Case 4:10-md-02185 Document 113 Filed in TXSD on 02/14/11 Page 1 of 182 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re BP plc Securities Litigation No. 4:10-md-02185 Honorable Keith P. Ellison LEAD PLAINTIFFS NEW YORK AND OHIO’S CONSOLIDATED CLASS ACTION COMPLAINT FOR ALL PURCHASERS OF BP SECURITIES FROM JANUARY 16, 2007 THROUGH MAY 28, 2010 Case 4:10-md-02185 Document 113 Filed in TXSD on 02/14/11 Page 2 of 182 TABLE OF CONTENTS Page I. INTRODUCTION ...............................................................................................................2 II. JURISDICTION AND VENUE ........................................................................................11 III. THE PARTIES ..................................................................................................................11 A. Plaintiffs .................................................................................................................11 B. Defendants .............................................................................................................12 C. Non-Party ...............................................................................................................17 IV. BACKGROUND ...............................................................................................................17 A. BP’s Relevant Operations ......................................................................................17 B. BP’s Process Safety Controls Were Deficient Prior to the Class Period ...............18 V. DEFENDANTS’ SCIENTER CONCERNING BP’S RISKS IN OFFSHORE DRILLING AND BP’S FAILURE TO IMPLEMENT PROPER PROCESS SAFETY CONTROLS AND PROCEDURES ..............................27 A. Defendants Knew, or Recklessly Disregarded, That BP’s Process Safety Procedures Did Not Adequately Address the Known Risks in Deepwater Drilling, Risks that Materialized at the Macondo Well .......................27 B Additional Scienter Allegations: Defendants’ Disregard of Safety and Operational Concerns With BP’s Other Operations ...............................................42 C. BP Retaliated Against Individuals Who Raised Concerns About the Safety and Integrity of its Operations ...............................................................47 VI. THE MATERIALIZATION OF THE UNDISCLOSED RISKS – DEEPWATER HORIZON OIL SPILL AND ITS AFTERMATH ............................................................53 A. BP’s Systematic Failures Caused the Explosion on and the Sinking of the Deepwater Horizon Rig .........................................................................................53 B. BP Was Wholly Unprepared to Contain the Oil Spill ...........................................72 VII. DEFENDANTS MADE FALSE AND MISLEADING STATEMENTS AND OMISSIONS OF MATERIAL FACT DURING THE CLASS PERIOD...............86 VIII. LOSS CAUSATION .......................................................................................................161 -i- Case 4:10-md-02185 Document 113 Filed in TXSD on 02/14/11 Page 3 of 182 TABLE OF CONTENTS (continued) Page IX. APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE MARKET DOCTRINE ...................................................................................................168 X. CLASS ACTION ALLEGATIONS ................................................................................169 XI. NO SAFE HARBOR .......................................................................................................170 XII. PRAYER FOR RELIEF ..................................................................................................177 XII. DEMAND FOR JURY TRIAL .......................................................................................178 -ii- Case 4:10-md-02185 Document 113 Filed in TXSD on 02/14/11 Page 4 of 182 Lead Plaintiffs, Thomas P. DiNapoli, Comptroller of the State of New York, as Administrative Head of the New York State and Local Retirement Systems and sole Trustee of the New York State Common Retirement Fund, and the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, the School Employees Retirement System of Ohio and the Ohio Police & Fire Pension Fund together with their statutory litigation counsel, the Ohio Attorney General Mike DeWine (collectively “New York and Ohio” or “Plaintiffs”) bring this action under the federal securities laws and the laws of the State of New York and the United Kingdom (“UK”) against BP plc (“BP” or the “Company”) and certain of its officers, directors and affiliates. This is a class action on behalf of a Class as follows: (1) With respect to Plaintiffs’ claims under the Securities Exchange Act of 1934 (the “Exchange Act”), (a) all persons and entities who purchased or otherwise