BP Manager In Charge of Cleaning Up the Gulf Oil Spill – Instead of Actually Cleaning Up – Committed Insider Trading and Sold $1 Million of BP Stock Before the Extent of the Spill Became Public Knowledge

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Washington's Blog | Apr 18, 2014

The Head of BP Also Sold Shares After Problems With the Well Were Apparent to Insiders

The Securities and Exchange Commission announced today:

The Securities and Exchange Commission today charged a former 20-year employee of BP p.l.c. and a senior responder during the 2010 Deepwater Horizon oil spill with insider trading in BP securities based on confidential information about the magnitude of the disaster.  The price of BP securities fell significantly after the April 20, 2010 explosion on the Deepwater Horizon rig and the subsequent oil spill in the Gulf of Mexico, resulted in an extensive clean-up effort.

According to the SEC’s complaint, filed in U.S. District Court for the Eastern District of Louisiana, BP tasked Keith A. Seilhan with coordinating BP’s oil collection and clean-up operations in the Gulf of Mexico and along the coast.  Seilhan, an experienced crisis manager, directed BP’s oil skimming operations and its efforts to contain the expansion of the oil spill.  The complaint alleges that within days, Seilhan received nonpublic information on the extent of the evolving disaster, including oil flow estimates and data on the volume of oil floating on the surface of the Gulf.

“Seilhan sold his family’s BP securities after he received confidential information about the severity of the spill that the public didn’t know,” said Daniel M. Hawke, chief of the Division of Enforcement’s Market Abuse Unit.

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The complaint alleges that by April 29, 2010, in filings to the SEC, BP estimated that the flow rate of the spill was up to 5,000 barrels of oil per day (bopd).  The company’s public estimate was significantly less than the actual flow rate, which was estimated later to be between 52,700 and 62,200 bopd.  The information that Seilhan obtained indicated that the magnitude of the oil spill and thus, BP’s potential liability and financial exposure, was likely to be greater than had been publicly disclosed.

According to the complaint, while in possession of this material, nonpublic information, and in breach of duties owed to BP and its shareholders, Seilhan directed the sale of his family’s entire $1 million portfolio of BP securities over the course of two days in late April 2010.  The trades allowed Seilhan to avoid losses and reap unjust profits ….

Interestingly, the head of BP – Tony Hayward – sold 1.4 million pounds worth of BP shares a few weeks before the start of the Gulf oil spill.  While – at first glance – this sound like it could not possibly have been connected to the Gulf spill, BP actually had major problems with the Gulf well months before the spill. In other words, the spill hadn’t yet happened … but it should have been obvious to knowledgeable insiders that the well was highly dangerous and unstable.

Sadly, Mr. Seilhan, Mr. Hayward and the rest of the BP team made normal oil-skimming procedures impossible because they sunk the oil with Corexit dispersant … so the oil skimmers couldn’t get to it.

And it is beyond doubt that BP and the government blatantly low-balled the amount of oil spilled.

Indeed, most people still don’t understand that – while the well was “capped” in 2010 – top experts say that the oil spill could have increased  the amount of oil flowing form natural seeps in the area … so that more oil continues to leak into the Gulf for years.   Indeed,  large oil slicks have flowed for years after the BP well was capped (and BP’s explanation for this phenomenon doesn’t hold up to scrutiny.)

Postscript:  Some BP personnel were criminally indicted for manslaughter and lying to federal investigators.

But the U.S. has let BP back into the Gulf.  And BP is going to drill even deeper … with an even greater potential for disaster (and see this and this).