Case 1:13-cv-06180-ER Document 37 Filed 11/14/14 Page 1 of 27 THE ROSEN LAW FIRM, P.A. Phillip Kim, Esq. Laurence M. Rosen, Esq. Kevin Chan, Esq. 275 Madison Avenue, 34th Floor New York, New York 10016 Telephone: (212) 686-1060 Fax: (212) 202-3827 [email protected] [email protected] [email protected] Lead Counsel for Plaintiffs and Class UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK : In re PetroChina Company Ltd. Securities : Master File No. 1:13-CV-6180 (ER) Litigation : : CLASS ACTION : : : : : JURY TRIAL DEMANDED : : This Document Relates to: ALL ACTIONS SECOND AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS Lead Plaintiffs Jeffrey Klein and Samuel Ayoub (“Plaintiffs” or “PTR Group”), by and through their attorneys, allege the following upon information and belief, except as to those allegations concerning Plaintiffs, which are alleged upon personal knowledge. Plaintiffs’ information and belief are based upon, among other things, their counsel’s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by PetroChina Company, Ltd. (“PetroChina” or the “Company”), with the United States Securities and 1 Case 1:13-cv-06180-ER Document 37 Filed 11/14/14 Page 2 of 27 Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and disseminated by PetroChina; and (c) review of Chinese news media reports. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of purchasers of PetroChina securities between April 26, 2012, and December 17, 2013, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). Excluded from the Class are (a) persons who suffered no compensable losses, e.g., those who bought PetroChina securities during the Class Period but sold prior to any corrective disclosure; and (b) Defendants, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants has or had a controlling interest. 2. PetroChina is China’s largest oil and gas producer and distributor, playing a dominant role in the oil and gas industry in the People’s Republic of China (“PRC”). It is not only one of the companies with the biggest sales revenue in the PRC, but also one of the largest oil companies in the world. PetroChina was established as a joint stock company with limited liabilities by China National Petroleum Corporation (“CNPC”) under the Company Law and the Special Regulations on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies on November 5, 1999. Consequently, CNPC is PetroChina’s parent. The American Depositary Shares (“ADS”) and H shares of PetroChina were listed on the New York Stock Exchange on April 6, 2000 (stock code: PTR). 3. The fraud in this case is simple. Throughout the Class Period, PetroChina falsely claimed: (a) to have adequate internal controls, (b) to have complied with applicable laws and regulations; and (c) maintained high standards of corporate governance and ethics. 4. Accompanying each annual report filed with the SEC during the Class Period 2 Case 1:13-cv-06180-ER Document 37 Filed 11/14/14 Page 3 of 27 were Sarbanes-Oxley Act of 2002 (“SOX”) certifications signed by senior management, including Defendant Jiang Jiemin, 1 PetroChina’s Chairman, that falsely certified that the accompanying annual report was accurate and that the signatory of the SOX certification disclosed “[a]ny fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.” Jiemin also certified that he had disclosed all significant or material internal control deficiencies. 5. Contrary to PetroChina’s public statements, Defendants made false and/or misleading statements and/or failed to disclose that: (1) the Company’s internal controls were inadequate; (2) contrary to Defendants’ public statements, the Company’s senior officials were in non-compliance with the applicable laws and regulations and the Company’s corporate governance directives and code of ethics; (3) as a result, the Company was subject to investigation and disciplinary action by various governmental and regulatory authorities; (4) the Company’s financial statements were materially false and misleading as they contained direct references to the Company’s Code of Ethics and statements regarding its compliance with applicable laws, regulations and internal governance policies; (6) that the SOX certifications signed by PetroChina’s senior management was materially false and misleading as senior management was aware of “any fraud, whether or not material” and of significant or material internal control weaknesses; and (7), as a result of the foregoing, the Company’s financial statements were materially false and misleading at all relevant times. JURISDICTION AND VENUE 6. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C.