels was usually "too little, too late." BP Texas City did not effectively assess the changes involving people, policies, or the organization. that could impact process safety.
C. BP Issues Incident Investigation Report
73. On December 9, 2005, BP issued its final incident investigation report on the Texas City disaster. In that report, BP claimed to improve safety not only at that refinery but throughout all of its operations.
74. Ross Pillarl, president of BP Products North America, Inc. stated that
"[t]he report clearly describes the underlying causes and management system failures which contributed to the worst tragedy in BP's recent history. We accept the findings, and we are working to make Texas City a complex that attains the highest levels of safety, reliability and environmental performance."
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75. "We are creating an environment in which people know that what they say matters, that they know what is expected of them and that they will deliver what is expected of them," said Texas City site manager Colin Maclean.
"We must keep our promises to each other. It is the first step in rebuilding trust and the only way to earn the respect and obtain the comi-nitment of a very skilled and very experienced workforce."
76. A BP press release issued after the Texas City accident stated, "BP has accepted responsibility for the explosion and fire that occurred at its Texas
City refinery on March 23, 2005. BP is deeply sorry for what occurred and for the suffering caused by its mistakes. BP is working to improve plant integrity, safety culture and process safety management at all BP-operated facilities in order to prevent incidents like this in the future."
d. BP Makes False Statements and Omits Material Facts after the Texas City Disaster Regarding Safety Improvements
77. After the Texas City refinery incident, BP followed the recommendation of the U.S. Chemical Safety and Hazard Investigation Board and formed the BP US Refinery Independent Safety Review Panel to conduct a thorough review of the company's corporate safety culture, safety management systems, and corporate safety oversight. The Panel included such luminaries as
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James A. Baker, 111, former U.S. Secretary of State and former Senator Thomas
Slade Gorton III (R-Washington).
78. In January 2007, the Panel issued a report, sometimes referred to as the "Baker Report," which stated that "BP's Group requirements are intended to ensure a consistent Group-wide effort to achieve BP's stated commitment toward
`no accidents, no harm to people, and no damage to the environment."'
79, The Baker Report set forth the standards and guidelines that BP publically claimed to be followed in a section entitled, "BP Group-Level
Standards, Practices, and Expectations for Process Safety." This section goes on to state:
BP CODE OF CONDUCT
The Code of Conduct provides a starting point for the conduct expected of BP employees." All employees must follow the Code of Conduct, and supervisors must also promote, monitor, and enforce compliance with it. The Code of Conduct contains a two-page section addressing the health-and safety-related conduct of all BP employees and anyone else working at BP facilities. It provides that "[n10 activity is so important that it cannot be done safely" and emphasizes that "(dimply obeying safety rules is not enough. BP's commitment to safety means each of us needs to be alert to safety risks as we go about our jobs. The Code of Conduct does not make reference to specific BP standards, practices, or expectations; instead, it contains a list of basic rules that all employees must follow. These basic rules indude practices that might be described as axiomatic, such as "stop any work that becomes unsafe" and
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"make sure you know what to do if an emergency occurs at your place of work."
GETTING HSE RIGHT
Getting HSE right (gHSEr) describes the BP HSE Management System Framework and represents how BP intends to meet its HSE performance commitment. It sets forth the Group's expectations for the health, safety, and environmental practices of its business units. These HSE expectations "encompass the complete spectrum of health, safety, and environmental risk management including personal security, technical/operational integrity of facilities and equipment, and product stewardship. gHSEr represents "the boundaries within which all SP managers must operate" and is mandatory for every business unit.
According to BP, an HSE management system containing the gHSEr elements should ensure continuous improvement of the business unit's HSE practices through a "P Ian -Perfo rm-Measure-an d- Improve cycle." Each business unit is then responsible for designing an HSE management system that meets all of the relevant BP Group-wide expectations set out in gHSEr:
BP's HSE expectations are presented in gHSEr's 13 Elements of Accountability, which provide expectations in the following areas:
• Leadership and accountability. Managers must develop, document, and implement HSE management systems in. accordance with HSE expectations.
• Risk assessment and management. Managers must assess, document, and reference risks in their decisions.
• People, training, and behaviors. HSE responsibilities should be assigned by managers to individuals, and managers must document those responsibilities and create performance targets.
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• Working with contractors and others. Contractors must be supervised, and this includes reviewing thair HSE policies,
• Facilities design and construction. There must be documentation of project management systems and formal approval for design, procurement, and construction standards. Also, pre-start-up reviews must be carried out for all new or modified equipment.
• Operations and maintenance. Post-start-up reviews must be completed and procedures must be developed and followed for equipment operations, maintenance, and retirement.
• Management of change. Changes must be formally assessed and approved, and they must nat exceed their original scope or duration.
• Information and documentation. Information must be made available but also secure.
• Customers and products. BP must maintain information about product hazards and adverse product effects and have a recall system in place.
• Community and stakeholder awareness. BP must communicate HSE information to the community.
• Crisis and emergency management. Plans must be developed, continuously updated, and tested through drills.
• Incident analysis and prevention. All incidents must be filly reported, investigated, and findings must be shared as appropriate. BP should have teams with some members from outside the business unit for major incidents.
• Assessment, assurance, and Improvement. HSE target, and audit programs to track progress towards them must be established.
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In addition to these elements of accountability, gHSEr contains key HSE processes that BP business units should employ as part of their HSE management systems. The HSSE processes listed in gHSEr are directed toward delivering HSSE assurance, behaviors, HSSE risk management, crisis and emergency management, major incident and high polential incident reporting, incident investigation guidelines, HSSE performance targets, HSSE reporting requirements, joint ventures and other operational experiences, HSSE reporting definitions, and health management.
gHSEr contains an expectation that BP business units conduct gHSEr self-assessments annually and sponsor external gHSEr audits at least once every three years. The Panel has reviewed a number of reports describing recent gHSEr self-assessments and audits of individual. U.S. refineries. The Panel has also reviewed reports that BP's Internal Audit function prepared describing trends and common issues identified in gHSEr audits across BP as a whole. The Panel's review of these reports contributed to lincings discussed in Sections VI.B and Section VI.C.
BP GOLDEN RULES
The Golden Rules are intended to provide easy-to-remember, basic guidance to the BP workforce in eight areas: (1) permit to work, (2) ground disturbance, (3) working at heights, (4) driving safety, (5) energy isolation, (6) confined space entry, (7) lifting operations, and (8) management of change. Several of the Golden Rules, including permit to work and management of change, are relevant to the management of process safely.
In addition to the Golden Rules, BP expects that the following basic principles will be incorporated into each rule:
"[Wlork will not be conducted without a pre-job risk assessment and a safety discussion ... [A]II persons will be trained and competent in the work they conduct. [P]ersonal protection equipment will be worn .... [E]mergency response plans.. will be in place before
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the commencement of work .... [And] everyone has an obligation to stop work that is unsafe."
The Golden Rules do not provide specific procedures aimed at refining operations or any other individual BP operation. Standards and policies addressing specific aspects of BP operations are contained in, among other sources, Group standards and engineering technical practices, which are discussed below. Because they apply broadly to the daily activities of BP's workforce, the Golden Rules frequently overlap with more specific sources of authority such as Group standards or engineering technical practices. The Golden Rules are relatively simple, and they do not appear to conflict wrth more specific authorities. BP's control of work Group standard, which touches on many of the same work practices contained in the Golden Rules, states that guidelines in the control of work standard should be used in conjunction with the Golden Rules.
BP GROUP STANDARDS
BP has issued a limited number of Group standards to address certain risks relating to all of BP's business segments, such as Refining and Marketing. Group standards establish expectations and processes for reducing the risk of failure to deliver Board goals or the risk of noncompliance with the Code of Conduct in the areas that are subject to Group standards. As of December 1, 2006, BP had issued Group standards related to safety in the areas of driving safety, control of work, and integrity management. In addition, a draft Group marine operations standard is currently under review. Three of BP's Group standards have direct bearing on process safety practices in refining, the 2001 process safety/integrity management standard: the new 2006 integrity management standard which replaces the process safety/integrity management standard; and the control of work standard.
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BP process safety/integrity management standard
In May 2001, BP issued a process safety/integrity management (PS/IM) standard directed toward process safety/integrity management at BP facilities. Intended to support the delivery of the HSE expectations in gHSEr, BP promulgated this standard partly in response to three major process incidents that occurred at the BP Grangemouth Petrochemical Complex in Scotland during May through June 2000,
The PS/IM standard sought to "help prevent the occurrence of, or minimize the consequences of, catastrophic releases of hazardous materials and to assure facilities are designed, constructed, operated[,] and maintained in a safe fashion using appropriate codes and standards." It established requirements in the following areas related to process safety and integrity management, hazard evaluation, management of change, mechanical integrity, protective systems, competent personnel, incident investigation, emergency response, and performance management and assurance, BP viewed the eight requirements comprising the PS/IM standard as having their basis in the gHSEr expectations, and applicable gHSEr expectations were linked to each of the eight requirements. A key aspect of the PS/IM standard is the requirement that "[a]ll facilities must systematically identify hazards within its boundary arising from normal and abnormal operations and shall eliminate/ control/mitigate the hazards such that residual risks are as low as is reasonably practicable. The new integrity management standard, described below, has superseded the PS/IM standard.
BP integrity management standard
BP designed the integrity management standard to ensure that equipment used in BP operations is fit for service, thereby avoiding loss of containment incidents. In promulgating this standard, BP observed that it was derived from, and intended to improve upon, the 2001 PS/IM standard. The integrity management standard defines a formal approach to management integrity at BP operations during all
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phases of equipment life, from design and construction, through operation and maintenance, to decommissioning. BP's U.S. refineries have begun to implement the integrity management standard, with full implementation required by December 31, 2008. BP has recently developed an audit protocol for assessing compliance with the integrity management standard.
The integrity management standard has ten elements: (1) accountabilities, (2) competence, (3) hazard evaluation and risk management, (4) facilities and process integrity, (5) protective systems, (6) practices and procedures, (7) management of change. (8) emergency response, (9) incident investigation and learning, and (10) performance management and learning. According to BP, the integrity management standard has incorporated all elements of the superseded PS/IM standard. However, the Panel notes that the integrity management standard's hazard evaluation and risk management element does not contain the PS/IM standard's requirement that identified risks be mitigated "as low as reasonably practicable." Instead, the new integrity management standard contains a more general requirement that BP operations "identify and mitigate" integrity management hazards and risks, including development of a hazard and risk register for each BP operation with links to the measures, systems, processes, and procedures in place to manage or mitigate the risks.
The integrity management standard requires all BP operations to conduct an assessment for quantifying and ranking major accident risks. This major accident risk methodology is described in BP Group Engineering Technical Practice GP 48-50, Guidance on Practice for Major .occident Risk Process, discussed below, To ensure that the assessments are done consistently from one refinery to the next, BP's Head of Major Hazards and Fire established dedicated teams to conduct major accident risk assessments of BP refineries, In addition to major accident risk assessments, the integrity management standard also requires each site to develop formal procedures for identifying and managing integrity management hazards associated with both nomial and abnormal operations.
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BP control of work standard
BP issued the control of work standard to ensure a "fori-nal approach to managing work risk for BP employees and for BP companies and their contractors. Although the BP Golden Rules existed prior to the control of work standard and provided some basic guidance relating to control of work, BP concluded that the standard was necessary based upon its review of fatal accidents to the BP workforce from 2000 to 2004. From this review, BP discovered that job factors related to control of work were frequently identified during its incident root cause analyses.
BP intends for the control of work standard to provide a means for safely controlling construction, maintenance, demolition, remediation, operating tasks, and similar work activities. Among other things, the control of work standard requires a written policy for describing the control of work process, defined accountabilities for all identified roles within the control of work policy and associated procedures, and training for persons involved in the control of work process. The standard also prohibits tasks unless they are assessed for risk. Additionally, it imposes a permit requirement for work involving confined space entry, work on energy systems, ground disturbance, hot work, or other hazardous activities. Control of work policy and associated procedures must also make clear to everyone that they have the obligation and authority to stop unsafe work. Refineries must implement the standard by the end of 2009.
BP refining subsequently published minimum expectations for control of work to implement the control of work standard. This publication contains element-by-element direction, specific to BP refining operations, to ensure that BP refineries comply with the requirements contained in each element of the standard.
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80, After the Baker Report was released, Lord John Browne, the former
CEO of BP, stated that "We will use this report to enhance and continue the substantial effort already underway to improve safety culture and process safety management at our facilities ... I intend to ensure BP becomes an industry leader in process safety management and performance."
e. Costs and Consequences to BP of the Texas City Disaster
81. As a result of the Texas City disaster, BP pleaded guilty to federal felony charges and was fined more than $50 million by the U.S. Environmental
Protection Agency. BP officers signed a settlement with federal safety inspectors vowing to institute improvements, but in 2009 the federal Occupational Safety and
Health Administration ("OSHA") imposed an $87 million fine - the largest in its history - on BP for failing to correct the safety violations at the Texas City plant.
OSHA also declared that BP had a "serious systematic safety problem."
82. A 2006 shareholder derivative lawsuit in the aftermath of the Texas
City refinery explosion resulted in a settlement in which BP agreed to incorporate changes to improve its safety record. BP did not follow through on its promises.
This fact was not disclosed to BP shareholders. Instead, BP continued to ignore and disregard safety issues concerning the company's deepwater operations, making purely cosmetic changes. In fact, BP continued to recklessly ignore its
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safety obligations even though its operations pose a serious threat to the environments in which it operates. Any potential disaster at any of its operating locations could threaten serious physical and environmental harm and have a significant impact of BP's financial condition. The Deepwater Horizon disaster finally brought to light the extent of BP's safety failures.
