hagensberman sobol shanro llp - scacsecurities.stanford.edu/filings-documents/1037/bpt_01/... ·...
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IC 2011 ).
UNITED STATES DISTRICT COUWF, WESTERN DISTRICT OF WAS14INGTONAT SEATTLE
1 . STEPHEN RABIN, individually and onbehalf of all others similarly situated,
Plaintiff, VO615O 5CLASS ACTION COMPLAINT
v .
ROBERT A. MALONE, RICHARDWOOLLAM, STEVE MARSHALL andMAUREEN L. JOHNSON,
Defendants .
111111111111 1111111111 IIIII 11111 IIIII 1111 III!11111111111111111111111111111 II III I06-C'V-015115-C'NI P
Plaintiff 1. Stephen Rabin ('Rabin"), by his undersigned counsel , complaining of
defendants, alleges upon information and belief, as follows :
I. PRELIMINARY STATEMENT
1 . This is a class action on behalf of all persons who purchased BPT1 securities
during the period from March 15, 2006 to August 4, 2006 (the "Class Period") . As a direct result
o1'the market learning the truth about defendants' wrongdoing, the price of BPT units declined
and plaintiff and the class suffered a loss on their investment in BPT .
"BPT" stands for BP Prudhoe Bay Royalty Trust
CLASS ACTION COMPLAINT - 1Case No. N ao--
HAGENSBERMANSOBOL SHANRO LL PORIGINAL I X01 Finn Avetace . SdRE 2900 • SeATTL,, WA 7E10 1
TELEPHONE (2061 623-77.92 FAC 31M14F (703 ) 67:1-0594001912-II 13362E VI
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II. JURISDICTION AND VENUE
2. This Court has subject matter, jurisdiction over this action pursuant to Section 27
of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U .S.C . § 78aa and 28 U .S.C .
§ 1331 . The claims asserted herein arise under section 10(b) and 20(a) of the Exchange Act as
amended, 15 U .S .C. § 78h (h) and § 781(a) and rule 1 Ob-5, 17 C .F .R . § 240 .1 Oh-5, promulgate d
II thereunder.
3 . Venue is proper in this district pursuant to section 27 of the Exchange Act, and is
proper pursuant to 28 U .S .C . § 1391 because, among other things, BP maintains offices and
conducts substantial business in this district including oversight of BP's American operations .
4. In connection with the acts, conduct, and other wrongs alleged in this complaint,
the defendants, directly and indirectly, used the means and instrumentalities of interstate
commerce, including the mail and telephone communications .
III. THE PARTIES
5. Plaintiff purchased securities of BPT during the Class Period as reflected in the
attached certification, and was damaged as a result of the market learning the truth about
defendants' misconduct .
6 . Defendant Robert A. Malone ("Malone") was appointed Chairman and Presiden t
of BP America, Inc. in 2006 .
7. Defendant Richard Woollam ("Woollam") was manager for corrosion, inspection
and chemicals at BP Exploration (Alaska), Inc . ("BP Alaska") until January 2005 .
8. Defendant Steve Marshall ("Marshall") was appointed president of BP Alaska in
2001 .
9. Defendant Maureen I .a, Johnson ("Johnson") is BP Alaska's senior vice presiden t
of the Greater Prudhoe Bay Unit ,
10. The Individual Defendants named herein, by reason of their status as officers and
have at all relevant times had the power and influence, and did in fact control and influence an d
CLASS ACTION COMPLAINT - 2Case No . r,~
FiAGENS GERMA N$OR04 $HA?IRQ LL P
1301 FISH AvEHUE, SME 2999 • SE,IrLE. WA 98101
TELEPHONE 1206162A-7272 • FACSIMILE 1206 1 623 .11594001932-1 L 13311$] VI
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cause or allow BP to engage in the unlawful acts and conduct complained of herein . Each of the
defendants is liable as a direct participant in, or responsible for, the wrongs complained o f
3 herein.
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5 A. BPT
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IV. FACTS
11 . 13PT is a publicly-traded royalty trust organized under the laws of the state of
Delaware, and headquartered in New York . As BPT's 2005 Form 10-K explains :
BP Prudhoe Bay Royalty Trust (the "Trust") was created as aDelaware business trust by the BP Prudhoe Bay Royalty TrustAgreement dated February 28, 1989 (the "Trust Agreement")among The Standard Oil Company ("Standard Oil"), B PExploration (Alaska) Inc . ("BP Alaska"), The Bank of New York,as trustee (the "Trustee"), and F . James Hutchinson, co-trustee(The Bank of New York (Delaware), successor co-trustee) . BPAlaska and Standard, Oil are wholly owned subsidiaries of BP p .l .c .(°`BP") .
