HOUSTON (CN) - Cobalt International Energy bribed Angolan officials for oil drilling rights and its stock price tanked when the SEC took note, costing investors billions of dollars, according to a class action lawsuit.
The named plaintiffs are two pension funds: one for St. Lucie County firefighters in Florida and one for firefighters and police in San Antonio.
They sued Cobalt, a Houston-based oil drilling firm, its directors, and several investment firms that controlled the company, including Goldman Sachs and The Carlyle Group, on Nov. 28 in Federal Court.
Goldman Sachs and its fellow investment firm Riverstone Holdings founded Cobalt in 2005 with $500 million in financing, according to the lawsuit.
"Between 2006 and the company's December 15, 2009 initial public offering, the investment firms invested more than $1 billion collectively to capitalize the company," the 72-page complaint states.
Cobalt also raised billions of dollars from outside investors and took its fat pockets to Angola to shop for oil wells, the pension funds claim.
"In February 2010, pursuant to an agreement with the Angolan government, Cobalt gained access to certain oil exploration 'blocks' in offshore Angola," the lawsuit states.
Cobalt enticed investors by claiming the blocks contained oil reserves with a "greater than billion barrel potential," according to the complaint.
But things were not as they seemed at Cobalt, the plaintiffs claim, which became apparent when the company announced in February 2012 that the SEC was investigating it under the Foreign Corrupt Practices Act.
Though Cobalt told investors it "strongly refuted any allegations of wrongdoing," the SEC did not go away, ramping up investigation in August to include possible securities violations, the plaintiffs say.
That news broke on Aug. 5 this year via an announcement from Cobalt.
"Also, on the morning of August 5, 2014, Bloomberg reported that an anti-corruption organization had determined that Cobalt had made an apparent bribe to the Angolan government, because Cobalt had paid the Angolan government millions of dollars to support an Angolan research center that Cobalt could not confirm actually exists," the complaint states.
On Nov. 5, Cobalt disclosed that contrary to its previous claims that one of its Angolan wells was oil-rich, testing revealed the well contained neither oil nor gas.
Investors were whipsawed with the announcements, as the share price fell from $15.97 in early August to $8.84 as of Tuesday morning.
"As a result of defendants' misconduct, plaintiffs and the class collectively incurred massive, multibillion-dollar losses on their investments in Cobalt securities," the complaint states.
The pension funds seek class certification and damages for Securities Act violations.
They are represented by Gerald Drought with Martin & Drought of San Antonio.
The defendants are a who's who of financial service firms, including Goldman Sachs Group, Riverstone Holdings LLC, The Carlyle Group, First Reserve Corp., KERN Partners Ltd., Morgan Stanley & Co., Credit Suisse Securities (USA), Citigroup Global Markets and JP Morgan Securities.
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