§§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 1 All PRC names used herein start with the family name (i.e. last name), followed by the first name. 3 Case 1:13-cv-06180-ER Document 37 Filed 11/14/14 Page 4 of 27 C.F.R. § 240.10b-5). 7. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §1331 and Section 27 of the Exchange Act (15 U.S.C. §7Saa). 8. Venue is proper in this Judicial District pursuant to 28 U.S.C. §1391(b) and Section 27 of the Exchange Act (15 U.S.C. §78aa(c)). The Company’s shares are listed on the New York Stock Exchange and are therefore traded in this Judicial District 9. In connection with the acts, transactions, and conduct alleged herein, Defendants directly and indirectly used the means and instrumentalities of interstate commerce, including the United States mail, interstate telephone communications, and the facilities of a national securities exchange. PARTIES 10. Lead Plaintiffs Jeffrey Klein and Samuel Ayoub, as set forth in their respective PSLRA certifications previously filed with the Court, and incorporated by reference herein, purchased PetroChina securities at artificially inflated prices during the Class Period and have been damaged thereby. 11. Defendant PetroChina is a Chinese corporation with its principal executive offices situated in Beijing, China. 12. Defendant Jiang Jiemin (“Jiang”) served as the Company’s former Chairman and acting Chief Executive Officer until March 18, 2013. 13. Defendant Li Hualin (“Li”) served as the Company’s Vice President and Secretary to the Board of Directors from May 2009 until his sudden resignation on August 26, 2013. Hualin was forced to resign in connection with the corruption at PetroChina. 14. Defendant Ran Xinquan (“Ran”) served as the Company’s Director and Vice President from 2011 until August 26, 2013. Xinquan was forced to resign in connection with the 4 Case 1:13-cv-06180-ER Document 37 Filed 11/14/14 Page 5 of 27 corruption at PetroChina. 15. Defendants Jiang, Li, and Ran are collectively referred to hereinafter as the “Individual Defendants.” 16. Each of the Individual Defendants: (a) directly participated in the management of the Company; (b) was directly involved in the day-to-day operations of the Company at the highest levels; (c) was privy to confidential proprietary information concerning the Company and its business and operations; (d) was directly or indirectly involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information alleged herein; (e) was directly or indirectly involved in the oversight or implementation of the Company’s internal controls; (f) was aware of or recklessly disregarded the fact that the false and misleading statements were being issued concerning the Company; and/or (g) approved or ratified these statements in violation of the federal securities laws. 17. PetroChina is liable for the acts of the Individual Defendants and its employees under the doctrine of respondeat superior and common law principles of agency because all of the wrongful acts complained of herein were carried out within the scope of their employment. 18. The scienter of the Individual Defendants and other employees and agents of the Company is similarly imputed to PetroChina under respondeat superior and agency principles. SUBSTANTIVE ALLEGATIONS Undisclosed Corruption at Petrochina 19. Under the leadership of PRC President Xi Jinping, the PRC government has been 5 Case 1:13-cv-06180-ER Document 37 Filed 11/14/14 Page 6 of 27 cracking down on corruption and improper self-dealing in state owned enterprises such as PetroChina. 20. In what the international community has described as the biggest corruption scandal since the Communist Party came to power in China in 1949, the PRC government seized over $14.5 billion in assets from the country’s former security czar Zhou Yongkang (“Yongkang”) (formerly no. 69 on Forbes Billionaire list) in connection with the government’s investigation of corruption, bribes, and illegal related party transactions involving Yongkang and his associates, including Yongkang’s protégé Defendant Jiang, concerning, among other things, state owned companies such as PetroChina. Yongkang has been under house arrest by the Chinese government since 2013. 21. Yongkang was CNPC’s General Manager and the Communist Party Chief of Sichuan between 1988 through 2002. Under Yongkang’s tutelage, Defendant Jiang enjoyed a meteoric rise at CNPC, working at several subsidiaries before becoming a Vice President of the company and Director in 1999. Ultimately, in May 2007 Jiang became Chairman of PetroChina. 22. On March 18, 2013, Jiang resigned from PetroChina and was “promoted” to Director of the State-owned Assets Supervision and Administration Commission (“SASAC”) in the PRC.