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Misleading and false statements made by BP PLC executives before the Deepwater Horizon oil spill were material to investors, not just a matter of corporate mismanagement, shareholders argued in court documents filed on June 6 in the securities multidistrict litigation against the company. Shareholders, who filed the documents in opposition to BP’s motions to dismiss the litigation, added that investors who purchased shares in the United States may bring securities fraud allegations against BP, which is based in the United Kingdom, despite a recent U.S. Supreme Court decision addressing foreign issuers. Shareholders have sued BP for securities fraud, alleging that its executives made false and misleading statements about the company’s commitment to safety before the oil spill on April 21, 2010, killed 11 workers and caused massive environmental damage in the Gulf of Mexico. The litigation — which includes a securities class action; a consolidated derivative complaint filed on behalf of shareholders of the company; and claims brought under the U.S. Employee Retirement Income Security Act by BP employees — has been coordinated before U.S. District Judge Keith Ellison in Houston. The shareholder cases are separate from the larger multidistrict litigation before U.S. District Judge Carl Barbier in New Orleans, which involves economic damages claims by individuals and businesses plus environmental and governmental claims against BP and other defendants. The securities class action involves a primary class of shareholders who purchased American depository shares in BP — shares sold on U.S. stock exchanges — and holders of ordinary shares from Jan. 16, 2007, through May 28, 2010. The case also involves a subclass of the same investors who bought shares from March 4, 2009, through April 20, 2010. BP filed motions to dismiss in May, arguing that the wrongdoing alleged did not amount to securities fraud, just “internal corporate mismanagement,” and said the plaintiffs have failed to identify specific misstatements made by individual defendants. BP also argued that the Supreme Court’s decision in Morrison v. National Australia Bank prohibits holders of BP’s ordinary shares, which are traded in London and Frankfurt, from bringing claims in U.S. courts. In Morrison, the justices ruled that, under U.S. securities law, investors who purchase a foreign company’s stock on a foreign exchange lack standing to sue in U.S. courts. Shareholders maintain that BP’s misrepresentations regarding its purported commitment to safety harmed investors in multiple ways. First, BP has agreed to pay billions to clean up after the Deepwater Horizon explosion. Furthermore, BP suspended dividends to investors for three quarters as a result of the disaster. And once the full truth was revealed, BP’s overall market capitalization declined by more than $91 billion, they wrote. “BP chose to regularly report to investors about its progress and measurable results in improving process safety throughout the class period, while concealing contemporaneous internal reports of process safety lapses,” wrote R. Paul Yetter of Yetter Coleman in Houston, the plaintiffs’ liaison counsel; co-lead counsel Steven Toll, a partner at Cohen Milstein Sellers & Toll in Washington; and Jeffrey Block, a partner in the Boston office of Berman DeValerio, also co-lead counsel. “The complaint details dozens of false and misleading misstatements or omissions made by defendants during the class period.” Shareholders maintained that the executives knew that their statements regarding safety were false and misleading–including public acknowledgements that the rig was leaking oil at between 1,000 to 5,000 barrels per day even though internal documents estimated the flow at between 5,000 to 14,000 daily barrels. “The failure to disclose the extent of the disaster and potential harm, when such information was known and actively discussed, is certainly a material false and misleading omission,” plaintiffs’ counsel wrote. Lawyers for the shareholders disputed BP’s assertion that Morrison wipes out their claims involving ordinary shares. They argued that BP’s ordinary shares were registered on the New York Stock Exchange and investors purchased those shares in the United States. A call to Toll was returned by Julie Reiser, another partner at Cohen Milstein, who declined to comment. Her client, lead plaintiff New York Comptroller Thomas DiNapoli, said in a prepared statement: “Comptroller DiNapoli wants BP to take full responsibility for its actions. The facts are clear: the company distorted material information and that resulted in serious losses for shareholders. Our opposition brief on behalf of the class makes it clear that BP acted fraudulently and hurt unsuspecting investors.” Thomas Taylor, a partner at Andrews Kurth in Houston who represents BP, did not return a call for comment. The derivative complaint alleges that BP’s current and former board members and senior officers deliberately ignored their duty to maintain safety in the company’s drilling operations during the past decade. A hearing on BP’s motion to dismiss the derivative complaint is scheduled for June 17. No hearing has been scheduled on the motions to dismiss the securities class action. Amanda Bronstad can be contacted at [email protected] .

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