acquired BP American Depositary Shares (“ADSs”) between January 16, 2007 and May 28, 2010, inclusive (the “Class Period”), and (b) all U.S. persons and entities who purchased or otherwise acquired BP ordinary shares in domestic transactions, executed on a foreign exchange, during the Class Period; (2) With respect to Plaintiffs’ claims under New York common law, all U.S. persons and entities who purchased or otherwise acquired BP ordinary shares during the Class Period; and (3) With respect to Plaintiffs’ claims under UK law, all persons and entities who purchased or otherwise acquired BP ordinary shares during the Class Period.1 1 The allegations in this Complaint are based on personal knowledge as to Plaintiffs’ own acts and on information and belief as to all other matters, based on an investigation conducted by Plaintiffs’ Co-Lead Counsel, including, among other things: (i) review and analysis of BP’s public filings with the U.S. Securities and Exchange Commission (“SEC”) and other regulatory agencies; (ii) review and analysis of other publicly available information concerning BP, including governmental records, documents obtained through other civil actions against BP, independent reports, and other testimony, documents, and reports obtained in connection with hearings held by the U.S. House of Representatives, the U.S. Senate, the Joint Investigation of the U.S. Coast Guard and Bureau of Ocean Energy Management, Regulation and Enforcement, (iii) the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (“Presidential Commission”); and (iv) interviews with former BP employees and other witnesses. Plaintiffs believe that substantial additional evidentiary support will exist for the allegations after a reasonable opportunity to engage in discovery. Case 4:10-md-02185 Document 113 Filed in TXSD on 02/14/11 Page 5 of 182 I. INTRODUCTION 1. On April 20, 2010, the deep sea oil rig, Deepwater Horizon – which Transocean owned and BP leased, operated, and controlled – exploded in the Gulf of Mexico. The crew was preparing to place the Macondo well – which they referred to as the “well from hell”2 – into “temporary abandonment,” whereby a drilling rig finishes a well and then seals it with cement, allowing another production rig to return, quickly drill through the cement, and begin pumping oil or gas for production. 2. The temporary abandonment was 45 days late and $58 million over-budget. A series of last minute modifications – hallmarks of BP’s operations – had rattled the crew, with one supervisor reporting that “we’re flying by the seat of our pants.” 3. At approximately 9:00 p.m. on April 20, 2010, drilling mud laced with oil and gas rocketed up through the well, knocking birds from the sky and covering the deck of the rig in a thick layer of hydrocarbon-filled drilling mud. Shortly thereafter, gas and oil flowing from the well ignited, causing an explosion aboard the Deepwater Horizon that claimed the lives of 11 crew members and injured many others, including some who jumped from the rig to save their lives. 4. The Deepwater Horizon burned for almost two days before sinking on the morning of April 22, 2010. As the Deepwater Horizon sank, it further damaged the pipe that had connected the rig to the wellbore. 5. Eighty-seven days passed before BP stopped the flow of oil from the Macondo well on July 15, 2010. Approximately 5 million barrels of oil (more than 206 million 3 gallons) – or about 60,000 barrels a day – spilled into the waters of the Gulf of Mexico causing 2 Unless otherwise indicated, emphasis has been added throughout. 3 A barrel of oil is equivalent to 42 gallons. 2 Case 4:10-md-02185 Document 113 Filed in TXSD on 02/14/11 Page 6 of 182 the largest oil spill in the history of the petroleum industry. As noted in a recent article appearing in Fortune magazine, the oil spill in the Gulf of Mexico “surpass[ed] the Exxon Valdez disaster by at least 1,800 percent, in terms of the number of barrels of oil spilled into the sea. 6. As the truth regarding the lack of safety and integrity of BP’s operations emerged, as well as information regarding: (i) the true size of the oil spill; (ii) BP’s inability to control the spill; and (iii) the mounting costs BP would pay as a result of the environmental disaster – BP’s ADSs and ordinary common shares plunged in value. From the date of the Deepwater Horizon explosion through May 28, 2010, BP’s securities fell in value by 48% and wiped out over $91billion in market capitalization. 7. No fewer than nine governmental investigations reviewed (and are currently reviewing) the incident, including a commission appointed by the President of the United States to study the catastrophe: the National Commission on the BP Deepwater