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Anadarko to Face Deepwater Horizon Lawsuit, BP Launches Gulf Claims Fraud Hotline

Published Jul 16, 2013 2:52 PM by The Maritime Executive

A federal judge ordered Anadarko Petroleum Corp, which owned part of the blown out well at the center of the 2010 Gulf of Mexico oil spill, to face a lawsuit accusing it of defrauding shareholders, but significantly narrowed the plaintiffs' case.

U.S. District Judge Keith Ellison in Houston said that while shareholders had highlighted 28 allegedly misleading statements attributable to Anadarko, they were entitled to sue over only a single "isolated" statement concerning the Macondo well, the majority of which was owned by BP Plc.

That statement was made by Anadarko senior vice president Robert Daniels on a May 4, 2010, earnings conference call, two weeks after the blowout, when he said Anadarko had not been involved in the design of or procedures at the well.

"The well design and procedures, operations procedures were all done before we actually farmed in," he told a caller, according to Ellison's decision on Monday. "We were not involved in that at all on this well."

Shareholders had accused Anadarko of mismanaging its 25 percent stake in the Macondo well, and understating its ability to manage risk and handle liabilities.

Ellison said one could make a "compelling" inference that Daniels "simply misspoke" and was not trying to blunt the impact of the spill on Anadarko's share price, but that his directness could offer a "cogent and compelling" inference to the contrary.

In rejecting other allegations, Ellison concluded that many alleged misleading statements were too general or "squishy" to provide a basis for securities fraud claims against the Houston-based oil and gas exploration company.

Anadarko spokesman John Christiansen said the company was reviewing the decision. It had sought to dismiss the lawsuit.

Gerald Silk, a lawyer for the plaintiffs, did not immediately respond to a request for comment.

The lead plaintiffs are the Pension Trust Fund for Operating Engineers in Alameda, California, and the Employees' Retirement System of the Government of the Virgin Islands.

In February 2012, Ellison allowed BP shareholders to pursue their own civil fraud lawsuit against that company, but limited the case to investors who had bought BP's American depositary receipts on U.S. exchanges. BP has denied fraud.

The explosion of the Deepwater Horizon drilling rig and Macondo well blowout killed 11 people.

The case is In re: Anadarko Petroleum Corp Class Action Litigation, U.S. District Court, Southern District of Texas, No. 12-00900. By Jonathan Stempel (C) Reuters 2013.

Separately, BP issued the following press release on July 15:

BP today launched the Gulf Claims Fraud Hotline to help protect the integrity of the claims processes relating to the Deepwater Horizon oil spill. 

The Fraud Hotline is a reliable resource for people who want to do the right thing and report fraud or corruption. Reports should be made of any fraudulent or corrupt activity, no matter where in the claims process it occurs – whether in the solicitation of the claim by attorneys, accountants or other claims preparation services, the preparation of the financial records and claim application, or the processing of the claim – and no matter whether the claim was filed with BP, the Gulf Coast Claims Facility (GCCF), or the Court Supervised Settlement Program (CSSP).

The launch of the hotline comes as federal law enforcement officials are clamping down on cases of fraud and other abuses in the claims process. In recent months, U.S. attorneys in Florida, Alabama and Louisiana have secured guilty pleas and convictions against multiple individuals for attempting to defraud the claims process and take money to which they are not entitled under the law.

What’s more, in the face of troubling allegations of unethical and potentially criminal corrupt behavior within the CSSP itself, the Court has appointed Louis Freeh, former federal judge and Director of the FBI, as Special Master. Judge Freeh is leading an independent investigation of the CSSP with wide latitude to look for “possible ethical violations or misconduct.” 

The launch of the Gulf Claims Fraud Hotline is particularly timely because the CSSP spends substantially less than the GCCF spent to combat fraud. This seems inappropriate given that the GCCF’s fraud detection program enabled it to identify more than 7,000 claims as “multi-claimant scams or even efforts at criminal fraud.” The GCCF referred more than half of these to the U.S. Department of Justice for criminal investigation.

Anyone with knowledge of fraud or corruption should report it by dialing, toll-free, 1-855-NO-2-FRAUD (1-855-662-3728). All reports can be made anonymously.

Tips received through the Hotline will be reviewed and referred for further evaluation, if warranted, to fraud investigators at the CSSP, the National Center for Disaster Fraud, or other law enforcement agencies. Tips that lead directly to an indictment, a recovery of money paid, or the denial of a claim because of fraud or corruption may entitle the reporter to a reward.

While BP continues to take steps to stamp out fraud and corruption and assure the integrity of the claims process, the company remains committed to the Gulf and to the payment of legitimate claims for real losses. So far, BP has spent $14 billion on response and cleanup to help restore the environment. The company has also paid more than 300,000 claims totaling over $11 billion to help restore the Gulf economy.