Shareholder Sues BP Over Oil Spill
As blame continues to shift from one party to another in the wake of the ongoing oil spill disaster in the Gulf of Mexico, a BP investor has filed a lawsuit against the company’s board of directors. According to Bloomberg Businessweek, shareholder Katherine Firpo alleged through her lawyer that negligence and lapses in safety oversight on the part of British Petroleum, even in the face of prior legal actions against the company, are largely responsible for the explosion at the Deepwater Horizon oil rig. The explosion resulted in the deaths of 11 platform workers, 17 injuries and a massive oil spill that has yet to be stemmed.
Attorney Lewis Khan, Firpo’s legal representative, filed the suit alleging that BP’s board prioritized cost-cutting measures and profitability at the expense of safety and maintenance practices. Khan went on to claim that BP used aggressive lobbying efforts “to remove or decrease the extent of safety and maintenance regulation of the company’s Gulf operations, claiming, against all evidence, that ‘voluntary compliance’ would suffice to address safety and environmental concerns.”
Cleanup Costs Soar While Market Value Plummets
Despite relief efforts, the oil continues to leak into the Gulf of Mexico and has already well surpassed the infamous Exxon Valdez disaster as the worst oil spill in the nation’s history. With a state of emergency in effect in Louisiana and scientists warning of the spill’s ecological impact, the financial consequences for the region’s commercial industries and shareholders’ bottom line promise to be no less severe.
With the value of its shares falling precipitously, analysts are expecting BP to lose a significant percentage of market share, amounting to over $23 billion in estimated losses. Weeks of coordinated response in the Gulf Coast are also coming at a heavy price. In a report by the Associated Press, BP stated that it has spent $450 million so far on the massive containment and cleanup effort and that it is spending a further $10 million a day as work continues. Estimates of the total cost of cleanup range as high as $1 billion or more.
Shareholders Voiced Safety Concerns in 2006
BP’s shareholders are understandably frustrated and worried about the financial losses, but their concerns about safety aren’t new. According to Firpo, shareholders initiated proceedings against the board in 2006 to force BP to look into outstanding safety issues on deepwater oil platforms. Firpo claims that even after the 2006 claim was settled voluntarily out of court, BP “continued to ignore and disregard safety issues concerning the company’s deepwater operations.”
Firpo’s claim that BP ignored shareholders’ safety concerns coincides with a recently released report that reveals that BP defended the status quo in the face of attempts by the U.S. Minerals Management Service to impose mandatory government regulations. Under the current system, many safety procedures are enforced on a voluntary basis only. BP argued that the traditionally hands-off approach, in which government agencies have given oil companies a wide berth when it comes to operations, is sufficient and that “prescriptive regulations . . . would be an administrative burden.”
Gross Negligence Could Remove Recovery Cap
One of as many as 100 other lawsuits of its kind, Firpo’s is certainly not the only civil action against the company, but a finding of gross negligence against BP could clear the way for unlimited liability. Under current U.S. law, any financial awards as a result of legal action are limited to $75 million unless gross negligence is proven. While Firpo’s suit seeks an unspecified amount in damages, it also demands a shake-up of the current board, asking for three new directors to be appointed and for the creation of a separate, independent monitoring board.