** *
The property of the Trust consists of an overriding royalty interest(the "Royalty Interest") and cash and cash equivalents held by theTrustee from time to time. The Royalty Interest entitles the Trustto a royalty on 16 .4246 percent of the first 90,000 barrels of theaverage actual daily net production of oil and condensate perquarter from the working interest of HP Alaska as of February 28,1989 in the Prudhoe Bay oil field located on the North Slope inAlaska. The Prudhoe Bay field is one of four contiguous NorthSlope oil fields that are operated by BP Alaska and are knowncollectively as the Prudhoe Bay Unit. The Royalty Interest wasconveyed to the Trust by an Overriding Royalty Conveyance datedFebruary 27, 1989 from BP Alaska to Standard Oil and a TrustConveyance dated February 28, 1989 from Standard Oil to theTrust .
The Royalty Interest is a non-operational interest in minerals . TheTrust does not have the right to take oil and gas in kind, nor does ithave any right to take over operations or to share in any operatingdecision with respect to BP Alaska's working interest in th ePrudhoe Bay field .
CLASS ACTION COMPLAINT - 3Case No .
W1932-11 135OZI VI
r,~HAGEN5 BERMA N
BOBOL SHAPIRO LL P
1301 F-Fin Avhmun. SURE 2900 - Srum E. WA 99 101
ILLEPHONE ( 206 ) 623-7295 . FACSIMILE ( 206) 6 2 3-0594
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The Trust has no employees . All administrative functions of theTrust are performed by the Trustee .
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BPT Form 10-K, filed 3/1612006, at 1-2 .
12 . BP, p.l .c . ("BP") is a public limited company registered in England and Wales .
BP was created as a result of the merger of Amoco Corporation and the British Petroleum
Company. BP performs all operations relating to BPT's Royalty Interest . In particular, BP,
directly or through its subsidiaries is responsible for (a) for the condition of the Pipeline, (b) for
the maintenance of the Pipeline, and (c) for reporting upon the condition of and/or the
maintenance of the Pipeline. BP maintains three operating business segments : Exploration and
Production; Refining and Marketing; and Gas, Power and Renewables . Approximately 40% of
BP's fixed assets are located in the United States . BP has a strong refining and marketing
presence in the United States, marketing under the Amoco and BP brands in the Midwest, East,
and Southeast, and under the Arco brand on the West Coast . BP is also involved in power
projects in the United States, For the years ended December 31, 2003, 2004, and 2005, the
United States accounted (or the single largest source of BP's sales and operating revenues
categorized by geographical area . Within its Exploration and Production operating business
segment, BP performs upstream activities (oil and natural gas exploration and field development
and production) and midstream activities (management of crude oil and natural gas processing
facilities) . In terms of its upstream activities, including oil production, BP lists the fields of
Prudhoe Bay as its most productive for per day net production . The United States also represents
BP's single largest concentration of employees worldwide reported by geographical area. BP
has stated in its SEC filings that "BP p .l .c . fully and unconditionally guarantees the payment
obligations of its 100% owned subsidiary BP Exploration (Alaska) Inc . under the BP Prudhoe
Bay Royalty Trust ." BP Form 20-F, filed 6/30/06, at F-217 .
13. BP (Exploration) Alaska Inc . ("BP Alaska") is a wholly owned subsidiary of BP .
CLASS ACTION COMPLAINT - 4Case No .
041932-II 135021 VI
r,~HAGENS BERMAN
5O8Ol. SNAPIRO LU P1301 FIFTH AVErvuE . SUITE 2900 • ItAi Lu. WA 98101
TELEPHONE X2061 623-72Y2 • FACSIMILE 17461 023-0591
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B. Problems at Prudhoe Bay
14. On March 2, 2006, BP discovered a crude oil spill in the Pipeline serving th e
Prudhoe Bay oil fields ,
15, On August 7, 2006, BP issued the following press release regarding the problem s
and related shutdown at Prudhoe Bay :
BP to Shutdown Prudhoe Bay Oil FieldRelease date : 07 August 2006
ANCHORAGE -BP Exploration Alaska , Inc. has begun an orderlyand phased shutdown of the Prudhoe Bay oil field following thediscovery of unexpectedly severe corrosion and a small spill froma Prudhoe Bay oil transit line, Shutting down the field will takedays to complete . Over time, these actions will reduce AlaskaNorth Slope oil production by an estimated 400,000 barrels perday.
