Case 2:20-cv-00200-GAM Document 43 Filed 06/15/20 Page 1 of 197 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA ALLEGHENY COUNTY EMPLOYEES’ RETIREMENT SYSTEM, EMPLOYEES’ RETIREMENT SYSTEM OF THE CITY OF Case No. 2:20-cv-00200-GAM BATON ROUGE AND PARISH OF EAST BATON ROUGE, DENVER EMPLOYEES OPERATIVE CLASS ACTION RETIREMENT PLAN, INTERNATIONAL COMPLAINT FOR VIOLATION OF ASSOCIATION OF MACHINISTS AND THE FEDERAL SECURITIES LAWS AEROSPACE WORKERS NATIONAL PENSION FUND, and IOWA PUBLIC JURY TRIAL DEMANDED EMPLOYEES’ RETIREMENT SYSTEM, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. ENERGY TRANSFER LP, KELCY L. WARREN, JOHN W. MCREYNOLDS, THOMAS E. LONG, MARSHALL MCCREA, MATTHEW S. RAMSEY, MICHAEL J. HENNIGAN, and JOSEPH MCGINN, Defendants. Case 2:20-cv-00200-GAM Document 43 Filed 06/15/20 Page 2 of 197 TABLE OF CONTENTS Page I. INTRODUCTION .............................................................................................................. 1 II. JURISDICTION AND VENUE ....................................................................................... 12 III. PARTIES .......................................................................................................................... 13 A. Lead Plaintiffs ....................................................................................................... 13 B. Defendants ............................................................................................................ 14 IV. SUMMARY OF THE FRAUD ........................................................................................ 16 A. Energy Transfer Embarked on the Simultaneous Construction of Several Pipeline Projects Through Pennsylvania .............................................................. 16 B. Energy Transfer Was Motivated to Rush Through the DEP’s Approval of the ME2 Permits to Avoid Public Criticism of the Pipeline’s Serious, Undisclosed Risks to Human Life ........................................................................ 18 C. Energy Transfer Obtained the ME2 Permits Through Intimidation and Coercion of Government Officials Despite the Applications Being Facially Deficient ................................................................................................................ 21 1. 2015: Energy Transfer Begins the Permitting Process for ME2.............. 24 2. March-May 2016: After DEP Secretary Quigley Warned Sunoco that DEP Would Deny the ME2 Permits, the Governor “Ushered [Him] Out” ................................................................................................ 26 3. Energy Transfer’s Permits for ME2 Were Riddled with Deficiencies............................................................................................... 28 4. The Pennsylvania DEP Was Statutorily Required to Deny Deficient Permits ...................................................................................... 31 5. The Governor’s Office Exerted Undue Pressure on the DEP to Approve the Permits, Which Sailed Through Despite the Deficiencies............................................................................................... 34 D. Energy Transfer Ruins Lisa Drive, Bribes Government Officials to Intimidate Local Residents and Creates the “Frankenpipe” (Which Causes Delay and Reduces the ME2 Throughput)............................................................ 42 Case 2:20-cv-00200-GAM Document 43 Filed 06/15/20 Page 3 of 197 1. August 2017: As a Result of Litigation, Energy Transfer Is Forced to Re-Evaluate the Risk Profiles of 63 HDD Sites, Including Sites in the Vicinity of Lisa Drive ..................................................................... 44 2. November 2017: An Outside Consultant Tells Sunoco to Stop Using HDD in the Exton Area Near Lisa Drive, Yet Sunoco Proceeds and Causes Dangerous Sinkholes .............................................. 49 3. 2017 Through 2019: Energy Transfer Bribes Pennsylvania State Constables to Intimidate Homeowners on Lisa Drive and Throughout Pennsylvania ......................................................................... 56 4. 2018: Energy Transfer Cobbles Together a Nearly 100-Year-Old, 12-Inch Pipe with the 20-Inch ME2 Pipe to Create a “Frankenpipe” Through the Pipeline Route Near the Lisa Drive Sinkholes ..................... 58 5. December 2018: Chester County Launches an Investigation of Energy Transfer ........................................................................................ 63 6. December 2019: DA Hogan Files Criminal Charges Against Energy Transfer’s Security Chief for Bribing Pennsylvania State Constables to Intimidate Homeowners ..................................................... 