2. 2006: Oil Leakage in Prudhoe Bay, Alaska
83. In 2006, BP had to shut down part of its Prudhoe Bay oilfield in
Alaska after oil leaked from a corroded pipeline. BP had been warned to check the pipeline in 2002, but did not do so, only discovering four years later that a six-mile length of pipeline was hopelessly corroded. BP was fined $20 million in criminal penalties after prosecutors charged it with neglecting corroded pipelines.
84. On October 25, 2007, BP pled guilty to a criminal violation of the
Clean Water Act and U.S. District Court Judge Ralph Beistline sentenced BP to three years probation. Judge Breistline stated at that time that oil spills were a
"serious crime" that could have been prevented if BP had spent more time and funds investing in pipeline upgrades and a "little less emphasis on profit." A
Congressional committee later determined that BP had ignored opportunities to prevent the spill and that "draconian" cost-saving measures had led to shortcuts in its operations. The Prudhoe Bay incident and the Texas City disaster led to the
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resignation under fire of John Browne, BP's former CEO. BP promised again that it would change and improve on its safety.
3. BP's Annual Filings on Form 20-F Tout Safety Measures Taken in Response to Past Incidents
85. BP filed annual reports or Form 20-F's with the SEC.
86. In BP's 2007 Form 20-F submission, it made the following representations regarding safety and risk management:
Safety
This section reviews BP's 2007 performance with respect to safety and the environment. An overview of our non-financial performance will appear in BP Sustainability Report 2007, expected to be published in May 2008.
In total, there were seven workforce fatalities relating to BP operations in 2007, compared with the same number in 2006. Two were the result of shootings relating to our retail operations in South Africa, two occurred in operations at our US refineries in Cherry Point and Texas City, one was on board a BP marine vessel, one was road-related and one an accident involving a defective fire extinguisher in Indonesia. We deeply regret the loss of any lives. These incidents re-emphasize the need for constant vigilance in seeking to secure the safety of all members of our workforce.
Our employee and contractor reported recordable injury frequency in 2007 was 0.48 per 200,000 hours worked, the same as that for 2006 (2006 data was corrected from 0.47 to 0.48), and below the industry average for 2006.
Implementing Baker Panel recommendations
Throughout 2007, BP continued to progress the process safety enhancement programme initiated in response to the March 2005 incident at the Texas City refinery. We worked to implement the recommendations of the BP US
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Refineries Independent Safety Review Panel (the panel), which issued its report on the incident in January 2007 (see www.bp.com/bakerpaneIreport)-
We have made material progress throughout the group across all of the panels 10 recommendations. Action can be grouped under the following headings:
Leadership
Our executive team carried out site visits, which included BP's five US refineries. Board members also undertook site visits, including one to the Texas City refinery. We have consistently communicated that safe and reliable operations are our highest priority. Our safety and operations audit group was strengthened and completed 28 audits in 2007.
Management systems
Implementation of our operating management system (OMS) began at a first group of sites that included all five US refineries (see page 40). We continued implementing the groups six-point plan', which focuses on key priorities for investment and action associated with safe operations (see below).
Knowledge and expertise
We established an executive-level training programme, ran process safety workshops and launched an operations academy for site-based staff to enhance process safety capability. Specialists have been deployed at our US refineries to accelerate priority improvement programmes.
Culture
To reinforce the need for a stronger safety culture, our in-house team undertook assessments of BPs safety culture, supported by communication from leadership.
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Indicators
Progress has been made in developing leading and lagging indicators, building on metrics already reported to executive management. These include measures on the competency of employees in roles critical to safety and on the development of appropriate operating procedures. We are working with the industry to develop indicators and this already includes progress to agree a metric covering loss of primary containment.
Progress at Texas City and our other US refineries
Across the US refining system, we have worked to address factors that contributed to the Texas City refinery incident of 2005, including facility siting, atmospheric relief systems, operating procedures and operator training, as well as control of work systems and process safety culture and leadership.
The refineries have engaged with employees on how to improve process safety. Each refinery is creating a strategic implementation plan to reduce process safety risk on a continuous improvement basis and to implement the OMS. With the United Steel. Workers Union, we have reached agreement in principle to work jointly to improve safety across four represented refineries. At Texas City, face-to-face communication with staff has been supplemented by The Future is Now, a monthly magazine widely circulated across the group.
Approximately 640 new staff were hired across our US refineries, strengthening our support of engineering, inspection and process safety.
Further infoi motion on Texas City and other refineries can be found in the Refining and Marketing section on page 27.
Implementing the six-point plan
We set out our immediate priorities for improving process safety management and reducing risk at our operations worldwide through a
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six-point plan. This plan, launched in 2006, pre-dated the panel's recommendations and creates a foundation for our approach.
Progress on the plan's elements is reviewed each quarter by the executive-level. group operations risk committee (GORC).
We have taken the following actions in relation to the six-point plan:
• In 2007, we implemented a group practice on occupied portable buildings and removed all temporary buildings out of high-risk zones in refineries and major onshore plants. We continue to apply the practice and report progress on identification and removal of relevant buildings to the GORC. A total of 17 blow-down stacks — all of those on heavier- than-air light hydrocarbon streams in refineries have been removed from service. The one remaining blow-down stack, at a chemical plant in Malaysia, is scheduled to be removed from service during 2008.
• We have completed 50 major accident risk assessments (MARs). The assessments identify high-level risks that, if they occur, would have a major effect on people or the environment. Many of these risks, such as a loss of containment from our operations, are common across the industry. Mitigation plans to manage and respond to identified risks form part of the MAR analysis,
• We are implementing group standards for integrity management and control of work on a locally risk-assessed and prioritized basis. Progress on implementing the standards is tracked quarterly. We have spent $6 billion on integrity management in the course of 2007, principally related to operating costs for maintenance and capital costs for plant improvement.
• We have continued to improve the way in which we seek to ensure our operations maintain compliance with health and safety laws and regulations. A project to establish a consistent compliance management framework has been under way in the US during the past
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two years and is expected to be completed globally by the end of 2008.
• Reviews have been undertaken resulting in many actions being closed out from past audits. Other actions requiring closure have been identified.
• Senior HSE advisors have carried out a preliminary assessment of the operational experience of BP management teams responsible for major production or manufacturing plant and any significant assessment findings have been addressed.
Operational integrity
As part of monitoring operational integrity, we track the number of major incidents during the year: oil spills of more than 100 barrels, significant property damage or fatal accidents related to integrity management failures. We also investigate any near-misses that could have resulted in a major incident. Overall in 2007, the total number of 'high potentials went down; however, more integrity management-related high potentials' were reported in 2007 than in previous years as a result of improved knowledge-sharing. The number of oil spills of one barrel or more in 2007 decreased to 340 from 417 in 2006. The volume of oil spilled was 1.05 million litres, of which 0.33 million litres were unrecovered.
Continuing to focus on personal health and safety
In combination with our efforts to improve process safety, we have continued to strive for excellence in occupational health and safety. This is in line with our aspiration of no accidents, no harm to people and no damage to the environment.
Continued focus on driving risks has resulted in a significant reduction in major driving incidents, (those that cause a fatality or result in a vehicle rollover) since 2005.
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Health is an integral part of the OMS. In 2007, work continued on developing practices in health management, covering industrial hygiene, asbestos, fitness to work, health impact assessment, medical emergency management, health promotion and wellness. These practices set minimum standards of health performance in BP (see below).
We recognize that the health and safety of our workforce and communities is affected by our operations and that meeting our aspiration of no harm to people requires continuous effort, every day.
Implementation of the OMS
We began implementation of the OMS at 12 representative pilot sites. Learnings from these pilots will be used to assess and improve the OMS before widening its introduction. We intend for the whole of BP to have commmenced use of the OMS by the end of 2010.
The OMS incorporates BPs principles for operating and provides a framework to help deliver competence, then excellence, in operations and safety. Standards for control of work and integrity management and detailed `practices' in matters such as risk assessment provide further underpinning. Training and development programmes have been strengthened to develop the right capability and culture across the organization.
As described by BP's group chief executive, the OMS "is the foundation for a safe, effective, and high-performing BP. It has two purposes: to further reduce HSE risks in our operations and to continuously improve the quality of those operations". The system's 'elements of operating' describe eight dimensions of how people, processes, plant and performance operate within BP. A continuous improvement process drives and sustains improvement of these elements at a local level.
Capability development
We have initiated development programmes designed to ensure that BP has the capability among its people to achieve operational excellence and identify and manage risks.
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The programmes support implementation of the OMS by developing technical knowledge and skills. They seek to improve management, behavioural, cultural and leadership skills to drive and sustain multi-year change in operations across multiple geographies.
For instance, the operating essentials programme is tailored to staff in maintenance, operations and safety who have responsibility for managing front-line employees and contractors. We completed operating essentials pilots in Anadarko (North America gas), Angola and Kwinana and started the first phase of the implementation at I I other sites.
The Operations Academy, provided in partnership with the Massachusetts Institute of Technology, is directed towards senior operations and safety leaders of sites or large units.
The executive operations programme targets group vice presidents and senior business leaders with accountability for multiple operations or sites. Its purpose is to deepen insight into manufacturing and operations activities and the consequences of leadership decisions.
In 2007, we began the development of programmes for the wider workforce such as technicians and operators, graduate new hires and managers in roles between supervisory and senior leadership levels.
4. BP's Other Safety Lapses
87. There were other incidents, some of which contributed to Browne's resignation as CEO of BP. For example, according to reports, Browne was personally implicated by a high-level BP employee as being involved in a multi- million dollar criminal bribery scheme to unlawfully influence government officials in nearby Azerbaijan. Les Abrahams, who had led BP's successful bid for
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oil rights in Azerbaijan stated publicly that line item expenditures on BP's books were not what they seemed. According to Mr. Abrahams, BP allocated a budget of
£45 million to cover costs for Azerbaijani operations which involved alcohol and prostitutes. According to Mr. Abrahams, "The BP officials would come out to
Baku in groups of five or six, every week. Sometimes I would charter an entire
Boeing 757 to carry as few as seven staff. Their main base was the hard currency bar of the old Intourist hotel - so named because it accepted only dollars and was only open to foreigners. It was full of prostitutes and many of us, including me, used them on a regular basis, although we quickly established they all worked for the KGB." Similar allegations were raised alleging that BP was involved in bribing government officials in Kazakhstan for oil rights.
C. BP Abuses Its Relationship With MMS
88. When current CEO Defendant Anthony Hayward took office in
2007, he promised to change BP's culture, with a renewed commitment to safety.
89. He represented that his first priority was "focusing like a laser on safe and reliable operations." In an interview before his announcement as CEO, he described how the death of a worker who was on an operation he was leading in
Venezuela shaped his opinion. Defendant Hayward stated that, "I went to the funeral to pay my respects. At the end of the service his mother came upon and
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beat me on the chest. 'Why did you let it happen?' she asked. It changed the way I think about safety. Leaders must make the safety of all who work them their top priority."
90. The record shows this promise was an empty one, as Hayward and BP have led the company on a furious expansion of its underwater drilling operations across the globe, coupled with severe cost-cutting measures. While aggressively seeking to grow and expand, BP was also implementing "draconian" methods of keeping costs down, including failing to provide extra safety measures to prevent a tragedy like the Deepwater Horizon explosion. Regardless, BP ignored safety and environmental concerns.
91. In 2007, BP was cited for inadequately training employees in well control in a scenario that was very similar to what transpired on the Deepwater
Horizon on April 20, 2010. In addition, the Deepwater Horizon was badly burned by an accidental fire in 2005 while under contract with BP. In May 2008, the accidental opening of a valve flooded the Deepwater Horizon with seawater, causing very substantial damage. This information was not disclosed to shareholders in any of BP's public statements.
92. A rule change enacted in 2008 by the U.S. Minerals Management
Service ("MMS") allowed BP to avoid filing a plan specifically for handling a major spill from an uncontrolled blowout at its Deepwater Horizon project -
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exactly the kind of disaster now unfolding in the Gulf of Mexico. According to reports, improper benefits were given by BP to the Interior Department so that BP could cut costs in its oil drilling and production operations in the Gulf of Mexico.
93. MMS, which is an arm of the Interior Department, oversees the
United States' natural gas, oil and other mineral resources. The 1,700-employee agency collects and distributes more than $13 billion per year in revenues from federal leases for offshore and onshore drilling. It also enforces laws and regulations that apply to drilling operations.
94. Oil rig operators generally are required to submit a detailed "blowout scenario." However, MMS issued a notice in 2008 that exempted some drilling projects in the Gulf under certain conditions. According to the documents it filed with the government, BP claimed to have met those conditions and as a result, the oil company had no plan written specifically for the Deepwater Horizon project.
95. In 2009, when the MMS proposed a rule that would have required companies to have their safety and environmental management programs audited once every three years, BP lodged a formal objection.
96. Moreover, BP actively opposed MMS's rules requiring oil rig lessees and operators to develop and audit their own safety and emergency management plans, insisting that voluntary compliance would suffice and that BP
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would put safety at the forefront of its operations. In 2009, BP spent $16 million lobbying the federal government on a wide variety of issues, including encouraging the government to remove restrictions on drilling on the continental shelf. BP fought for these government changes despite its history of spills and explosions and BP's knowledge of the high risks involved in such drilling.
97. According to critics, these two roles conflict and the agency has long been accused of being too cozy with the oil and natural gas industry and receiving improper benefits from companies such as BP. On May 14, 2010, President
Barack Obama stated, "For too long, for a decade or more, there has been a cozy relationship between the oil companies and the federal agencies that pen-nits them to drill."
98. In fact, over a year ago, on January 28, 2009, Kenneth Salazar, the
Secretary of Interior, told reporters that, over the past eight years, the Interior
Department "has been tarnished by ethical lapses and criminal behaviour that has extended to the very highest levels of government."