The decision follows the receipt on Friday, August 4 of the datafrom a smart pig run completed in late July . Analysis of the datarevealed 16 anomalies in 12 locations in an oil transit line on theeastern side of the oil field .
In response to the inspection data, BP conducted follow upinspections of anomalies where corrosion-related wall thinningappeared to exceed BP criteria for a continued operation. It wasduring these follow up inspections that BP personnel discovered aleak and small spill estimated at 4 to 5 barrels ,
The spill has been contained and the clean up effort is underway .The pipeline was shutdown at 6 :30 am Sunday morning . BP hasnotified state and federal officials of the decision and will workclosely with the U.S . Department of Transportation and the AlaskaDepartment of Environmental Conservation, among others ,
"We regret that it is necessary to take this action and we apologizeto the nation and the State of Alaska for the adverse impacts it willcause," said BP America Chairman and President Bob Malone ."However, the discovery of this leak and the unexpected results ofthis most recent smart pig run have called into question thecondition of the oil transit lines at Prudhoe Bay . We will notresume operation of the field until we and government regulatorsare satisfied that they can be operated safely and pose no threat tothe environment."
BP is identifying and mobilizing additional resources from acrossAlaska and North America in order to speed inspection ofremaining Prudhoe Bay oil transit lines . BP operates 22 miles of
CLASS ACTION COMPLAINT - 5Case No .
00 1932-11 135021 VI
D-0HAOENS GERMA N
SOBOL SHAPIRO LI P
1301 Frtii Avr.MVe. SINCE 2900 • SrArri r, WA 98101
TELEPHONE (20H1 ¢23-7757 • FACSIMILE {206) 629-0544
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oil transit pipeline at Prudhoe Bay . Smart pigging inspection hasbeen completed over about 40 percent of that length.
BP previously announced plans to replace a three -mile segment ofpipeline following inspections conducted after a large spilldiscovered on March 2, 2006 .
16 . The press release made no mention , however, that BP was conducting the °°smart
pig" testing only because it was required to under a Corrective Action Order ("CAO") issued by
the United States Department of Transportation on March 15 , 2006 , following the spill of
200,000 gallons from the same line in March 2006 - the worst spill since oil production began on
Alaska's northern slope . According to the Department of Transportation 's preliminary findings
contained in the CAO :
• An internal inspection of Prudhoe Bay west operatingarea (PBWOA) was last performed in 1998 using high-resolution magnetic flux leakage (MFL) toll .Respondent has not established a regular internalinspection or maintenance pigging (cleaning pig)program .
• Respondent's leak detection system was not effective inrecognizing and identifying the failure .
17 . On August 7, 2006, THE NFw YORK TIMES reported that officials at BP could no t
determine how long production would be halted and that Torn Williams, senior tax and royalty
counsel does not "even know how long it's going to take to shut [Prudhoe Bay] down ."
According to the article, Daren Beaudo, a BP spokesman, said that safety standards require at
least 70 percent of the steel walls of the oil transit pipe to be intact and that inspections found
corrosion had reduced wall thickness below that standard .
18 . Also , on August 7, 2006 , THE WALL STREET JOURNAL reported that the shutdown
of the Prudhoe Bay oil field will "occur over several days" and result in a "curtailment of a n
estimated 400,000 barrels a day ." This curtailment amounts to almost half of the total dail y
production from fields on the Alaskan Northern Slope . The article also noted that State and
CLASS ACTION COMPLAINT - 6Case No- r,~
HAGENS BERMA N50BOL SHAPIRO LL P
1301 Finn Avn4ue , StJll E 2900 • SFAI I Lt . WAYS 101
TELEPHONE (2C0) 823-7292 • FACSIMILE (206) 673-959 4961932,11 133021 VI
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Federal regulators have launched investigations into the corrosion along oil transit networ k
including a criminal probe by the Environmental Protection Agency .
