(April 30, 2013) — New York City’s five pension funds have filed a lawsuit against oil giant BP and several of its branches and executives in an attempt to recover investment losses related to the 2010 Deepwater Horizon oil spill.
Representatives of the funds claim that BP was not forthcoming with shareholders as to the accurate risks involved in its offshore oil extraction processes. Furthermore, the complaint asserts that BP inaccurately presented the extent of the leak, and the estimated cost of the cleanup.
The city comptroller’s office estimated the funds’ ensuing investment at upwards of $39 million.
“BP failed to disclose to shareowners the serious risks involved in its offshore drilling operation,” Comptroller John Liu said. “After the spill began, it misleadingly attempted to minimize the extent of the damage and the cost to shareowners.”
A BP spokesperson declined to comment on the charges.
However, the firm and others in the industry have repeatedly characterized the spill as an extreme tail-risk event-the prospect of which was not diminished to shareholders. In a speech this last May, Executive Vice President Dev Sanyal likened the oil spill to a Black Swan experience.
Similarly, during a conference presentation in October, BP’s Vice President of Global Deepwater Response Richard Morrison said, “risk management in this high-hazard industry has always been at the forefront of BP’s agenda…On that tragic night aboard the Deepwater Horizon, multiple barriers — both human and physical — failed to prevent the accident from occurring.”
New York City’s de-centralized city pension system filed the lawsuit earlier this month in the Southern District Court of Manhattan. However, court documents related to the case have been sealed up until now. The presiding judge agreed with BP’s attorney’s that the initial complaint “contains confidential and highly confidential information as defined by confidentiality orders” which have been applied to several similar, ongoing cases in the District Court of Southern Texas.
Inga Van Eysden, chief of the New York City law department’s pensions division, said that due to a 2010 court decision (Morrison v. National Australia Bank, Ltd), “the city pension funds are barred from seeking recovery from BP under federal securities laws for the vast majority of its losses.” This ruling disallowed any US federal securities fraud suits for assets traded on foreign stock exchanges. Given this decision, Vam Eysden said, “We strongly believe the funds deserve to be compensated for BP’s fraudulent actions and are therefore pursuing this case.”
As of April 13, the five New York City pension funds owned a combined 2,822,840 shares in BP valued at $19.3 million.
The case is New York City Employees Retirement System v. BP Plc, 13-2551, U.S. District Court, Southern District of New York (Manhattan).
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