Fatal Explosion Leads to Shareholder Lawsuit

     HOUSTON (CN) – Black Elk Energy’s directors mismanaged the company so badly it was cited for 300 safety violations before a Nov. 16 explosion killed three oil rig workers, shareholders claim in court.
     Lead plaintiff Thomas G. Andrus sued Black Elk Energy, its CEO John Hoffman and six affiliated companies, in a shareholders derivative complaint Harris County Court.
     Andrus claims he bought into the company in 2007 as a “seed investor.”
     “Each seed investor contributed $1,000 per class A unit,” he says.
     Due to defendants’ mismanagement Black Elk Energy’s value has dropped by millions, Andrus says.
     “Defendants have harmed BEE’s value by: (1) grossly mismanaging the company, causing safety violations resulting in BEE Offshore’s credit rating to drop and (2) causing the offer to purchase BEE Offshore by a potential buyer to drop by a substantial amount,” the complaint states.
     “On November 16, 2012, an explosion and fire ripped through one of BEE’s oil production platforms in the Gulf of Mexico.
     “The explosion killed three workers and critically injured others.
     “Before the fatal fire, defendants caused the company to reach more than three hundred (300) documented safety mistakes and violations offshore.
     “The director of the Bureau of Safety and Environmental Enforcement stated that ‘Black Elk has repeatedly failed to operate in a manner that is consistent with federal regulations,'” according to the complaint.
     Andrus adds: “In August, BEE was investigated by the Federal Bureau of Ocean Energy Management Regulation and Enforcement for an incident in which two employees were dropped 60 feet into the Gulf of Mexico due to a crane malfunction.
     “BEE also paid a $300,000 civil fine in September 2012 related to a site inspection in 2011 of one of its facilities that revealed it was not complying with refutations.
     “On twelve (12) separate occasions, the Bureau of Safety and Environmental Enforcement ordered BEE to shut down its facilities because the violations were considered so severe or life threatening that work could not safely continue.”
     Due to the company’s “long history of mismanagement” Standard & Poor downgraded its credit rating, Andrus says.
     “Furthermore, an energy producer made a substantial offer to purchase BEE Offshore in June 2012,” the complaint states.
     “However, by early September 2012, the potential buyer lowered its offer by a substantial amount.
     “This substantial reduction in the offer by the potential buyer caused a substantial loss in the sale price of BEE Offshore, harming BEE and its members.” (Graph 41)
     Andrus seeks damages for breach of fiduciary duty and gross mismanagement.
     Named as defendants are CEO John G. Hoffman, Island Technologies Inc., PPVA Black Elk (Equity) LLC, PPVA Black Elk (Investor) LLC, Platinum Partners Value Arbitrage Fund LP, PPVA Black Elk (US) Corp., and Black Elk Energy, LLC.
     Andrus is represented by Muhammad Aziz with Abraham, Watkins, Nichols, Sorrels, Agosto & Friend of Houston.

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