19. On August 8, 2006, BP America, Inc. defendant Malone announced at a press
conference that "it has been necessary to take this drastic action of [a] . . . shutdown of the
Prudhoe Bay" and that BP has "taken the decision to replace the main oil transit lines at Prudhoe
Bay" in order to ensure "the integrity of the field ." No time-line was released in this statement
regarding the completion of repairs .
20 . On August 8, 2006, The Wall Street Journal reported that the shutdown of the
Prudhoe Bay oil field facility will reduce production by about 400,000 barrels a day for AP,
which operates the field, and its partners, including Mobil Corporation and ConocoPhillips . BP
owns about 26% of the Prudhoe Bay oil field and a prolonged shutdown will make it difficult for
the company to deliver on its guidance for year-end oil and natural gas production . According to
the article, the Prudhoe Bay oil field facility is almost thirty years old and operates with a
network of pipelines designed to last only twenty-five years . The article goes on to quote
Michael Bolkovatz, a production manager at Prudhoe Bay, as saying that BP wants to stretch the
field's life by several more decades and that "the real goal of our program is to make these pipes
last another 50 years." The transit line responsible for triggering the field shutdown runs
between two processing plants in the eastern portion of the field, and corrosion exceeding 30%
of the pipe's walls was detected by a probe - called a "smart pig ." Phil Flynn, an analyst and
trader at Alaron Corp ., a Chicago brokerage firm specializing in energy industry futures, -
observed that the oil transit network is "under stress like it's never been before" and that it "was
never designed to do this much work ." Representative John Dingell, a Michigan Democrat, is
pushing for a Congressional hearing to investigate the Prudhoe Bay shutdown and released a
statement saying that it is °°appalling that BP let this critical pipeline deteriorate to the point that
a major production shutdown was necessary . "
CLASS ACTION COMPLAINT - 7Case No . ND,
HAGENS BERMA NSOBOL SHAPIRO LL P
I2I I I i in AykNuE SuIFE 2904 • SEATTLE . WA 451G1
TELEPHONE (2461 623-7797 • FACSIMILE ( 2 0 d ) $23 .QS9 4001932-11 135021 V]
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21 . On August 8, 2006, CNNMoney .com reported that the Prudhoe Bay oiI field
shutdown is the first of its kind and its impact on consumer gas prices and oil futures has pushe d
both to near records highs . Oil analyst Peter Beutel, president of Cameron Hanover, an energy
risk management firm, was quoted as saying that shutting down an oil field is an expensive and
risky step that is only taken in extreme circumstances and that "once you shut it down, you don't
know what will happen when you come back ." Beutel goes on to say that the outage accounts
for "almost all Alaska" and that repairs "could drag on for months . "
C. Stock Purchases and Share Pric e
22. On August 4, 2006, the Friday before BP's Monday press release announcing the
shutdown of Prudhoe Bay, BPT shares closed at $87 .89 per share .
23 . As a result of the disclosures , on August b and 7 , 2006 , of defendants '
wrongdoing, on August 8, 2006, the price of BPT shares fell and closed at $73 .61 per share. By
September, the price had declined to $67 .25 as a result of public disclosures concernin g
defendants' misconduct,
V. CLASS ACTION ALLEGATIONS
24. P1 aintif brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (h)(3) on behalf of a Class, consisting of (as stated above) all those who
purchased or otherwise acquired shares of BPT between March 15, 2006 to August 4, 2006,
inclusive (the "Class Period") and who were damaged thereby . Excluded from the Class are
defendants, the officers and directors of BP and BP Alaska and the Trustee of BPT at all relevan t
times, members of their immediate families and their legal representatives, heirs, successors o r
assigns and any entity in which defendants have or had a controlling interest .
25, The members of the Class are so numerous that joinder of all members i s
impractical . Throughout the Class Period, BPT shares were actively traded on the NYSE. The
exact number of Class members is unknown to plaintiffs at this time and can only be ascertaine d
26 11 through appropriate discovery . Indeed, during the Class Period, BP T had more than 21,400,00 0
CLASS ACTION COMPLAINT - 8Case No.
001932-II 1 3IO21 VI
101HAGENS BERMA N
SOBOL SHAPSR4 LLP
1301 FIFTH AvE,iuc. SU fL 39W • SF.ATTLr , WA 991f11
TELEPHONE 12O6 623-7792 + FAC IMIkE (206) 623-0594
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units outstanding. Record owners and other members of the Class may be identified from
records maintained by BPT or its transfer agent and may be notified of the pendency of this
action by mail, using the form of notice similar to that customarily used in securities clas s
actions .
