Anadarko Shareholders Advance in Fraud Suit

     HOUSTON (CN) – An Anadarko Petroleum executive opened the company to securities fraud claims by downplaying its role in the Deepwater Horizon disaster, a federal judge ruled.
     The oil and gas producer owned a 25 percent interest in the Macondo Prospect, a well that dumped 4.1 million barrels, or 172 million gallons, of oil into the Gulf of Mexico over 87 days after the Deepwater Horizon drilling rig exploded on April 20, 2010.
     Pension Trust Fund for Operating Engineers and the Employees’ Retirement System of the Government of the Virgin Islands lead a class action accusing Anadarko of deceiving investors before and after the explosion that killed 11 people and set off the worst oil spill in U.S. history.
     Though Anadarko never admitted liability, it reached a $4 billion settlement with BP in 2011.
     Looking at the shareholder action, U.S. District Judge Keith Ellison explained that, “while laying blame for the Deepwater Horizon disaster at Anadarko’s feet is a prominent theme in the complaint, it is not the focus of the liability alleged therein.”
     Ellison had before him 28 statements listed by the plaintiffs as examples of misrepresentations by Anadarko. The judge identified a single statement by an Anadarko executive during an earnings conference call that could hold up.
     The complaint attributes the comment to Senior Vice President of Worldwide Exploration Robert Daniels, who addressed Anadarko’s involvement in the design of the Macondo and its operating procedures.
     “When you typically approve these as a nonoperator, you basically approve just the capital spending level in the targeted zones from a geological perspective, as opposed to looking at the detail, well design or procedures,” Daniels allegedly stated on May 4, 2010. “We were not involved in that at all on this well.”
     Ellis agreed Monday to advance only the claim regarding this statement, tossing all of the shareholders’ other allegations.
     “The court agrees that plaintiffs have sufficiently identified the way in which Daniels’s quote was misleading,” Ellison wrote. “Additionally, viewing the statement in isolation, the inference that Daniels spoke with knowledge that his statement was misleading, or with reckless disregard for whether it was true, is ‘cogent and compelling’ – particularly because he spoke so directly and did not use any qualifying or hedging words.”
     There are nevertheless other factors weighing against this claim, according to the 44-page order.
     “The above statement was apparently an isolated occurrence, not repeated by Daniels or any other Anadarko executive,” Ellis wrote. “Moreover, Daniels is not alleged to have engaged in any suspicious trading activity. This suggests that Daniels simply misspoke on the conference call, and that the statement was not part of a coordinated scheme to blunt the effect of the oil spill on Anadarko’s share price. Although the court agrees that this inference is compelling, it cannot determine that it is more compelling than the alternative.”

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