99. A year earlier, in November of 2008, a number of MMS employees were fired and more than half a dozen disciplined after a two-year probe into allegations of serious misconduct.
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100. The claims, which centered on works with the royalty-in-kind program, included allegations that staff abused illegal drugs, had sex with industry officials and accepted gifts from workers at the oil companies they were hired to oversee. "Some employees engaged in blatant and criminal conflicts of interest and self-dealing," Salazar said. "It is one of the worst examples of corruption, abuse and of government putting special interests before the public interests."
"We will no longer tolerate those types of lapses at any level of government from political appointees or career employees," Salazar said, promising a "long term-effort to enact comprehensive, top-to-bottom reforms."
D. The Misrepresentations and Omissions During the Class Period
101. Beginning on March 4, 2009, BP began to highlight its operations in the Gulf of Mexico as one of its primary economic drivers, hyping the fact that it was one of the largest deepwater operators in the world. At the same time, BP failed to disclose that its Gulf of Mexico operations were exceedingly risky and that the Company was dangerously exposed due to its deficient safety procedures.
1. 2008 Form 20-F Annual Report
102. On March 4, 2009, BP filed with the SEC its 2008 Form 20-F which included the following representations on safety and risk management:
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Safety
This section reviews BP's safety performance in 2008.
There were five workforce fatalities in 2008, compared with seven in 2007. One resulted from fatal injuries sustained during operations at our Texas City refinery; one was the result of a fall from height at the Tangguh operations in Indonesia; one fatality was on a land farm near Texas City, and two were driving fatalities incidents in Mozambique and South Africa. We deeply regret this loss of life. By learning from these incidents and implementing appropriate improvement actions, we continue to seek to secure the safety of all members of our workforce. Our workforce reported recordable injury frequency, which measures the number of injuries per 200,000 hours worked, was 0.43 in 2008. This was a good improvement on the rate of 0.48 recorded in both 2007 and 2006.
Throughout 2008, senior leadership across the group continued to hold safety as their highest priority. Site visits, in which safety was a focus, were undertaken by the group chief executive (GCE) and members of the executive team to reinforce the importance of their commitment to safe and reliable operations.
Management systems
We continue to implement our new operating management system (OMS), a framework for operations across BP that is integral to improving safety and operating performance in every site.
When fully implemented, OMS will be the single framework within which we will operate, consolidating BP's requirements relating to process safety, environmental performance, legal compliance in operations, and personal, marine and driving safety. It embraces recommendations made by the BP US Refineries Independent Safety Review Panel (the panel), which reported in January 2007 on safety management at our US refineries and our safety management culture,
The OMS establishes a set of requirements, and provides sites with a systematic way to improve operating performance on a continuous basis. BP
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businesses implementing OMS must work to integrate group requirements within their local system to meet legal obligations, address local stakeholder needs, reduce risk and improve efficiency and reliability. A number of mandatory operating and engineering technical requirements have been defined within the OMS, to address process safety and related risks.
All operated businesses plan to transition to OMS by the end of 2010. Eight sites completed the transition to OMS in 2008; two petrochemicals plants, Cooper River and Decatur, two refineries, Lingen and Gelsenkirchen and four Exploration and Production sites, North America Gas, the Gulf of Mexico, Colombia and the Endicott field in Alaska. Implementation is continuing across the group and a number of other sites, including all refineries not already operating the OMS, are expected to complete the transition in 2009.
For the sites already involved, implementing OMS has involved detailed planning, including gap assessments supported by external facilitators. A core aspect of OMS implementation is that each site produces its own 'local OMS', which takes account of relevant risks at the site and details the site's approach to managing those risks. As part of its transition to OMS, a site issues its local OMS handbook, and this summarizes its approach to risk management. Each site also develops a plan to close gaps that is reviewed annually. The transition to OMS, at local and group level, has been handled in a formal and systematic way, to ensure the change is managed safely and comprehensively. Experience so far has supported our expectation that having one integrated and coherent system brings benefits of simplification and clarity, and that the process of change is supporting our renewed commitment to safe operations.
We are on track to meet our target of implementing OMS across the group by the end of 2010.
Capability development
In addition to ongoing training programmes we are undertaking a group wide programme to enhance the capability of our staff from front line to executive level to deliver operational excellence.
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Almost 1,000, around a third, of our front-line supervisors have started the Operating Essentials programme, which includes training on leadership, process safety, operating culture, practices and coaching and effective performance conversations.
More than 190, around half, of our operations leaders started the Operations Academy programme in 2008. The academy, which has been established in partnership with the Massachusetts Institute of Technology (MIT), provides participants with a total of six weeks of operations training, concentrating on the management of change and continuous improvement.
The Executive Operations programme, which seeks to increase insight into manufacturing and operation activities among senior business leaders, has built on its successful launch with the first group, which included the group chief executive and his executive team. By the end of 2008, 99 executives had attended the three-day programme.
In addition, new cadres of projects and engineering staff have progressed through the Project and Engineering Academy at MIT and 13 process safety courses have been delivered for project and project engineering managers at the Project Management College. We have continued to develop training on hazard evaluation and risk assessment techniques for all engineers, operators and HSSE professionals.
Process safety management
We remain fully con-nnitted to becoming a recognized industry leader in process safety management and are working to achieve this. We have taken a range of steps, including acting on the recommendations from both the panel and those within the first annual report of the independent expert.
Our actions can be summarized in three principal areas:
• We have made progress in reducing process safety risk at our US refineries. For example, we have completed and learned from safety and operations audits, relocated workers to lower-risk accommodation and implemented fatigue reduction programmes.
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• Executive management has taken a range of actions to demonstrate their leadership and commitment to safety. The group chief executive has consistently emphasized that safety, people, and performance are our top priority, a belief made clear in his 2007 announcement of a forward agenda for simplification and cultural change in BP. Safety performance has been scrutinized by the Group Operations Risk Committee (the GORC), chaired by the group chief executive and tasked with assuring the group chief executive that group operational risks are identified and managed appropriately. We continued to build our team of safety and operations auditors. A team of 45 auditors is now in place, with 36 audits completed in 2008.
• Many of the process-safety related improvements recommended by the panel are being implemented across the group through the OMS. The group essentials within the OMS (which cover diverse aspects of operating activity including legal compliance, process and environmental safety and basic operating practices) in some cases go beyond the panel's process safety recommendations, a point noted by the independent expert in his first report.
In addition to action in these areas, we have continued to participate in industry-wide forums on process safety and have made efforts to share our learning with other organizations.
The independent expert has been tasked with reporting to the board on BP's progress in implementing the panel's recommendations. We welcome the independent expert's view expressed in his first report (May 2008) that BP appears to be making substantial progress in changing culture and addressing needed process safety improvements'. However, we also acknowledge his observation that 'a significant amount of work remains to be done on the process safety journey' and that 'successful completion of the task will require the continued support and involvement of the board, executive management, and refinery leadership along with a sustained effort over an extended period of time'. The independent expert's second report is expected in the first half of 2009.
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Operational integrity
We continue to implement the six-point plan launched in 2006 to address immediate priorities for improving process safety and minimizing risk at our operations worldwide.
We have met our commitment to remove occupied portable buildings (OPBs) from high-risk zones within onshore process plant areas and to remove all. blow-down stacks in heavier-than-air, light hydrocarbon service. All major sites and our fuels value chains have completed major accident risk assessments, which identify major accident risks and develop mitigatio9- plans to manage and respond to them.
We continue to implement the Control of Work and Integrity Management standards. We have made progress in ensuring our operations meet the requirements of a group framework designed to ensure we stay in compliance with legal requirements on health and safety. We are continuing to take steps to close out past audit actions. Leadership competency assessments, which involve assessment of the experience of BP management teams responsible for major production sites or manufacturing plant, have been completed in Exploration and Production and in all major Refining and Marketing manufacturing sites.
Implementation of these actions is expected to be largely complete by the end of 2009, with some aspects of implementation being incorporated into the transition to the OMS, expected to be completed by the end of 2010. The GORC regularly monitors progress against the plan.
We monitor and report separately on major incidents such as those covering fatal accidents, significant property damage or significant environmental impact.We also track and analyze 'high potential' incidents — those that could have resulted in a major incident. All major incidents and many high-potential incidents are discussed by the GORC and we continue to seek to learn as much as possible from each incident.
A total of 21 major incidents were reported in 2008. Two of the major incidents were related to hurricanes and eight were related to driving incidents.
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There were 335 oil spills of one barrel or more in 2008, similar to 2007 performance of 340 oil spills. The volume of oil spilled in 2008 was approximately 3.5 million litres, an increase of 2.5 million litres, compared with 2007. This was largely the result of two incidents, one at Texas City and one at the Whiting refinery, which accounted for two-thirds of the total reported volume of oil spilled, the great majority of which remained contained and the oil recovered.
Performance indicators
We have well-developed systems, processes and metrics for reporting personal safety and environmental metrics that support internal performance management as well as public reporting.
We introduced several new metrics in 2008 that aim to enhance our monitoring of process safety performance within BP's operating entities. These include, for example, a process safety incident index, as recommended by the panel, which uses weighted severity scores to record and assess process safety events, and a measure to record any loss of hydrocarbon from primary containment.
Our indicators include industry-aligned 'lagging' process safety metrics that register events that have already occurred, and 'leading' indicators that focus on the strength of our controls to prevent undesired events in future. A suite of indicators is regularly reported to the GORC within the quarterly `HSE and Operations Integrity Report' and several new metrics have also been piloted. To further enhance the management of health risks across the group, we began the systematic reporting of recordable illness rates within the HSE and Operations Integrity Report. We continue to work with industry bodies such as the Centre for Chemical Process Safety and the American Petroleum Institute on the development of process safety metrics, definitions and guidance.
Continuing to focus on health
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healthy performance is delivered through healthy people, healthy processes and healthy plant.
In the course of 2008, we defined health 'group essentials', which specify requirements designed to prevent harm to the health of employees, contractors, visitors and local communities. These were incorporated within the OMS framework. Our health strategy and plan was also refreshed in 2008. Priorities include reducing significant occupational exposure and infectious disease risks, maintaining robust regulatory compliance in product health and safety and addressing the issue of fatigue management raised by the panel by providing training and awareness-raising.
2. March 10, 2009 Initial Exploration Plan
103. On March 10, 2009, BP riled an Initial Exploration Plan for
Mississippi Canyon 252. The document was dated as being received by the MMS
on February 23, 2009. Attached as Exhibit A is a true and correct copy of the
Initial Exploration Plan, which details the safety mechanisms that BP said it
intended to implement. This document was false and misleading as it failed to
appropriately and accurately detail the true risks and dangers of this operation and
failed to disclose the fact that BP had disregarded known risks relating to the
operation of the Deepwater Horizon.
3. November 19, 2009: Statements to the Senate Energy and Natural Resources Committee
104. In June of 2006, the Senate Energy and Natural Resources Committee passed a major energy bill (S. 1462) that included a provision to lift a 2006 moratorium on oil and gas drilling in the eastern Gulf of Mexico, including the
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gas-rich Destin Dome area. On November 19, 2009, David Rainey, Vice President
for Gulf of Mexico Exploration for BP America, Inc. (a subsidiary of BP, plc)
appeared before the committee, and stated that advances in technology had
enabled the industry to reduce the occurrence of oil spills and other environmental
consequences of offshore drilling. Rainey also stated that developments over the
last 50 years have made it easier to protect the environment. While Rainey
acknowledged the general risks of drilling for oil in the Gulf of Mexico, he
omitted the fact that BP had not implemented adequate safety provisions, and therefore was highly exposed to operational risks in the Gulf of Mexico.
1.05. In addition, Rainey provided a written statement prior to that Senate committee hearing which included the following statements regarding BP's energy portfolio:
BP's Energy Portfolio
BP is not only the largest oil and gas producer in the United States, but also the largest investor in energy of all sorts. In the last five years, we have invested approximately $35 billion in the US to ensure Americans have the energy and fuels they need to live their lives. These include:
Oil and natural gas: Offshore and onshore, from the Alaskan North Slope to the deep waters of the US Gulf of Mexico, we are a leader in providing America's traditional energy needs. In 106. discussing safety specifically, Rainey stated:
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While our intent is to prevent all accidental discharges, we conduct regular emergency drills with local, state, and federal agencies. All of our production facilities have contingency plans that identify the procedures, response equipment, and key personnel needed for responding to incidents.
107. Rainey's statement further provided specific information regarding the complexities of oil operations in the Gulf of Mexico, but failed to include material facts relating to BP's inadequate safety protocols:
US Deepwater Gulf of Mexico
Industry began to explore in the US Gulf of Mexico during the early 1930's. The first discovery out of site of land was made by Kerr McGee in 1947. The MMS classifies water depths greater than 1,000 feet as deepwater, and depths beyond 5,000 feet as ultra-deepwater. The first deepwater exploration well was drilled in 1975. The first ultra-deepwater exploration well was drilled in 1987. So, while it took more than 40 years for industry to develop the technology to move from the shoreline to 1,000 feet water depth, it took just 12 years to move from 1,000 feet to 5,000 feet, Wells in water depths up to 10,000 feet are now routine.
In the US Gulf of Mexico, shallow salt canopies underlie about 65 percent of the seabed in the deepwater areas. These salt canopies make seismic imaging of the subsurface very challenging. [See Figures I A and 1B] They present the same barrier to our seismic imaging capability that a pane of frosted glass presents to our eyes and our ability to see through it. The salt canopies bend the seismic waves and obscure the image of the underlying geology.