26 . There is a well-defined community of interest in the questions of law and fac t
involved in this case . Questions of law and/or fact common to the members of the Class which
predominate over questions which may affect individual Class members include :
(a) Whether the 1934 Act was violated by defendants ;
(b) Whether defendants omitted and/or misrepresented material facts ;
(c) Whether defendants' statements omitted material facts necessary to make
the statements made, in. light of the circumstances under which they were made, not misleading ;
(d) Whether defendants knew or recklessly disregarded that their statements
were false and misleading ;
(e) Whether the price of BPT securities was artificially inflated as a result of
defendants' misrepresentations and/or omissions; and
(f) The extent of damage sustained by Class members and the appropriat e
measure ofdamages.
27. Plaintiff's claims are typical of those of the Class because plaintiff and the Class
sustained damages from defendants' common course of wrongful conduct involving BP's SEC
filings and defendants' other public statements concerning the Pipeline .
28. Plaintiff wil will adequately protect the interests of the Class and have retaine d
counsel who are experienced in class action securities litigation . Plaintiff knows of no interests
he has which conflict with those of the Class .
29. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable . Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense an d
CLASS ACTION COMPLAINT - 9Case No- r,0
HAGENS BERMA N$0R04 $HANRO UP
1301 FIFTH AVEM'JE. SURE 2900 • SEA)TLe . WA99101
TELLFHONE 12x11 673. 7292 • FACSIMILE (2116) 623-1159 4001932-11 135021 VI
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burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them . There will be no difficulty in the management of this action as
a class action .
VI. FRAUD ON THE MARKET DOCTRINE
30 . At all relevant times , the market for 13PT securities was an efficient market for the
following reasons, among others :
(a) BPT securities met the requirements for listing, and was listed and actively
traded on the NYSE a highly efficient market ;
(b) On average BPT traded hundreds of thousands of units per day during the
Class Period;
(c) As a regulated issuer, BPT filed periodic public reports with the SRC an d
I the NYSE ;
(d) BP, upon whose operations HPT's market value was directly based,
regularly communicated with public investors via established market communication
mechanisms, including through regular disseminations of press releases on the national circuits
of major news services and through other wide-ranging public disclosures, such
communications with the financial press and other similar reporting services ; and
(e) BPT was followed by securities analysts employed by many major
brokerage firms who wrote reports which were distributed to the sales force and certain
customers ol'their respective brokerage firms . Each of these reports was publicly available and
entered the public marketplace .
31 . As a result of the foregoing, the market for BPT securities promptly digested
current information regarding BPT from all publicly available sources and reflected such
information in BPT's share price . Under these circumstances, all purchasers of BPT securities
during the Class Period suffered similar injury through their purchase of BPT securities at
artificially inflated prices, and a presumption of reliance applies .
CLASS ACTION COMPLAINT - 10Case No .
001932-1I 17 5x21 YI
rHAGENS BERMA N
SOBOL SHAPIRO LI P
1301 Finn Avcr4u[, 51J TE 2903 * SrkT1 F, WA 481 Q I
TELEPHONE. (2061623-7292 • FACSIMILE (206) 62 E-i ?4
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VII. SCIENTER
32. Defendants were aware, and had had been aware for years before March 2, 200 6
spill, of the severely corroded condition of the Pipeline and of the inadequacy of their Pipeline
maintenance program. Defendants were aware of these facts, as described above, by virtue of
their role as operators of the Pipeline, and specifically through their receipt of at least one written
report that detailed the corroded condition of the Pipeline and called for increased maintenance .
33 . Defendants knowingly made the misstatements and omissions regarding th e
Pipeline, for the purpose of protecting the stock price of BP and its related entities, and for th e
purpose of protecting their bonuses and profits from their potential sale of BP stock and/or
exercise of BP stock options .
34, Defendants also knowingly made the misstatements and omissions regarding th e
Pipeline for the purpose of concealing their wrongful conduct, relating to their failure to properl y
maintain the Pipeline, from the public and from government regulators .