65 E. Energy Transfer’s Revolution Pipeline Explodes, Rendering the Revolution Pipeline Inoperative to this Day ......................................................... 76 1. Energy Transfer Commits Hundreds of Permit Violations When Constructing the Revolution Pipeline ....................................................... 80 2. September 2018: Energy Transfer’s Egregious Misconduct Causes the Revolution Pipeline to Explode .......................................................... 87 3. Energy Transfer’s Response to the Revolution Explosion Worsens Investors’ Losses ....................................................................................... 90 4. Energy Transfer’s Post Explosion Misconduct and Misrepresentations .................................................................................... 93 F. Energy Transfer’s Reckless Pipeline Construction Resulted in Scores of Additional Violations, Regulatory Scrutiny and Consent Orders ......................... 99 1. July 2017: Sunoco Enters Into a Consent Order for Its Repeated ME2 Permit Violations that Polluted Drinking Water .............................. 99 2. Energy Transfer Destroys the Loyalhanna and Raystown Lakes ............. 99 3. December 2017: DEP Issues a Consent Order to Energy Transfer ....... 104 - ii - Case 2:20-cv-00200-GAM Document 43 Filed 06/15/20 Page 4 of 197 4. January-February 2018: DEP Temporarily Suspends Construction of ME2, and Issues a $12.6 Million Fine ................................................ 104 5. April 2018: The DEP Orders Energy Transfer to Pay $355,000 for Multiple Violations of Pennsylvania Law .............................................. 109 6. March-May 2018: The Public Utility Commission Orders a Temporary Shutdown of ME1 and a Judge Halts ME2 Work ................ 110 7. August 2018: The DEP Fines Energy Transfer $147,000 for Contaminating Private Water Supplies ................................................... 112 8. August 2019: The DEP Fines Energy Transfer $318,000 for More Than 100 Violations of Pennsylvania Law ............................................. 112 G. November 2019: The FBI Launches Its Investigation into the Pennsylvania Governor’s Office Related to the Permitting Process .................. 113 H. Despite Energy Transfer’s Prior Claims of Purported Pipeline Completion, The Intended ME2 Pipeline Remains Unfinished to this Day ............................ 113 V. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSIONS ......................................................................................................... 115 A. Energy Transfer Misstated Revolution’s and ME2’s Completion Timelines and ME2’s Throughput, and Hid Contrary Undisclosed Facts ........................... 116 B. Energy Transfer Falsely Claimed It Was Constructing Its Pipelines Safely and Preserving and Protecting the Environment ................................................. 134 C. Energy Transfer Hid Its Violations of Criminal Statutes and Misstated Its Compliance with Its Code of Business Conduct and Ethics ............................... 142 VI. LOSS CAUSATION – THE TRUTH IS REVEALED TO INVESTORS..................... 148 A. August 9-13, 2018: Energy Transfer Discloses that the Problems with the Pipeline Require It to Cobble Together Old and New Pipe, Which Will Reduce Throughput and Delay Completion of the ME2 Pipeline ...................... 149 B. October 27-29, 2018: The DEP Orders Energy Transfer to Stop Work on the Revolution Pipeline ....................................................................................... 154 C. December 19-21, 2018: Chester County Launches an Investigation Into Energy Transfer .................................................................................................. 157 D. August 8-12, 2019: Chester County Charges the Constables Hired by Energy Transfer with Bribery ............................................................................. 159 - iii - Case 2:20-cv-00200-GAM Document 43 Filed 06/15/20 Page 5 of 197 E. November 12-13, 2019: The Associated Press Discloses the FBI’s Investigation into Energy Transfer’s Alleged Bribery of Pennsylvania Officials............................................................................................................... 162 F. December 3, 2019: Chester County Charges Energy Transfer’s Security Supervisor with Bribery ...................................................................................... 164 VII. ADDITIONAL ALLEGATIONS OF SCIENTER ......................................................... 168 A. Senior Energy Transfer and Sunoco Executives Were Personally Involved in Pressuring the Governor’s Office and DEP to Grant the Pipeline Permits ...............................................................................................................