Early exploration in the US Deepwater Gulf of Mexico was focused on the 35 percent of the area which has no salt canopy. Without the salt, conventional seismic imaging worked and fields were discovered as the advances in drilling technology enabled industry to move rapidly into the deepwater. Much of the success in this period was
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enabled by widely-spaced two dimensional seismic data. The technology challenge was about developing the systems to safety produce the oil and gas in these water depths. Our colleagues in Shell were at the forefront of this phase of Gulf of Mexico development.
By the mid-I 990's, the large fields had been found in the areas of the deepwater free of shallow salt canopies. This led industry to turn its attention to the challenge of exploring below the salt. To do this, we matured a technology known as seismic depth imaging. This technology combines geological modeling and computer algorithms to restore the seismic wave paths to their correct positions-allowing the image to emerge.
By the late 1990's, depth imaging allowed the industry to begin to explore beneath the salt. These early forays were restricted to areas where the top and base of the salt were geometrically simple and the imaging problem was, from where we stand today, relatively easy to solve. BP's Mad Dog, Atlantis, and Thunder Horse discoveries were delivered on the back of this technology in 1998 and 1999. Since then, we have continued to refine the technology and have been able to announce a steady stream of discoveries - most recently Kaskida in 2006, Isabela in 2007, Kodiak and Freedom in 2008, and this year Mad Dog South and Tiber.
In 2003, BP began to address the problem of how we would explore under more complex salt geometries. We predicted that continuing incremental improvements to what was then considered conventional; depth imaging methods would soon reach a point of diminishing returns. So we set out to create a step change by developing a completely new seismic imaging technology.
Conventional depth imaging is a data processing technology which involves some of the most sophisticated computer algorithms ever created. These algorithms require powerful super-computers to run them. However, the underlying data were acquired using a technology which had not changed significantly for 25 years. The data were acquired using a single seismic vessel towing both the seismic source and the receivers. Effectively, therefore, the data were
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acquired in two dimensions, but at sufficiently close spacing to allow processing in three dimensions.
BP's Wide Azimuth Towed Streamer (WATS) and Ocean Bottom Node technologies involve truly three-dimensional seismic acquisition. They were conceptualized, modeled, and piloted at scale in the US Deepwater Gulf of Mexico. The WATS pilot was on our on Mad Dog Field, and the Nodes pilot was Atlantis. At Mad Dog, the WATS data have contributed significantly to our ability to continue to develop the field. The successful Mad Dog South. appraisal well which we announced in July of this year was enabled by these data. At Atlantis, development of the North Flank of the field has been enabled through the application of nodes technology and production has begun.
We have worked hard to drive our WATS technology into the market, and to refine it to make it cost effective in the exploration arena. Today, much of the US Deepwater Gulf of Mexico is covered by what we call XWATS - for Exploration WATS - seismic surveys. [See Figure 2] The data from these surveys will allow us to continue to move forward the limits of where we explore. As a result, we will be more efficient, drill fewer wells, and have less impact on the environment as we become better at predicting the presence of oil and gas in the subsurface.
I have mentioned above how drilling technology advanced to allow Lis to drill in deep and ultra-deep waters. As discoveries were made, production technology followed. A variety of production systems have been developed to account for the different metocean, seabed, and reservoir conditions. [See Figure 3]
BP has been at the forefront of this recent phase of deepwater development. Today, we operate eight major producing facilities in the US Deepwater Gulf of Mexico. [See Figure 4] They range from the Pompano fixed platform, installed in 1994 in 1,300 feet of water, to the Atlantis semi-submersible platform, which started production in 2007 and sits in 7,100 feet of water. In between lie:
68 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 9 of 69
• The Marlin tension leg platform in 3,234 feet of water;
• The Holstein, Mad Dog, and Horn Mountain spar facilities in 4,344, 4500 and 5,422 feet of water, respectively; and
• The Thunder Horse and Nakika semi-submersible platforms in 6,050 feet and 6,340 feet of water, respectively;
Today Atlantis is the world's deepest oil production facility, an honor previously held by both Horn Mountain and Nakika, when they began production.
In addition to enabling the industry to move into ever deeper waters, the drilling envelope has been extended by advances in directional and extended reach drilling. The Nakika development is an example of where these technologies have been combined with subsea production technology to bring six otherwise uneconomic discoveries to production. These independent, medium-sized fields are tied back to the centrally-located semi-submersible production host facility. Distance from the central host varies from five to 26 miles. By combining directional and extended reach drilling with subsea production systems, the environmental footprint has been reduced by requiring only one surface facility, where previously six would have been needed. [See Figure 5]
This month marks the tenth anniversary of our Marlin oil and gas hub. As the Marlin Field has declined, a series of satellite fields have been tied back using subsea production technology. In total, five satellite fields have been tied back, with distance from the host ranging from two miles to 18 miles. This year, the Dorado and King South satellite fields have been brought on line. These tiebacks have returned the facility to a second peak of production - a very rare occurrence in our industry. Again, the combination of directional and extended reach drilling and subsea production technology has enabled multiple fields to be developed from a single host platform. The
69 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 10 of 69
environmental footprint has been reduced and the useful life of the facility has been extended.
In addition to directional and extended reach drilling, today's drilling technology allows us to drill to total depths which were unimaginable just 15 years ago. In the mid-1990s, drilling was restricted to roughly 20,000 feet total depth. Today we routinely drill to 30,000 feet and below. [See Figure 6] This means that we encounter ever greater temperatures and pressures. Our Thunder Horse development currently defines the limits for what we call high-pressure/ high-temperature production technology. That said, we are already moving beyond these limits. Our Kaskida discovery, with reservoir depths ranging from 30,000 feet to 32,500 feet, has reservoir pressures above 20,000 pounds per square inch. We are currently designing the systems which will be required to bring Kaskida to production.
Finally, we have recently announced our Tiber discovery - which was at the time of rig release the deepest well in the history of the oil and gas industry at 35,055 feet. Tiber is an exciting discovery, and we are working hard to understand the technologies which will be required to bring it to production.
108. The representations were false and misleading. While explaining the
successes and profit potential of BP's Gulf of Mexico operations, Rainey omitted from investors the risks and dangers of these operations. Most importantly,
Rainey omitted the fact that BP's safety protocols were woefully inadequate to protect the public, its employees and the environment from an incident like the
Deepwater Horizon disaster,
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4. 2009 Annual Review
109. On February 26, 2010, BP issued its 2009 Annual Review. The
Annual Review included a letter from Chairman of the Board Carl-Henric
Svanberg, stating "Risk remains a key issue for every business, but at BP it is
fundamental to what we do. We operate at the frontiers of the energy industry, in
an environment where attitude to risk is key. The countries we work in, the
technical and physical challenges we take on and the investments we make - these
all demand a sharp focus on how we manage risk. We must never shrink from
taking on difficult challenges, but the board will strive to set expectations of how
risk is managed and remain vigilant on oversight."
110. This statement is not true. The reality was that BP was trying to
manage risk in the most cost-effective means possible, meaning that they were
prepared to put its employees, the public and the environment at substantial risk in
order to save money on such items as a back-up blowout preventer at the
Deepwater Horizon. If BP had truly been willing to put safety first, it would have
complied with safety standards and reduced safety risks necessary to prevent a
disaster like the Deepwater Horizon incident.
111. In the 2009 Annual Review, Defendant Hayward wrote, "Despite these difficult conditions, a revitalized BP kept up its momentum and delivered
71 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 12 of 69
strong operating and financial results while continuing to focus on safe and
reliable operations. Replacement cost profit for the year was $14 billion, with a
return on average capital employed of 11%,"
112. Defendant Hayward went on to say, "2009 was an outstanding year.
Reported production grew by 4% and unit production costs were down by 12%.
We are now the largest producer in deepwater fields globally. In the Gulf of
Mexico we ramped up production at Thunder Horse to more than 300,000 barrels of oil equivalent per day. Production started from Atlantis Phase 2, Dorado and
King South. And in September we announced the Tiber discovery, the deepest oil and gas discovery well ever drilled. These successes make us the largest in producer and leading resource holder the deepwater Gulf of Mexico."
113. Defendant Hayward acknowledged that BP was operating on the frontiers of the energy industry, but then reassured investors that risks were being handled appropriately, "BP has always operated at the frontiers of the energy industry and our core strengths are more relevant and valuable than ever. BP's experience, skills, capability, technology and access to markets enable resource holders to maximize returns over the long term. We continue to show our ability to take on and manage risk, doing the difficult things that others either can't do or choose not to do. This is why we are able to form such strong relationships
72 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 13 of 69
with governments and national oil companies and why we continue to have a
critical role to play in supplying the world with its future energy needs."
114. Ina section entitled "Sustaining momentum and growth," BP
acknowledged that its safety protocols are material to investors by including a
separate section on safety entitled "Safety, reliability, complianceI and continuousi
improvement." That section states:
"Safe, reliable and compliant operations remain the group's first priority. A key enabler for this is the BP operating management system (OMS), which provides a common framework for all BP operations, designed to achieve consistency and continuous improvement in safety and efficiency. Alongside mandatory practices to address particular risks, OMS enables each site to focus on the most important risks in its own operations and sets out procedures on how to manage them in accordance with the group-wide framework."
115. In BP's 2009 Annual Review, Defendant Inglis, BP's Chief Executive of Exploration and Production reiterated BP's claim that safety was BP's primary focus: ,
'Safety, both personal and process, remains our highest priority. 2009 brought further improvement in personal safety with the segment's reported recordable injury frequency improving from 0.43 in 2008 to 0,39 in 2009.
We also achieved improvements in the number of process safety-related incidents and a signifi cant reduction in the number of spills.
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During the year we continued our migration to the BP operating management system (OMS), which provides an increased focus on process safety and continuous improvement. By the end of 2009, 87% of our operating sites had transitioned to OMS."
116. In the 2009 Annual Review, BP boasted that, due to its proactive
safety measures, it was reducing oil spills:
?" A r Process safety — oil spills
\AJe report all spins of hydrocarbons 500 greater than or equal to one Darrel 159 litres, 42 US gallons). 400 [ he reductilnn in the number of oil spills in 2009 follows several years Of 300 on ocu—S ac r oss BP P r ocedures such -is 200 intearity C?`1anaCjer3' ten and cont rol of ^ rw hich are cure elements of BP's 1 L3 o p eratingI"^i4P1.at^1^?rit systr3^, ^ e +# 09
117. Defendant Inglis went onto reaffirm BP's purported "Deepwater
Expertise" stating that, `BP is the leading operator in the deepwater Gulf of
Mexico. We are the biggest producer, the leading resource holder and have the largest exploration acreage position. Thunder Horse is now the largest single producing field in the Gulf of Mexico. Fully operational and performing beyond expectations, it has enabled us to grow our Gulf of Mexico production from
240,000 barrels of oil equivalent per day in 2007 to more than 400,000 barrels of oil equivalent per day in 2009."
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118. These representations were false and misleading. After the
Deepwater Horizon disaster, it became apparent that BP had been operating in an unsafe manner, particularly with respect to its deepwater Gulf of Mexico operations critical to BP's financial results. The truth was that safety was not BP's first priority. Rather, BP's failure to implement and enforce appropriate safety measures made a costly and deadly incident like the Deepwater Horizon a virtual inevitability.
5. Strategy Presentation
119. On March 2, 2010, BP published and made a Powerpoint presentation in London which highlighted its deepwater operations, especially in the Gulf of
Mexi Co.
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75 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 16 of 69
by Leading deepater company 0
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120. BP's presentation also highlighted the Gulf of Mexico as the site of a majority of its "final investment decisions" for 2010 and 2011. These sites would be crucial for BP's continued economic growth.
by Planned Final Investment [decisions 2010-11 0 At mad ds t K,...i rf :^
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76 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 17 of 69
121. In the following additional slide, BP acknowledges that the largest
area of growth for BP from 2010-2015 is the Gulf of Mexico. In fact, the majority
of new projects for BP during the 2010-2015 time period were to be in the Gulf of
Mexico.
Project start-ups 2010-201
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FN.e ltKilo lD P,,-ph..3 abet WND G."- f^...t Cats Pfcase N. Kik' Phan.4 - Aa94 6^1i4 Etmart FfV '!. T.W.r 8..11. * ,,,, ;°emu•. Fraed— hr SSaiab Sawthaen Now En Axtxenaa Cbprekst+m K.asklda * Trinidad & Tgpnq aar5 8 °'+3i, r^H Aaa PR. ki H-1. M.—taro Ph— 2 ° 7r5ntdad Campre:.slrn x .4tiani3s Ph.-3 ' ^funiy ms' N tth Rankin 2 Anaola T.ng%.h Ex-}sansio. E?t P-di P"tom•, < Sang. Sang. Co.s Bed Al.thane C!n 4i AfBFA t. Ki¢ ba SAWitas Ph— 2 81& W.,t CLOV
2010 Start ups 2011 Start ups 2012-2015 Start ups 2P1.2 2015
122. BP's presentation also highlighted its safety record. BP's first point is that "Safe and reliable operations remains #1
77 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 18 of 69
by Safety, efficiency, quality and integration 0
Safe and reliable operations remains #1
Over $2bn p.a. of pre-tax performance opportun ity in 2-3 years
Costs: return to below 2004 levels
Refining: targeting break-even in similar environment to 2009
Whiting Refinery Modernization Project on-stream during 2012
Portfolio: focus on quality and integration
Margin share growth
Sustainable contribution to group cash flow and dividend
IVP Safe, reliable and efficient operations 0 Recordable Injury Frequency Integrity Management Major IncidentsM
sa 25. 20
9's
311 0 go 0:: 2(4* 210M 2002 2003 2004 21106 2006 2007 2008 200 2004 2006 2006 2007 200P 2004
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1009 2000 '1008 4008 1009 2004 ^009 4009
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123. The presentation was false and misleading. While it is true that the
Gulf of Mexico was an important economic driver for BP, it is not true that BP was focused on safety. Instead, a cascade of failures by BP made an incident like the
Deepwater Horizon disaster virtually inevitable. No lessons were learned from the past and no new commitment was made to safety and safety protocols that were promised were either never implemented or enforced after 2009.
