HOUSTON - One more disaster could spell the end for oil company BP, shareholders warn in federal litigation over losses from the Deepwater Horizon explosion and spill.
"The Deepwater Horizon disaster was BP's last and final wakeup call," Thomas Ajamie of Houston wrote in a 107-page consolidated shareholder complaint filed Feb. 4 in the Southern District of Texas.
"The direct damage to BP is already in the tens of millions," he wrote. "Its goodwill will be impaired by billions more in the future."
The complaint calls on U.S. District Judge Keith Ellison to declare that BP leaders breached their fiduciary duties to shareholders, and seeks an order requiring individual BP executives and board members to repay the company for damage they caused.
It proposes a constructive trust for all benefits executives and board members obtained through misconduct, including salaries, bonuses, fees, options and stock sales. It also calls for reforms to protect against recurrence of damaging events.
Ellison presides over shareholder suits that the U. S. Judicial Panel on Multi District Litigation consolidated and assigned to him last year.
District Judge Carl Barbier of New Orleans presides separately over civil suits alleging personal injuries and economic losses from the explosion and spill.
Ajamie filed the shareholder complaint on behalf of Louisiana's police pension fund, the New Orleans city employee pension fund and John Miles of New Mexico. Thirty other lawyers added their names to the complaint for dozens of other clients.
According to the complaint, BP was founded in 1909 as Anglo-Persian Oil Company. It then merged with Amoco in 1998 and that the combined company bought Atlantic Richfield to become the third largest oil company in the world.
Ajamie wrote that BP generated $246 billion in revenue and $16 billion in profit in fiscal year 2009.
The defendants consciously elevated cost cutting at the expense of maintenance and safety, he wrote.
He wrote that BP implemented incentive and bonus programs - ranging from $2,000 to $6,000 - for workers who completed projects ahead of schedule.
Ajamie wrote that the strategy resulted in multiple disasters with deadly consequences.
Even BP's logo is "synonymous with poor corporate governance and wanton behavior," he wrote, adding that BP has considered changing the name of 11,500 service stations.
On April 20, the date of the explosion, the Macondo drilling project was 43 days behind schedule and $55 million over budget, according to Ajamie.
"BP personnel cut a number of safety corners," he wrote. "BP started capping the well despite signs that the well appeared unstable and at risk of a blowout."
A blowout prevention device didn't fully engage, backup systems didn't function, and no alarm sounded, the suit states.
"The ensuing explosion killed 11 workers, injured at least 17 others, and ignited a massive explosion and fire aboard the Deepwater Horizon," he wrote.
The spill surpassed the Exxon Valdez by at least 1,800 percent, according to the complaint.
Ajamie wrote that nearly 500,000 claims have been filed for payments from a $20 billion fund that BP set up.
A lawsuit by the U. S. Department of Justice under the Clean Water Act and Oil Pollution Act exposes BP to fines from $5 billion to $21 billion, and, Ajamie says, BP's legal costs alone could reach $2 billion.
"EPA officials are currently considering whether BP will be barred from receiving any government contracts, including concessions to drill in federally controlled land and selling fuel to the military," Ajamie alleges.
In a footnote he attributed that sensational assertion to a CBS News report last May.
Ajamie also quoted Reuters news agency calling for radical reshaping of the board and appointment of a new chairman.
He wrote that anyone acting in accordance with fiduciary duties would consider the lawsuit to be in the best interest of BP shareholders and employees, and that any BP director deciding not to prosecute it would act in bad faith.
"Plaintiffs will adequately and fairly represent the interests of BP in enforcing and prosecuting its rights," he wrote.
The shareholders sued five executive directors on BP's board, starting with Vice President of Refining and Marketing Iain Conn, a British national. Current Chief Executive Officer Robert Dudley, a Texas citizen; previous chief Anthony Hayward, a British national; Chief Financial Officer Byron Grote, a Connecticut citizen; and former Chief Executive of BP Exploration and Production Andy Inglis, a British national; were sued along with 10 other directors.
They sued BP America President Lamar McKay and previous President Robert Malone, both Texans.
MDL-2185 IN RE: BP p.l.c. Securities Litigation, Case No. 4:10-cv-03447, Civil Action No. 4:10-md-2185