Plaintiff Stephen Baldwin’s attorney, James Cobb, told the jury that Costner’s dream was to invent an oil- and water-separating centrifuge and put “a machine on every ship and in every part of the world.”
But when the BP oil spill disaster began, Costner and his business partner Patrick Smith saw a chance to make money off of two Louisiana men, plaintiffs Stephen Baldwin and Spyridon Contogouris, who owned shares in a company that sold the oil- and water-separating centrifuges, Cobb said.
Costner and Smith then “came down and squeezed out the Louisiana guys by fraudulently deceiving them,” the attorney said.
Baldwin and Contogouris sued Costner and Smith, both of California, their company Westpac Resources LLC, and Rabobank, in a complaint filed on Dec. 22, 2010.
Baldwin and Contogouris claim Costner and Smith tricked them into selling their shares in the company for $1.9 million just weeks after the April 20, 2010 oil spill.
Sometime after the sale, the plaintiffs say, Costner and Smith took an $18 million deposit on a $51 million order from BP. They “grabbed the $18 million and had it wired to California, where they could control it,” Cobb told the jury.
Cobb said the pair ultimately got $71 million from their deal with BP.
But Costner’s attorney, Wayne Lee, a soft-spoken man, said his client had nothing to do with Baldwin and Contogouris’s decisions to sell their shares in the company for $1.4 million and $500,000, respectively.
Lee said Costner, who lost $20 million in his previous effort to market the centrifuge technology to the oil and gas industry, decided to contact BP about the product because he wanted to help the Gulf Coast during the worst oil spill in U.S. history. Costner “came down in 2010 to try to do something helpful,” Lee said. “But no good deed goes unpunished.”
Baldwin and Contogouris seek more than $21 million in damages.
Costner and his co-defendants seek damages in counterclaims.
Lee said: “Fraud is about the intentional misrepresentation of facts,” but that Costner never participated in negotiations about the sale of shares in the company.
Baldwin and Contogouris “wanted to take the cash,” the attorney said. “They had their piece of the cake and sold it and walked away risk-free.”
Baldwin and Costner are expected to testify at trial.
At the height of the 87-day oil spill, BP ordered 32 of the centrifuges. It sent a few of them to the Gulf in June 2010.
Baldwin and Contogouris claim they were excluded from the June 8 meeting when BP executive Doug Suttles agreed to pay an $18 million deposit on a $52 million order for 32 centrifuges.
The well was successfully capped at the end of July 2010.
Before U.S. District Judge Martin Feldman returned from lunch Monday, and again before the first witness took the stand, Baldwin turned his seat toward the packed courtroom and peered long at the faces in the crowd.
Patrick Smith, the first witness, said Contogouris helped draft the centrifuge marketing plan to present to BP, and that Contogouris of his own volition missed the June 8 meeting between Smith, Costner and Suttles.
Smith described the centrifuge as a “big, strong piece of equipment that weighs about 5 tons,” and said water comes out one side and oil out the other. The idea behind the machine, he said, is for the water to be clean enough to go back to from where it came, while the oil is separated out for use.
Smith said one problem Costner ran into in developing the centrifuge is that it could initially separate water from oil at the rate of 100 parts per million.
EPA regulations require a separation of 15 parts per million.
Smith said that at the time of the oil spill he had some “boys from UCLA” and his own office, who came up with a fix – a glass membrane capable of separating the oil and water to EPA standards.
But Smith said that before he had the chance to test the new membrane, the EPA reduced its standards to 100 parts per million due to the severity of the spill.
Smith’s attorney, Roy Cheatwood, said that Contogouris, an off-Wall Street hedge fund consultant, prepared the buyout agreement for $1.9 million because “he didn’t like the way Pat and Kevin worked.”
Cheatwood said Contogouris helped devise the plan to ask BP for an advance to test the machines, and that Contogouris was prepared to ask BP for $51 million, but he got discouraged after the first centrifuge test run was unsuccessful.
“They had their cake and they want to eat it too,” Cheatwood said.
The trial is expected to last two weeks.
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