124. In fact, BP concealed the fact that BP's engineers predicted a catastrophic disaster of this nature. According to recent reports, BP also owned a rig known as Atlantis that operated with incomplete and inaccurate engineering documents, which one BP official warned could "lead to catastrophic operator error." Engineering documents - covering everything from safety shutdown systems to blowout preventers - are meant to be roadmaps for safely starting and halting production on the huge offshore platform. In an August 15, 2008 e-mail that was never revealed to the shareholders, a BP project manager stated that, "The current procedures are out of date." In discussing whether or not to provide incorrect documentation, the project manager states that, "This could lead to catastrophic operator errors due to their assuming the drawing is correct."
125. Ken Abbott, a BP consultant hired to advise on operations on the
Atlantis oil rig told BP that critical blueprints and drawings needed to safely
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operate the Atlantis had not been reviewed or approved by BP engineers,
According to Mr. Abbott, 89% to 95% of the blueprints that are critical to BP's
operation of the Atlantis had never been reviewed or approved. According to Mr.
Abbott, the culture at BP was shockingly lax towards safety. When Mr. Abbott
raised the issue of safety with senior BP managers, he was criticized, isolated and
later dismissed by BP. Mr. Abbott's concerns were never revealed to the
shareholders of BP. This information is material since accidents, such. as the Texas
City disaster and the Deepwater Horizon disaster, have a significant impact on BP.
1.26. Even in the aftermath of the Deepwater Horizon, BP has publically
stated that their other operations remain safe and that Deepwater Horizon was
merely an isolated incident. From the evidence revealed to date, BP's push for
speed over safety was the primary cause of the Deepwater Horizon explosion. BP's representation that safety was the most important priority was false. It appears now that inadequate safety mechanisms at the Atlantis oil. rig make another catastrophic incident likely, The Atlantis, operating a short distance away from the Deepwater
Horizon, intends to install a total of sixteen oil wells. An accident at the Atlantis would dwarf the catastrophe of the Deepwater Horizon. Until the Deepwater
Horizon incident, all of this information had been concealed by BP.
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127. In February of 2010, two months before the Deepwater Horizon
disaster, 19 members of Congress called on the agency that oversees offshore oil
drilling to investigate a whistle-blower's complaints about the BP-owned Atlantis,
which is stationed in 7,000 feet of water more than 150 miles south of New
Orleans. The Atlantis operates in the same region as the Deepwater Horizon and
there is evidence that BP's general approach to safety in the Gulf of Mexico was
seriously flawed.
128. According to the Associated Press, an independent firm hired by BP
substantiated the complaints in 2009 and found that the giant petroleum company
was violating its own policies by not having completed engineering documents on
board the Atlantis when it began operating in 2007. Stanley Sporkin, a former
federal judge whose firm served as BP's ombudsman, said that the allegation "was
substantiated, and that's it." This study was never disclosed to shareholders and
was not revealed until after the Deepwater Horizon disaster.
129. In January of 2010, Karen Westall, an attorney for BP, wrote a letter to
Congress saying the company is compliant with all federal requirements and the
Atlantis has been operating so safely that it received an MMS award. This
statement was false and misleading. University of California, Berkeley engineering professor Robert Bea describes running an oil rig with flawed and missing
81 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 22 of 69
documentation is like cooking a dinner without a complete recipe. According to
Mr. Bea, "This is symptomatic of a sick system. This kind of sloppiness is what leads to disasters."
6. 2009 Form 20-F Annual Report
1.30. On March 5, 2010, BP issued its 2009 Form 20-F Annual Report. BP stated in a section entitled "Outlook" that "Our priorities remain the same - safety, people and performance, focusing on the delivery of safe, reliable and efficient operations. In 2010, we aim to use the momentum generated in 2009 to continue to improve operational, cost and capital efficiency, while ensuring we maintain our priorities of safe, reliable and efficient operations."
131. In discussing the Gulf of Mexico, BP specifically stated:
"BP applies high resolution seismic data for the identification of reservoir extent and fluid contacts only where there is an overwhelming track record of success in its local application. In certain deepwater fields, such as fields in the Gulf of Mexico, BP has booked proved reserves before production flow tests are conducted, in part because of the significant safety, cost and environmental implications of conducting these tests."
132. BP's operations in the United States take place in three major areas: the deepwater Gulf of Mexico, the lower 48 states and Alaska. BP acknowledges the deepwater Gulf of Mexico is easily its largest area of growth in the United
States. The report specifically stated:
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Deepwater Gulf of Mexico
Deepwater Gulf of Mexico is our largest area of growth in the US. In addition, we are the largest producer and acreage holder in the region.
Significant events were:
• In May 2009, BP announced it had begun production from the Dorado (BP 75% and operator) and King South (BP 100%) projects. Both projects are subsea tiebacks to the existing BP Marlin Tension Leo, Platform (TLP) infrastructure. Dorado comprises three new subsea wells located about two miles from the Marlin TLP. King South comprises a single subsea well located 18 miles from the Marlin TLP. Both projects leverage existing subsea and topsides infrastructure and the latest subsea and drilling technology to enable the efficient development of the fields. Dorado utilizes dual completion technology enabling production from five Miocene zones and King South is produced through the existing King subsea pump.
• In June 2009, the Atlantis Phase 2 (BP 56%) project achieved first oil ahead of schedule, signalling the official start-up.
• In July 2009, BP announced the drilling of a successful appraisal well in a previously untested southern segment of the Mad Dog field (BP 60.5% and operator). The 826-5 well is located in the Green Canyon block 826, approximately 100 miles south of Grand Isle, Louisiana, in about 5,100 feet of water. The results from this well continue the successful phased development of the Mad Dog field and build upon the success from 2008.
• In September 2009, BP announced the Tiber discovery in the deepwater Gulf of Mexico (BP 62% and operator). The discovery well, located in Keathley Canyon block 102, approximately 22 50 miles south-east of Houston, is in 4,132 feet of water. It was drilled to a total depth of approximately 35,055 feet making it the deepest oil and gas discovery well ever drilled. The well found oil in multiple Lower
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Tertiary reservoirs. Appraisal will be required to determine the size and commerciality of the discovery.
133. Again, these representations were false and misleading. While touting the Gulf of Mexico as one of the critical areas of growth, BP omitted the fact that its operations in the Gulf of Mexico were unsafe and that it had unlawfully sought to manipulate regulatory agencies into allowing it to conduct operations in the Gulf of Mexico in a low cost, high risk manner. The truth, as revealed by the cascade of systematic failures that resulted in the Deepwater Horizon disaster, shows that the above-mentioned statements were not true. BP did not have in place a mechanism for conducting operations in a safe and reliable manner, which made an incident of this nature virtually inevitable. These facts were not disclosed.
134. BP's 2009 Form 20-F also included the following representations:
Safety
Safety, people and performance are BP's top priorities. We constantly seek to improve our safety performance through the procedures, processes and training programmes that we implement in pursuit of our goal of 'no accidents, no harm to people and no damage to the environment.'
In 2009, a third-party-operated helicopter carrying contractors from BP's Miller platform crashed in the North Sea resulting in the tragic loss of 16 lives. In addition, BP sustained two fatalities within our own operations, one, when a rig worker was lost overboard during drilling operations in Azerbaijan and a second, in a crush injury on a well pad in Alaska.
We deeply regret the loss of these lives.
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Safety and operational performance
In 2009, BP's safety record continued to improve, as indicated by measures of personal safety including reported recordable injury frequency (RIF) and days away from work case frequency (DAFWC).
Our overall RIF of 0.34 was significantly lower than the rate of 0,43 in 2008 and 0.48 in 2007. Our DAFWCF was 0.069, an improvement on the level of 0.080 in 2008.
In 2009, eight work-related major incidents were reported, compared with 21 in 2008. Major incidents include incidents resulting in fatalities, significant property damage or significant environmental impacts. All fatalities and other major incidents and many that have the potential to become major incidents, are discussed by the group operations risk committee (GORC), chaired by the group chief executive. Our mandatory internal requirement to undertake incident investigations seeks to ensure that we learn as much as possible from each incident and take action to prevent re-occurrence.
There were 234 oil spills of one barrel or more reported in 2009, a significant reduction on the 335 spills that occurred in 2008. The reported volume of oil spilled in 2009 was approximately 1,191 million litres, a reduction of 65% compared with 2008.
This performance follows several years of intense focus on training and procedures across BP. BP's operating management system (OMS), which provides a single operating framework for all BP operations, is a key part of continuing to drive a rigorous approach to safe operations. 2009 marked an important year in the continuing implementation of OMS.
Safe, reliable and responsible operations
Having been introduced at eight operating sites in 2008, implementation of the OMS gathered pace in 2009. The system was up and running at 70 operations across the business by the end of the year, including all our operated refineries and petrochemicals plants. This represents around 80% of the operations for which OMS implementation is planned, with the remainder scheduled to be live by the end of 2010.
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Taking a systematic approach is integral to improving safety and operating performance in every BP site. Our OMS covers all areas from process safety, to personal health, to environmental performance. By applying consistent principles and processes across the BP group's operations, the system provides for an integrated and consistent way of working. These principles and processes are designed to simplify the organization, improve productivity, enable consistent execution and focus BP on performance.
Capability development
Having built a safety and operations learning framework to enhance the capability of our staff to deliver safe, reliable, responsible and efficient
operations, we defined target populations for these programmes more accurately in 2009.
More than 2,700 front-line operational leaders across our global operations have started one or more of the modules within the Operating Essentials programme which seeks to embed the BP way of operating as defined by OMS. Our Operations Academy (OA), a partnership with the Massachusetts Institute of Technology (MIT), is also now well established. Seven cadres of senior operations staff have already attended this academy and three of these have graduated: all are applying their learning and having a deep influence in the operations community. We also have an Executive Operations Programme which has continued to support the executive team and senior business leaders in the development of their unique operations capability requirements.
Process safety management
We continued to implement the 2007 recommendations made by the BP US Refineries Independent Safety Review Panel (Panel), which following the incident at Texas City in 2005, reviewed process safety management at our US refineries and our safety management culture.
In accordance with those recommendations, we appointed an Independent Expert for a five-year term to monitor their implementation. We again co-operated closely with the Independent Expert in 2009, providing him
86 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 27 of 69
access to our sites, personnel and documentation and routinely supplying him with progress reports. In the Independent Expert's second annual report, published in 2009, he acknowledged BP's sustained focus on its safety and operations agenda and the priority given by executive management and the board to safe, reliable and responsible operations. The report identified areas for continued focus and highlighted the progress made in several areas, including the development of capability programmes, OMS implementation, safety and operations auditing, and the improvement of metrics to monitor process safety perfon-nance. During the course of 2009, we also provided regular progress updates to the Safety, Ethics and Environment Assurance Committee of the board.
See Legal proceedings on pages 95-96 in respect of ongoing Texas City refinery matters.
By the end of 2009 our safety and operations audit team had audited a total of 94 BP businesses, including all major operating sites, within a three-year period. The audits, which in 2009 included pilot audits for analysis against the requirements of the OMS, have provided a rigorous process for assessing our businesses against BP's relevant standards and requirements.
We also participated in industry-wide forums on process safety. We chaired the API/ANSI multi-stakeholder group developing a standard for public reporting of leading and lagging process safety indicators. Through this and other bodies, we shared our learning with other organizations within and outside the oil and gas industry.
`Six-point plan'
Our efforts on process safety included taking action to close out our six-point plan for process safety, which was launched in 2006 to address immediate priorities for improving process safety and minimizing risk at our operations worldwide. We have either completed the required actions or integrated the few continuing requirements within the OMS, for tracking to completion. We established a clear approach for future monitoring of these within the internal HSE & Operations Integrity Report. This report, which is the key source of management information relating to safety and operations in BP, is prepared quarterly for the GORC.
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135. BP's statements in its 2008 and 2009 Form 20-F Annual Reports were
false and misleading or omitted material facts necessary to make other statements not misleading. While highlighting the rewards of its Gulf of Mexico operations,
BP actively hid the risks and dangers, the failure to implement appropriate safety measures, and its abdication of appropriate risk management,
7. Code of Conduct
136. BP published in its public filings its "Code of Conduct." BP's Code of Conduct states, in pertinent part:
BP is committed to providing all BP employees - and those of other companies working on our premises - with a safe and secure work environment where no one is subject to unnecessary risk.
We recognize that safe operations depend not only on technically sound plant and equipment, but also on competent people and an active HSSE culture. No activity is so important that it cannot be done safely.
Simply obeying safety rules is not enough. BP's commitment to safety means each of us needs to be alert to safety risks as we go about our jobs. Basic rules you must follow.
Always
• Comply with the requirements of the HSSE management system at your work location — including the use of relevant standards, instructions and processes — and with the golden rules of safety.
• Stop any work that becomes unsafe.
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• Only undertake work for which you are trained, competent, medically fit and sufficiently rested and alert to carry out.
• Make sure you know what to do if an emergency occurs at your place of work.
• Help ensure that those who work with you - employees, contractors and other third parties - act consistently with BP's HSSE commitments.
• Promptly report to local BP management any accident, injury, illness, unsafe or unhealthy condition, incident, spill or release of material to the environment, so that steps can be taken to correct, prevent or control those conditions immediately. Never assume that someone else will report a risk or concern.
