A company’s bad behavior may result in thousands of victims, but some of them aren’t so obvious. These include the shareholders who own stock either directly or in other ways, as through pension funds, points out Reuters writer Alison Frankel.
One such company is BP, which recently worked out a settlement dealing with its Deepwater Horizon oil spill in 2010.
“As part of BP’s historic $4.5 billion deal Thursday to resolve criminal and civil charges related to the Deepwater Horizon oil spill in 2010, the British oil company agreed to pay a $525 million penalty to the Securities and Exchange Commission for defrauding its own investors,” Frankel writes Nov. 16 in “BP’s Other Victims Are its Shareholders.”
“The settlement, which is the third-largest in SEC history, is based on the agency’s claims that BP violated U.S. securities laws when company executives filed false reports with the SEC and made false public statements about how much oil was flowing out of BP’s well and into the Gulf of Mexico. The SEC announced that the money would be used to compensate investors for their losses by way of a Fair Fund.”
But there’s a glitch. BP is not a U.S. company.
“… By the time the BP securities litigation was consolidated before U.S. District Judge Keith Ellison of Houston in August 2010, you know what had happened: The U.S. Supreme Court issued Morrison v. National Australia Bank, which held that investors have no cause of action under U.S. securities laws for losses on foreign-traded shares.
“In effect, the BP securities class action, at least for holders of BP common shares, was over before it started. Around 30 percent of BP shares are traded on U.S. exchanges as American Depository Receipts. ADR holders, whose claims remain alive after Morrison, are still litigating their class action against BP in Houston.”
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