Anadarko Blew It With BP, Shareholder Says

HOUSTON (CN) - Anadarko Petroleum paid $4 billion to settle litigation from the BP oil spill because its directors "performed virtually no due diligence" before buying a stake in BP's "nightmare" Macondo well, a shareholder claims in court.

Lead plaintiff Michael Williams sued 12 current and former Anadarko directors in Harris County Court, in a 97-page shareholders derivative complaint.

"Anadarko was formed in 1985 and initially focused on drilling for oil in Texas and Oklahoma. As oil and gas prices skyrocketed to unprecedented levels starting in 2005, defendants caused the company to begin investing in the significantly more expensive and risky practice of deepwater oil exploration and drilling in the Gulf of Mexico," the complaint states.

Anadarko bought a 25 percent stake in BP's Macondo well for $24 million in October 2009, the complaint states.

Before that purchase, Williams says, Anadarko "was provided numerous key documents concerning the Macondo well." When it bought in, "to protect its multi-million dollar investment ... Anadarko was granted broad rights to monitor and approve activities on the Macondo well," he adds.

But Williams says Anadarko's directors were asleep on the job, ignoring BP's "abysmal" safety record and BP's "facially absurd" spill response plan for the Macondo.

Ten days after the Deepwater Horizon oil rig exploded on April 20, 2010, "the price of Anadarko's common stock dropped from $73.94 per share to $62.16 per share, a decline of nearly 16 percent, wiping out more than $5.8 billion in market capitalization," Williams says in the complaint.

As millions of barrels of oil gushed into the Gulf of Mexico, Anadarko CEO James Hackett "falsely assured investors that Anadarko's potential liability for the Macondo well would be relatively small $177.5 million, and fully covered by insurance," the complaint states.

But Hackett's liability estimate was off by $3.8 billion, Williams says: Anadarko paid more than $4 billion to settle litigation from the disaster.

In September 2010, five months after the Deepwater Horizon exploded, Williams says, he sent a "shareholder litigation demand letter" to Anadarko's board.

He got a refusal letter in January 2011 from Anadarko's general counsel and chief administrative officer Robert K. Reeves.

"Essentially all the refusal stated is that the claims in the demand were (as of that time) premature, as well as 'expensive' and 'distracting' for the company to prosecute," the complaint states. "Further, the refusal attempted to skirt the real issues contained in the demand by stating that defendants will be shielded by the company's Restated Certificate of Incorporation."

Williams claims he sent a supplemental demand letter on March 1, 2012 after the company disclosed its $4 billion settlement.

Reeves rejected his demand again, Williams says, again "claiming that the claims in the demand were 'premature.'"

Williams says it's been nearly three years since he issued his demand.

"Put simply, defendants have used every excuse possible for nearly three years to avoid conducting an independent, good faith investigation of the claims raised in the demand and in the supplement demand, and taking any meaningful action on behalf of the company," the complaint states.

"Specifically, a number of the company's executive officers at the time of the disaster remain employed by the company. Further, the company has not initiated any litigation against these individuals nor has it clawed back any of the compensation they earned."

Williams seeks damages for breach of fiduciary duty, unjust enrichment, insider selling and misappropriation of information, abuse of control and gross mismanagement.

He also wants the defendants ordered to develop a plan "for greater shareholder input" into Anadarko's operations and to pay restitution to shareholders.

Williams is represented by Paul Warner of Cypress, Texas.

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