• Seek advice and help if, — You are ever unclear about your HSSE obligations. — You have a concern about a potential or actual breach of HSSE law or a BP HSSE requirement,
Never
• Undertake work when your performance is impaired by alcohol or other drugs, legal or illegal, prescribed or otherwise.
• Possess, use or transfer illegal drugs or other substances on company premises.
• Use threats, intimidation or other violence at work, or bring weapons — including those carried for sporting purposes — onto company premises
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Wherever we operate, we will strive to minimize any damage to the environment arising from our activities.
To help achieve its HSSE goals, BP has developed a HSSE management system framework, getting HSSE right (gHSSEr), which provides the basis for the development of local/site/facility HSSE management systems. This framework helps line managers focus on critical HSSE needs, forecast and allocate resources, set direction for HSSE activities, and consistently deliver improved HSSE performance. It encompasses the complete spectrum of health, safety and environmental risk management including personal security and product stewardship. For more information on HSSE in BP,, see the group HSSE website http://hse.bpweb.bp.com/hse For additional security requirements, refer to the Digital systems use and security section of this code. If you have questions or concerns relating to BP's HSSE requirements or activities, you have many ways to get help. You can raise the matter with your line management. Or, if you feel uncomfortable raising something with line management, you can use OpenTalk.
E. Defendants Concealed repeated Warnings Associated With Its Drilling Operations
1. The Deepwater Horizon Operations
137. BP's reckless inattention to safety and maintenance issues culminated in the Deepwater Horizon disaster. Like the Texas City disaster and others, BP had ample warning of problems and ignored them,
138. The risks of offshore drilling were well known to BP, and are especially high in the Gulf, where floating rigs are used, unlike the permanent rigs used in other areas such as the North Sea. Permanent rigs are anchored to the ocean
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floor and cannot sink, while floating rigs are far more precarious and subject to serious accidents.
139. At the time of the disaster, the Deepwater Horizon was not producing any oil. The Deepwater Horizon had drilled a well in the sea floor and was in one of the last phases of the exploratory operation prior to turning the well into a production well. In this final phase, Halliburton workers on the Deepwater
Horizon, under the supervision and control of BP's employees, were attempting to create a cement seal to plug off the wellhead. BP's employees under the supervision and control of one or more of the BP Defendants had authority over the
Halliburton workers to determine the type and amount of cement to be used.
140. According to one of the survivors of the Deepwater Horizon, BP had known about potential problems on the Deepwater Horizon for months prior to the accident. The survivor informed 60 Minutes that BP had initially estimated work to take 21 days (3 weeks). However, as the time for setting up the latest well extended to 6 weeks, BP managers became agitated and ordered workers to speed up the schedule. An earlier problem with the well that later exploded had cost BP
$25 million. BP managers told this to the workers on the oil rig in order to pressure them to speed up work in order to make up that loss. The Deepwater
Horizon survivor told 60 Minutes that BP was always pressuring them to do their
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work quickly but when the timeline for the Deepwater Horizon well extended into
6 weeks and with the loss of $25 million in an earlier incident, BP managers
ordered the drillers to speed up the rate of penetration. In other words, BP told the
drillers to work faster.
141. Approximately four to five weeks prior to the Deepwater Horizon
incident, chunks of the annular on the blowout preventer had broken off and
floated to the surface. The annular is a critical part of the blowout preventer used
to ensure that explosive gas does not escape to the surface. BP also knew in the
weeks and months prior to the incident that the battery on the blowout preventer
was weak and one of the control pods on the blowout preventer was broken.
According to engineering expert Robert Bea, he described the malfunctioning
control pod as "like losing one of your legs."
142. While this information was known to BP in the weeks and months
leading up to the Deepwater Horizon disaster, BP officials were publically representing to shareholders that it would be able to deliver strong growth in the
company in a safe and reliable manner. For example, at a March 22, 2010 Howard
Weil Conference in New Orleans, Defendant Hayward stated that:
"We are currently planning to make final investment decisions for 24 new major projects in the next two years. Each project has been high- graded through our project selection and progression process. They are concentrated in the Gulf of Mexico, the North Sea, Azerbaijan
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and Angola - high-margin production areas that improve the portfolio and enable profitable growth."
"Safety and operational integrity underpins everything we do, and we are now in the final phase of rolling out our operating management system that provides a single, consistent framework for our operations, covering all areas from personal and process safety to environmental performance. And I am pleased to say that in 2009 we saw continuing improvement in all aspects."
At a March 25, 2009 Howard Well Conference in New Orleans, Defendant
McKay stated:
"You are investing in your future."
"There's no better example of what technology can do than the deep waters of the Gulf of Mexico."
"By the way, let me add that managing costs down does not mean BP will be skimping when it comes to ensuring our operations remain safe, reliable and compliant in the years ahead.
"Safety will continue to have first call on the company resources."
143. BP's atrocious approach to safety was never disclosed to Plaintiffs, a fact that would have been material to them and the market.
144. Cementing a wellhead, particularly in deep water, is delicate work that carries the risk of a blowout or an uncontrolled release of oil and/or natural gas from the well. Indeed, BP knew that the work being performed at the Deepwater
Horizon was especially risky. In 2007, MMS raised concerns about oil rig blowouts
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associated with the exact type of cementing work the Deepwater Horizon was
doing when it exploded.
145. According to a 60 Minutes report, based on interviews with a survivor
of the Deepwater Horizon and the government's expert tasked with investigating the Deepwater Horizon disaster, BP issued orders that greatly heightened the risk
of a disaster. These orders were issued by senior BP managers. BP knew that it was operating in a dangerous formation in which extra safety precautions were required, not less. Immediately before the disaster, BP ordered that the drillers begin extracting the mud from the well before all of the concrete plugs were put into place. This would speed up the process but meant that pressure in the well would be highly unstable. According to Robert Bea, if the mud had been left in place, the Deepwater Horizon accident would likely not have occurred.
Nevertheless, with a broken blowout preventer, BP ordered a dangerous procedure be performed that jeopardized the workers on the Deepwater Horizon, the public and the environment. This directive was given by BP in order to save money. The results were catastrophic.
146. Not only did the blowout preventer on the Deepwater Horizon fall to stop the flow immediately after the explosion on the evening of April 20th, but repeated attempts to engage the blowout preventer in the days and weeks that
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followed similarly have been to no avail. Worse, BP failed to install at least two pieces of back-up safety equipment that would have stopped the leak even without the blowout preventer.
147. First, BP consciously elected not to install an acoustically activated remote-control shut-off valve, costing only $500,000, to the well. Indeed, such acoustic switches are mandated in countries like Brazil and Norway, and are employed by companies such as Royal Dutch Shell and Total SA, but have not been legally required in the U.S. due to the lobbying efforts of BP and other oil companies.
148. Second, BP chose not to install a deep-water valve that would have been placed about 200 feet under the sea floor. BP ignored these precautions despite being well aware of the increased risk of a failure of the primary blowout safety mechanism, the blowout preventer, from deep-sea operators.
149. A 2004 study by federal regulators showed that blowout preventers may not function in deepwater drilling environments because of the increased force needed to pinch and cut the stronger pipes necessary to drill at such great depths.
Only three of 14 rigs studied had blowout preventers able to squeeze off and cut the pipe at the water pressures present at the equipment's maximum depth. "This grim snapshot illustrates the lack of preparedness in the industry to shear and seal a
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well with the last line of defense against a blowout," the study said. By contrast, the replacement cost of the Deepwater Horizon is $560 million. BP has so far incurred $350 million in costs because of the incident and is incurring at least an additional $6 million per day trying to contain the spill. The total expenses of containment and clean-up could reach $10 billion.
150. Over ten years ago, the MMS sent out an industry-wide safety alert ordering companies drilling in deep water in the outer continental shelf to have effective backup systems. The March 2000 notice stated: "The MMS considers a backup [blowout preventer] actuation system to be an essential component of a deepwater drilling system, and therefore expects OCS operators to have reliable back-up systems for actuating the [blowout preventer]."
151. MMS, however, left it up to the individual companies to decide what kind of backup system to use. BP chose the cheapest method, electing not have a back-up system for activating the blowout preventer on the Deepwater Horizon.
152. BP's direction of the completion operations of the well, in particular the installation of the final cement casing at the wellhead prior to the conclusion of the exploratory phase of the well, was carried out by Halliburton and BP with extreme recklessness. As the New York Times reported on May 3, 2010:
More than a half-dozen workers who were on the rig at the time of the explosion told the lawyers that the rig operator had seemed to be
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rushing to finish and detach from the well - a possible factor that could have contributed to the explosion.
The explosion that sank the drilling rig came less than a day after workers finished pumping concrete into the well, a step toward closing it off temporarily. BP planned to return to the well later to set up a permanent rig and start producing oil.
Encasing a well in concrete is one of the most critical aspects of oil drilling, and presents many risks.
The concrete involved is highly specialized. It needs to be blended and stirred properly. It also must be pumped down into the well so that it comes out the bottom and oozes back up around the well casing, forming a tight seal.
The concrete work apparently did not achieve a complete seal., and natural gas started seeping into the well in the late stages, the lawyers said. But idling a rig to address such a problem can cost huge sums... [L]awyers said that supervisors either missed or ignored the signals and proceeded with the job.
When workers released the last valves that were holding back the natural gas that had built up inside the well, the gas shot up the pipe and sprayed into the drilling rig, igniting the fireball that caused the deaths of 11 workers, injured others and sank the rig ....
153. Employees working on the Deepwater Horizon experienced recurring problems with pockets of highly flammable natural gas forcing its way up the drilling pipes. Prior to the Deepwater Horizon incident, BP did not view these incidents as problematic, but instead stated that the gas was likely to only create a
"negligible" risk. The government, however, cautioned the company that gas
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buildup was a genuine concern and that BP should take note and "exercise caution." In the weeks leading up to the Deepwater Horizon incident, so much natural gas rose to the surface that an emergency announcement called for a stop to all "hot work," meaning any welding, cooking or any other use of fire or igniters.
Smaller emissions of gas also slowed work at the Rig on other occasions too.
154. Despite the dangers posed by the extreme gas build up, BP allowed
Halliburton to employ a risky technique of mixing nitrogen gas into the cement to create a mousse-like compound. Employees on the Deepwater Horizon have suggested that workers were motivated to finish early in order to earn bonuses for finishing the job ahead of schedule.
155. The New York Times has also reported that: "At least one worker who was on the oil rig at the time of the explosion on April 20, and who handled company records for BP, said the rig had been drilling deeper than 22,000 feet, even though the company's federal permit allowed it to go only 18,000 to 20,000 feet deep . . ."
2. Earlier Incidents Provided Warnings of Identical Risks
156. An MMS study noted that blowouts during cementing work were continuing with alarming regularity, particularly in the Gulf of Mexico. Cementing
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was a factor in 18 of 39 well blowouts in the Gulf of Mexico between 1992 and
2006.
157. Halliburton was responsible for cementing a well off the coast of
Australia that blew in August 2009, leaking oil for ten weeks before it was plugged. MMS is investigating that incident, and an MMS official has testified that a poor cement job likely caused the blowout.
158. Moreover, a blowout preventer manufactured by Cameron and another company was the subject of a dispute between BP and Transoccan (the builder and owner of the oil rig) in June 2000. Cameron also made the blowout preventer that failed on the Deepwater Horizon. In the 2000 incident, BP issued a notice of default to Transocean concerning the functioning of one of Transocean's oil rigs, in which the blowout preventer was the subject of concern. Nevertheless , BP used a Cameron-built blowout preventer on the Deepwater Horizon. Defendant
Hayward acknowledged the existence of this dispute in public comments on May 4,
2010.
159. In addition, BP was aware of an August 2009 blowout in the Timor
Sea off the coast of Australia, which was found to have been caused by careless cementing work. During that incident, which bears a strong resemblance to the
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Deepwater Horizon disaster, oil leaked from the site for ten weeks, spreading damage over 200 miles from the well site.
F. The Explosion and Sinking of the Deepwater Horizon
160. The Deepwater Horizon, a mobile offshore drilling unit owned and built by Transocean had been chartered by Defendant BP and completion operations of the well were directed by BP. As the operator of the well that the
Deepwater Horizon had drilled, BP was ultimately in charge of ensuring that appropriate safety protocols were implemented and followed. Between 10:00 p.m to 11:00 p.m. on April 20, 2010, an explosion erupted on the Deepwater Horizon.
Two days later after the explosion, on April 22, 2010, the Deepwater Horizon sank and began discharging oil into the Gulf of Mexico. Eleven workers lost their lives because of the Deepwater Horizon explosion and to date, over 3 million barrels of crude oil has poured into the Gulf of Mexico, a number that increases daily.
161. The Deepwater Horizon was connected to the wellhead on the sea] floor by a 5,000-foot pipe called a riser. As the Deepwater Horizon sank to the bottom, it pulled the riser down with it, bending and breaking the pipe before finally tearing away from it completely. The riser bent into a crooked shape underwater, and now snakes along the ocean floor and in the deepest waters
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slightly above it. Oil is leaking from the open end of the riser and from three places along its length, including one location almost at the wellhead.
162. BP's initial response to the Deepwater Disaster was lackluster and only intensified the damage.
163. After the explosion, BP attempted to downplay and conceal the severity of the oil spill. An initial leak estimate of 1,000 barrels (42,000 gallon) per day was found by government investigators to be a fraction of the actual leak amount of 5,000 barrels (200,000 gallons) per day. Moreover, BP was slow and incomplete in its announcements and warnings to Gulf Coast residents and businesspeople about the severity, forecast, and trajectory of the oil spill.
164. The Deepwater Horizon was located at Mississippi Canyon 252, close to the states of Louisiana, Mississippi, Alabama and Florida. While BP had initially tried to convince the public that the Deepwater Horizon was discharging only 1,000 barrels a day into the oil, the evidence soon forced them to change their estimates to approximately 5,000 barrels of oil a day. In a worst case scenario, experts estimate that the Deepwater Horizon may be discharging up to 60,000 barrels of oil a day. As of May 7, 2010, the oil spill has been measured at about
130 miles by 70 miles.
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165. Experts and analysts are still investigating the causes of this tragedy.
According to a preliminary analysis, bad wiring and a leak in what is supposed to
be a "blowout preventer" may have contributed to the explosion. Sealing problems
may have allowed a methane eruption. Even a dead battery may have been part of
the cause of the incident. Congressional investigators revealed on May 12, 2010,
that a key safety system, known as the blowout preventer, used in BP's oil-drilling
rig in the Gulf had a hydraulic leak and a failed battery that probably prevented it
from working as designed. Based on new disclosures, it was revealed that a
complicated cascade of deep-sea equipment failures and procedural problems
played a major role in the oil rig explosion and massive spill that is still fouling the
waters of the Gulf of Mexico and threatening industries and wildlife near the coast
and on shore. All of these problems were the result of BP's failure to follow its representations to its investors regarding it's purported commitment to safety.
1.66. According to Representative Henry Waxman (D-Calif ), BP told the
House Energy and Commerce Subcommittee on Oversight that the well that exploded had failed a key pressure test hours before the April 20, 2010 explosion.
"Significant pressure discrepancies were observed in at least two of these tests, which were conducted just hours before the explosion," said Rep. Waxman, citing documents his committee had received from BP. According to Steven Newman,
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president of Transocean, and Lamar McKay, president of BP America, these pressure readings were worrisome. Despite these worrisome pressure readings, according to Rep. Waxman, "it appears the companies did not suspend operations, and now 11 workers are dead and the Gulf faces an environmental catastrophe."
These problems are emblematic of a systemic and cultural failure at BP to disregard safety and risk management, undisclosed to investors.
167. BP is the holder of a lease granted by MMS that allows BP to drill for oil and perform oil-production-related operations at the Macondo well site in the
Mississippi Canyon 252 section of the outer continental shelf in the Gulf of
Mexico. BP also leased the Deepwater Horizon from Transocean and was operating the mobile offshore drilling unit on April 20, 2010, when the incident occurred. Anadarko Petroleum Corp. is an oil and gas exploration and production company that owns a 25% interest in the Macondo well at Mississippi Canyon 252.
168. Workers on the Deepwater Horizon told BP internal investigators in interviews that the blowout was triggered by a bubble of methane gas that escaped from the drilling well and shot up the drill column. The bubble expanded quickly after it escaped from the drilling well and burst through several seals and barriers before exploding.
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169. Below is a NASA satellite image of the oil spill as of May 2, 2410.
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170. The fire and explosion on the Deepwater Horizon, its sinking and the resulting oil spill were a direct result of the inadequate safety protocols put into place by BP. If BP had adequately informed shareholders and the public of its poor safety records, such risk would have been appropriately priced into BP securities..
171. The risks of offshore drilling are well known to BP. In fact, BP and the Individual Defendants were well aware that drilling at the depths that the
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Deepwater Horizon was drilling at posed increased risks. Defendants knew that, in
the Gulf of Mexico, it was appropriate to spend more money and adopt stricter
safety procedures because of the heightened risks and dangers. Defendants,
however, chose not to ignore such risks in order to cut costs. Defendants' behavior
made an incident of this nature virtually inevitable, with the resultant costs. This
was not appropriately disclosed to the investing public.
172. At the time of this filing, BP has not capped the wellhead, and the flow of oil continues unabated into the Gulf of Mexico. The ever-expanding oil
slick made landfall on the fragile Louisiana coastline on Friday morning, April 30,
2010, and balls of tar began washing up on an Island three miles off the coast of
Alabama on Saturday, May 8, 2010. The oil spill will continue to affect more and more of the Gulf coastline as it is driven landward by currents and winds. BP's attempt over the weekend of May 8-9, 2010 to contain the oil by placing a specially-engineered "dome" over the wellhead failed. BP has resumed injecting dispersants into the gusher a mile below the surface. BP is considering other options, such as using a smaller containment box, called a "top hat" or injecting debris (such as shredded rubber) into the well as a stopper, a process known as a
"junk shot." It is far from clear, however, that such renewed efforts will be
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successful, and any relief will take weeks or months to complete while oil
continues to spew forth from the well.
173. Worse, the floating booms that BP has set in place to block the oil
from reaching the coastline may be too low and/or be placed too far out to sea to be
useftit. Experts report that anything higher than a three-foot wave will clear the
boom, lifting the oil stick over the barriers along with it. In the first few days of
May, the Gulf experienced seven to ten-foot swells, making the booms all but
useless.
1.74. On or about May 8, 2010, BP lowered a 40-foot-tall steel chamber
over the oil leak about a mile below the surface, hoping to capture the leaking oil
and purnp it to a nearby ship. The steel chamber took approximately 2 weeks to build, and an additional 3 days to cart it out 50 miles into the Gulf. When the steel chamber was slowly lowered to the well, it plan failed because ice-like hydrates, a slushy mixture of gas and water, clogged the opening in the top of the peaked box.
BP was forced to abandon the effort and begin to study how to stop the ice forming before it makes another attempt using this method.
175. While BP struggles to develop containment systems on the spot, 5,000 barrels of crude oil are leaking into the Gulf of Mexico each day. On May 10,
2010, BP Chief Operating Officer Doug Suttles admitted that Company was
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woefully unprepared to mitigate the damage of the Deepwater Horizon incident duc.
to its location. Suttles stated, "There's a lot of techniques available to us. The
challenge with all of them is, as you said, they haven't been done in 5,000 feet of
water."
176. BP now admits that the Deepwater Horizon disaster has cost it $350
million so far for immediate response, containment efforts, commitments to the
Gulf Coast states, and settlements and federal costs. BP did not speculate on the
ultimate cost, which most analysts expect to run into the tens of billions of dollars
177. As the oil continues to make landfall along the Gulf Coast, it will
cause severe damages to the delicate wetlands and intertidal zones that line the
coast of Louisiana, Mississippi, Alabama, and Florida, destroying the habitats
where countless species of fish and marine life breed, spawn, and mature. The
timing of this disaster makes it even more damaging, as May is spawning season
for much sea life and is migration time for many species of shrimp and pelagic fish.
Devastation of so many species will severely damage and perhaps even destroy the
livelihoods of many commercial fishing interests in the area. The National
Oceanographic and Atmospheric Administration ("NOAA") may soon declare that a 6,800-square-mile area is a "fisheries disaster."
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178. In addition, the Gulf accounts for about one-fifth of the total U.S. commercial seafood production and nearly three-quarters of the nation's shrimp output. Nearly a third of all marine recreational fishing trips, including the $1 billion-per-year sport fishing industry, take place on Gulf waters. In 2008, 3.2 million recreational fishermen in the Gulf of Mexico took 24 million fishing trips.
All of these activities and business are now in serious jeopardy.
179. Unlike the 1989 Exxon Valdex disaster, which involved an oil tanker with a limited amount of oil, the Deepwater Horizon disaster involves a continuous flow of oil that will continue unless affirmative steps are successful) in shutting down the discharge Experts have estimated that the volume of the continuous gush of oil into the Gulf will eclipse that of the Valdez spill within 50 days.
180. Pursuant to the Oil Pollution Act of 1990, the federal government has assigned responsibility for the cleanup to BP. The Act provides for the recovery, among other things, of "[d]amages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by any claimant."
181. Although liability under federal law is capped under the Act at $75 million, legislation is moving through Congress that would raise the liability cap
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10 billion and make that change retroactive - i.e., fully applicable to BP with
respect to the Deepwater Horizon disaster.
182. Moreover, even before legislative efforts were initiated to raise the
cap, Defendant Hayward - in an implicit admission of liability - announced that BP
would voluntarily pay in excess of the liability cap imposed by the Act to remediate the problem.
183. The New York Times reported on April 29, 2010:
"But regardless of the out-of-pocket costs, the long-term damage to BP's reputation - and possibly, its future prospects for drilling in the Gulf of Mexico - is likely to be far higher, according to industry analysts.
The magnitude of the Deepwater Horizon disaster seems to be finally sinking in with investors. BP's stock plunged more than 8 percent Thursday in American trading in an otherwise strong day for stocks. Since the accident, the American depositary receipts of the company have fallen about 13 percent, closing Thursday at $52.56.
For Tony Hayward, who has led BP for the last three years, the accident threatens to overshadow all of the efforts he has made to burnish the tattered reputation of the company after a refinery explosion in Texas in 2005 and a pipeline leak in Alaska in 2006.
As Mr. Hayward said to fellow executives in his London office recently, "What the hell did we do to deserve this?"
A BP spokesman said no executives were available for an interview Thursday. But in response to a written question, Mr. Hayward said, "Reputationally, and in every other way, we will be judged by the quality, intensity, speed and efficacy of our response."
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184. The Deepwater Horizon oil. spill also caused losses to the energy sector. In 2008, offshore drilling in the Gulf produced about 1.15 million barrels per day, about one-third of total domestic crude production. Offshore energy production facilities are highly sensitive to external conditions and frequently have to stop operations when threatened by spills, storms or other unusual circumstances. Floating oil in the Gulf of Mexico poses the threat of fire and constitutes a threat to the health of workers. Nearby rigs might have to be shut down if the oil spreads to them. Three platforms already have been evacuated because they were close to the Deepwater Horizon site. As the oil spill expands, other rigs in the Gulf could face this problem.
185. The Deepwater Horizon oil spill will also significantly impact the shipping industry. While oil does not damage ocean-going vessels, it will cling to their hulls, and it is illegal for ships to enter U.S. ports or waterways if they will contaminate the waters. Incoming dirty ships would have to transfer their cargo or be cleaned. Cleaning ships requires time and money and could create delays and port congestion. As the oil spill grows in size, it will have an increasingly greater impact on shipping and will put much of the near-shore and coastline at risk.
The Louisiana Offshore Oil Port (LOOP) and major ports at Pascagoula,
Mississippi and Mobile, Alabama may have their shipping lines impacted by the
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growing oil spill. According to the NOAH, the main Southwest Passage into New
Orleans may soon become impacted by the oil spill. This would affect a string of
local ports, from Plaquernines to Baton Rouge as well as New Orleans, the United
States' 13th-largest port by total overseas trade. The entire Mississippi River
system — a critical transportation route for the economy of the U.S. heartland - will
feel reverberations if delays result from the need to clean oil off of ships.
G. BP ADR Prices Plunge
186. As a result of the Deepwater Horizon spill, which revealed the truth
about BP's disregard of risk management and safety practices, BP's shares have
lost nearly 20% of its value. On April 20, 2010, the price of one BP ADR was
approximately $59. Within a week, the share had dropped to approximately $50.
BP currently trades at approximately $48. Plaintiffs purchased their shares of BP
in reliance on BP's statements that they had implemented appropriate risk management and safety mechanisms to ensure that catastrophic and expensive disasters such as the Deepwater Horizon would not occur. It is now apparent, however, that such mechanisms were not, in fact, implemented.
H. Scienter Allegations
1.87. BP's Board of Governance Principles sets forth the obligations of
BP's Executive Management Team. According to that document:
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"The GCE ("Group Chief Executive") will not engage in or cause or pen-nit any practice, activity or decision to be taken:
(a) without having regard to:
• the health, safety and environmental consequences;
• the interests of BP's employees or those of other parties doing work for BP and, in particular, the need both to endeavour to treat them in an equitable and dignified manner and to maintain a safe working environment;
• the political consequences;
• the need to foster BP's business relationships with suppliers, customers and others; or
• its effect on the reputation of BP;
(b) which represents a material deviation from the Strategy and/or the Plan; and
(c) without ensuring that a system of control is in place for the prevention of conduct which is dishonest, illegal or involves coercion.
188. Defendants Castell, Anderson, Burgmans, Carroll and Davis are all directors of BP and are all members of BP's Safety, Ethics and Environment
Assurance Committee. These directors are responsible for making both day-to-day and strategic decisions regarding safety for BP and for monitoring that those safety mechanisms were implemented.
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189. BP's Board of Governance Principles describes their responsibilities
as follows:
• Monitor and obtain assurance that the GCE's internal control system for operations is designed and implemented effectively in support of his observance of the relevant Executive Limitations.
• Monitor and obtain assurance that the management or mitigation of significant BP risks of a non-financial nature is appropriately addressed by the GCE.
• Receive and review regular reports from the GCE or his delegate, the Group Internal Auditor and the Group Compliance and Ethics Officer regarding the GCS's adherence to the relevant Executive Limitations and his management in responding to risk.
• Review material to be placed before shareholders which addresses environmental, safety and ethical performance and make recommendations to the Board about their adoption and publication.
• Review reports on the Group's compliance with its Code of Conduct and on the employee concerns programme (OpenTalk) as it relates to non-financial issues.
• Recommend to the Board any changes or further delineation of the Executive Limitations in relation to non-financial matters.
190. The implementation of an appropriate safety mechanism is a matter that was driven from the top of the organization. BP's CEO and Board of Directors were involved in both the day-to-day and strategic decisions not to implement appropriate safety protocols.
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191. Defendants had knowledge that the Gulf of Mexico was a key driver for BP. As the documents cited above show, many of which were signed or attested to by top officers and directors, BP had publically stated that new exploration in the Gulf of Mexico was critical to BP's growth and success and that it could achieve those results in a safe manner.
192. However, Defendants also knew that BP had deep, systemic problems.
This knowledge is shown by-,
• Internal communications by project managers to senior staff in BP that, in the Gulf of Mexico, project managers and engineers were submitting out-dated information that violated BP's Code of Conduct and created a serious risk of a catastrophic disaster. This includes the April 1.5, 2008 Duffy e-mail.
• In the months leading up the Deepwater Horizon, BP not only knew about problems on the oil rig, it was BP senior managers who gave direct orders that put profit and speed before safety. Those orders are one of the principal causes of the Deepwater Horizon disaster. These facts were concealed and not disclosed to BP shareholders.
• The January 2007 Baker Report showed that there was a poor safety culture at BP. BP's officers and directors were made aware of systemic problems at BP and were aware that nothing was being done to correct them. The report acknowledged that "a significant amount of work needed to be done" and required the "continued support and involvement of the board, executive management and refinery leadership."
• Based on the January 2009 investigation from the Interior Department, BP knew that it and other oil companies had provided improper benefits to the MMS in order to manipulate it into reducing regulation, another issue that heightened safety risks.
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• A January 14, 2010 letter from Representatives Stupak and Waxman raised serious concerns about BP's operations in Alaska. BP claimed that they were improving safety processes throughout the company but the reality was that the company was not doing so.
• BP senior management violated its own Code of Conduct by consciously electing not to install an acoustically activated remote- control shut-off valve on the Deepwater Horizon at a cost of $500,000. Such a device likely would have prevented the Deepwater Horizon disaster.
• A 2004 study by federal regulators showed that blowout preventers may not function in deepwater drilling environments because of increased force. BP knew that better blowout preventers were needed for the Deepwater Horizon but consciously chose not to install them.
• A 2000 MMS safety alert stated that all oil rigs operating in the continental shelf, such as the Deepwater Horizon, should include a backup blowout preventer. BP senior management knew that none had been installed on the Deepwater Horizon.
• BP knew that employees experienced recurring problems with pockets of highly flammable natural gas on the Deepwater Horizon. BP knew that this was a huge risk but publically referred to this risk as "negligible" so it would not have to spend more money in an effort to prevent this risk.
• BP knew for weeks leading up to the explosion on April 20, 2010 that an emergency announcement had called for a stop to all "hot work." Nevertheless, under BP's direction, a high risk cementing technique was used. BP senior management knew of and authorized this work.
• BP knew that its federal permit only allowed it to drill from 18,000 to 20,000 feet and also knew that operations on the Deepwater Horizon had gone down to at least 22,000 feet. BP knew that offshore drilling operations along the lines of those conducted by the Deepwater Horizon were extremely high risk. Nevertheless, BP authorized
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breaking the federal pei i iit limit without implementing improved safety measures,
• BP knew of previous problems on the Deepwater Horizon but instead on of improving safety the oil rig, made efforts to further cut costs,
V1.
FRAUD-ON-THE MARKET DOCTRINE
193. At all relevant times, the market for BP ADRs was an efficient market
for the following reasons, among others:
194. BP ADRs met the requirements for listing, and was listed and actively
traded, on the NYSE, a highly efficient market.
195. As a regulated issuer of securities in the United States, BP filed
Annual Reports on Form 20-F with the SEC. These reports were publicly available and could be and were reviewed by the investing public.
196. BP ADRs was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports were publicly available and entered the public marketplace.
197. BP regularly issued press releases that were carried by national newswires. Each of these releases was publicly available and entered the public marketplace.
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198. As a result, the market for BP securities promptly digested current
information with respect to BP from all publicly-available sources and reflected
such information in BP's stock price. The price of BP ADRs moved in direct
response to information regarding the company that was put out in the public
marketplace. For example, the share price of BP ADRs dropped significantly after
the explosion on the Deepwater Horizon and the resulting discovery of BP's safety
and risk management practices. Under these circumstances, all purchasers of BP
ADRs during the Class Period, including Plaintffs, relied on the market price of BP
ADRs and suffered similar injury through their purchase of these ADRs at
artificially inflated prices and a presumption of reliance applies.
V11.
INAPPLICABILITY OF THE STATUTORY SAFE HARBOR
199. The statutory safe harbor provided for forward-looking statements
under certain circumstances does not apply to any of the allegedly false statements
pleaded in this complaint. The statements alleged to be false and misleading
concerned statements of existing or historical fact or conditions. Additionally, to
the extent that any of the statements alleged to be false and misleading may be
deemed to be forward looking statements, the Defendants are nevertheless liable for those statements because they were not identified as forward looking statements
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or, even if so identified, the statements were material. They were not accompanied
by meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those in the purportedly forward-looking
statements. Additionally, at the time each of those statements was made, the
Defendants had actual knowledge that the particular forward-looking statement was
false or the forward looking statement was authorized and/or approved by an
officer or director of BP who knew that the statement was false when made. In addition, to the extent that any of the statements set forth above were accurate when made, they became inaccurate or misleading because of subsequent events, and the Defendants failed to update those statements that later became inaccurate and/or did not disclose information that undermined the validity of those statements. Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 59 of 69
VIII.
CLAIMS FOR RELIEF
COUNT I.
VIOLATION OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE lOb-5 PROMULGATED THEREUNDER
(Against the BP Defendants McKay, Hayward, Svanberg and Inglis)
200. Plaintiffs hereby incorporate by reference all of the allegations set
forth above as though fully set forth hereafter.
201. During the Class Period, each of the Defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class
Period, did deceive the investing public, including Plaintiffs and other Class members, as alleged herein and caused Plaintiffs and other members of the Class to purchase BP securities at distorted prices that they would not have paid had they known of the improper conduct alleged herein. In furtherance of this improper scheme, plan and course of conduct, Defendants, and each of them, took the actions set forth herein.
202. Defendants: (1) employed devices, schemes, and artifices to defraud;
(ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the
119 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 60 of 69
purchasers of BP ADRs, including Plaintiffs and other members of the Class, by making false and misleading statements and omitting material facts regarding BP's risk management and safety practices. This was done in an effort to artificially inflate BP's ADRs' value in violation of Section 10(b) of the Exchange Act and
Rule I Ob-5. All Defendants are sued as primary participants in the wrongful and illegal conduct and scheme charged herein. These false statements and omissions are set forth above.
203. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to make affirmative misrepresentations and conceal adverse material information about BP's safety record and earnings, as specified herein.
204. Defendants employed devices, schemes and artifices to defraud and a course of conduct and scheme as alleged herein to improperly manipulate and profit and thereby engaged in transactions, practices and a course of business which operated as a fraud and deceit upon Plaintiff and members of the Class.
205. As set forth above, Defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with. reckless disregard for the truth in that they failed to ascertain and to disclose such
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facts, even though such facts were available to them. Defendants' material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of inflating the market price of BP ADRs.
206. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market prices of BP ADRs were distorted during the Class Period such that they did not reflect the true financial health and risk management and safety practices of BP as alleged herein. In ignorance of these facts, the market prices of the shares were distorted, and relying directly or indirectly on the false and misleading statements made by the Defendants, or upon the integrity of the market in which the securities trade, and/or on the absence of material adverse information that was known to or recklessly disregarded by Defendants but not disclosed in public statements by
Defendants during the Class Period, Plaintiffs and the other members of the Class acquired the shares or interests in BP during the Class Period at distorted prices and were damaged thereby when the value of their shares fell after the truth became known, representing the causal connection between Defendants' fraud and
Plaintiffs' damages.
207. At the time of said misrepresentations and omissions, Plaintiffs and other members of the Class were ignorant of their falsity, and believed them to be
121. Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 62 of 69
true. Had Plaintiff and other members of the Class and the marketplace known of
the truth concerning BP's operations, which were not disclosed by Defendants,
Plaintiffs and other members of the Class would not have purchased or otherwise
acquired their shares or, if they had acquired such shares or other interests during
the Class Period, they would not have done so at the distorted prices which they
paid.
208. By virtue of the foregoing, Defendants violated Section 10(b) of the
Exchange Act, and Rule I Ob-5 promulgated thereunder.
COUNT 11.
VIOLATION OF SECTION 20(a) OF THE EXCHANGE ACT
(Against the Individual Defendants)
142, Plaintiffs hereby incorporate by reference all of the allegations set
forth above as though fully set forth hereafter.
143. It is appropriate to treat the Individual Defendants and BP as a group
for pleading purposes and to presume that the materially false, misleading, and
incomplete information conveyed in the BP public filings, press releases and other
publications are the collective actions of the Individual Defendants and BP.
144. The Individual Defendants acted as controlling persons of BP within the meaning of Section 20(a) of the Exchange Act for the reasons alleged herein.
122 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 63 of 69
By virtue of their operational and management control of BP's respective businesses and systematic involvement in the fraudulent scheme alleged herein, the
Individual Defendants named herein each had the power to influence and control and did influence and control, directly or indirectly, the decision-making and actions of 13P, including the content and dissemination of the various statements which Plaintiffs contend are false and misleading. Each of the Individual
Defendants named herein had the ability to prevent the issuance of the statements alleged to be false and misleading or cause such statements to be corrected.
145. Each of the Individual Defendants named herein had direct and supervisory involvement in the operations of BP and, therefore, did have the power to control or influence the implementation of BP's risk management and safety procedures for its oil exploration and production operations, including those that relate to the Deepwater Horizon disaster that give rise to the securities violations as alleged herein, and exercised the same.
146. Each of the Individual Defendants named herein, by virtue of their high-level positions and participation in and/or awareness of BP's operations, had the power to influence and control and did influence and control, directly or indirectly, the decision-making of BP, including the content and dissemination of the various statements that Plaintiffs contend are false and misleading. The
123 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 64 of 69
Individual Defendants were provided with or had unlimited access to copies of
BP's reports, press releases, public filings and other statements alleged by Plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. BP controlled the Individual Defendants and all of its employees.
147. As set forth above, Defendants BP, McKay, Hayward, Svanberg and
Inglis violated Section 10(b) and Rule I Ob-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions as controlling persons, each of the
Individual Defendants is liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants' wrongful conduct, Plaintiffs and other members of the Class suffered damages in connection with their purchases of BP securities during the Class Period at inflated prices and the losses suffered when the value of their shares fell after the truth became known, representing the causal connection between Defendants' fraud and the damages suffered by Plaintiffs and the Class.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs, on behalf of themselves and the Class, prays for judgment as follows:
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Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 65 of 69
1. Declaring this action to be a proper class action pursuant to Rule 23 of
the Federal Rules of Civil Procedure on behalf of the Class defined herein;
2. Awarding Plaintiffs and all members of the Class damages against the
Defendants, jointly and severally, in an amount to be proven at trial;
3. Awarding Plaintiffs and members of the Class pre judgmentinterest,
as well as reasonable attorneys' fees and other costs;
4. Awarding such other relief as this Court may deem just and proper.
JURY TRIAL DEMAND
Plaintiffs, pursuant to Federal Rule of Civil Procedure 38, individually and
on behalf of all others similarly situated, demands a trial by jury of all issues which
are subject to adjudication by a trier of fact.
Dated: May 21, 2010 DOMENGEAUX WRIGHT ROY & EDWA,7S
By: /A JAMES ROY (Local Counsel) (La. Bar #1 1511) 556 Jefferson Street, P.O. Box 3668 Lafayette, LA 70502 Phone: (337) 233-3033 Fax: (337) 233-2796
125 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 66 of 69
COTCHETT, PITRE & WCARTHY
Y. a -`
JOSEPH W. COTCHETT (T.A.) (pro hac vice pending) } MARK C. MOLUMPHY (pro hac vice pending) NANCY L. FINEMAN (pro hac vice pending) ARON K. LIANG (pro hac vice pending) 840 Malcolm Road, Suite 200 Burlingame, California 94010 Phone: (650) 697-6000 Fax: (650) 697-0577
Attorneys for Plaintiffs and the Class
126 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 67 of 69
CERTIFICATION PURSUANT TO FEDERAL SECURITIES LAWS
1. 1, Robert H. Ludlow, Jr,, on behalf of the Robert H. Ludlow, Jr, 1.999 Revocable
Trust, make this Declaration pursuant to Section 21 D(a)(2) of the Securities Exchange Act of
1934, as amended by the Private Securities Litigation Reform Act of 1995.
Z 1 have reviewed the Complaint against BP plc and others and authorize a filing of the Complaint on my behalf.
3. 1 did not purchase the subject BP securities at the direction of plaintiffs' counsel
or in order to participate in any private action arising under the Securities Exchange Act of 1934,
4. 1 am willing to serve as a representative party on behalf of a Class as set forth in the Complaint, including providing testimony at deposition and trial, in necessary. I understand that the Court has the authority to select the most adequate load plaintiff in this action and that my counsel may exercise its discretion in determining whether to move on my behalf for appoiutment as lead plaintiff.
S. To the best of my current knowledge, the attached sheet lists all of my during transactions in the American Depository Receipts of BP plc the Class Period as specified in the Complaint,
6. During the three-year period proceeding the date on which this Certification is
signed, I have not sought to serve as a representai tive party on behalf of a class under the federal
securities laws.
I Il ly Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 68 of 69
7, 1 agree not to accept any payment for serving us a representative party on behalf of the class as set forth in the Complaint, beyond my pro rata share of any recovery, except such reasonable costs and expenses directly relating to the representation of the class as ordered or approved by the Court.
8. 1 declare under- penalty of perjury that the foregoing is true and correct,
Executed at (Date) (City,
(Signature)
Robert H. Ludlow, Jr., on behalf of the Robert H. Ludlow, Jr. 1999 Revocable Trust (Type or Print Name)
128 Case 6:10-cv-00818-RTH-CMH Document 1-1 Filed 05/21/10 Page 69 of 69
SUMMARY OF PURCHASE, AND SALES
DATE PURCHASE OF N"MER OF PRICE PER SALE SNARES SHARE 01/04/2010 Purchase 200 $52.15
129