35, Alternatively, to the extent defendants, or any one of them, did not have actua l
knowledge of the falsity and misleading nature of the misstatements and omissions regarding the
Pipeline, their conduct was reckless, given their access to, control over, and responsibility for the
Pipeline, as well as the availability to defendants of information about the condition of th e
Pipeline and the inadequacy of 13P's maintenance program .
FIRST CLAIM FOR RELIE F
VIOLATION OF § 10(b) OF THE 1934 ACTAND RULE 14b-5 PROMULGATED THEREUNDER
ON BEHALF OF THE CLASS AGAINST ALL DEFENDANT S
36, Plaintiff repeats and realleges the preceding allegations as i t' fully set forth herein .
37 . During the Class Period, defendants, and each of them, carried out a plan, scheme
and course of conduct which was intended to and, throughout the Class Period, did . (i) deceive
the investing public, including plaintiff and the Class ; (ii) artificially inflate and maintain the
market price of BP"1' securities ; and ( iii) caused plaintiff and the Class to purchase or otherwise
CLASS ACTION COMPLAINT - 11Case No .
001932-II 135021 WI
PLO-1HAGENS BERMA N
546OL SHAPIRO LL P1901 FIFTH AVENUE. SUIIL 2900 • SLA-ILe. WA98101
TELEPHONE 12061 623.7292 • FACSIMILE 1206 ; 671-0594
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acquire BPT securities at inflated prices . In furtherance of this unlawful scheme, plan and cours e
of conduct, defendants took the actions set forth herein .
3 S . Defendants (a) employed devices, schemes, and artifices to defraud; (b) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements made not misleading; and/or (c) engaged in acts, practices, and a course of business
which operated as a fraud and deceit upon the purchasers and/or acquirers of BPT securities and
which maintained artificially high market prices for BPT securities in violation of § 10(b) of the
1934 Act, 15 U.S .C . 78j(b), and rule 101 -5 promulgated thereunder, 17 C .F.R. 240.1 Ob-5 .
Defendants are sued either as primary participants in the wrongful and illegal conduct charged
herein or as controlling persons as alleged below .
39. In addition to the duties of full disclosure imposed on defendants as a result o f
their making of affirmative statements and repo rts, or participation in the making of affirmative
statements and reports to the investing public , they had a duty to promptly disseminate truthful
information that would be material to investors, in compliance with the integrated disclosure
provisions of the SEC as embodied in SEC Regulations S-X (17 C . F .R . § 210 . 01 et seq .) and S-K
(17 C.F' .R. § 229 .01 et seq .) and other SEC regulations , including truthful , complete, and
accurate information with respect to, inter cilia, the condition of the Pipeline , so that the market
price of BPT securities would be based on truthful , complete and accurate information.
40. Defendants, individually and in concert, directly and indirectly, by the use o f
means and instrumentalities of interstate commerce of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about BP's operations,
including the operation and production outlook of Prudhoe Bay and in particular about the
condition and maintenance of the Pipeline. Defendants employed devices, schemes, and artifices
to defraud, while in possession of material adverse non-public and engaged in acts, practices, and
a course of conduct as alleged herein, in an effort to assure investors of the value of BPT
securities, This included the making of, or the participation in the making of, untrue statement s
CLASS ACTION COMPLAINT - 12Case No .
001932,11 135021 V1
C DHAGENS BERMA N
5060E SHAPIRO LL P1301 Fir I Avrrlur, $ UrrF ?900 - SEATTLE, WA 4A 101
TFLEPHQWF (20.) 623-7292 . FACSIMILL 12(16) 6230594
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of material facts and omitting to state material facts necessary in order to make the statements
made about BP's operations, in the light of the circumstances under which they were made, not
misleading, as set forth more particularly herein, and engaged in transactions, practices, and a
course of business which operated as a fraud and deceit upon the purchasers and acquirers of
BPT securities during the Class Period .
41 . Each of the defendants had actual knowledge of the misrepresentations an d
omissions of material facts set forth herein, or acted with reckless disregard for the truth in that
they failed to ascertain and to disclose such facts, even though such facts were available to them .
Defendants' material misrepresentations and/or omissions were done knowingly or recklessly
and for the purpose and effect of concealing BP's operations and business affairs from the
investing public, thereby supporting the artificially-inflated price of BPT securities . As
demonstrated by defendants' statements throughout the Class Period, if they did not have actual
knowledge of the misrepresentations and omissions alleged, they were reckless in failing to
obtain such knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading .
42 . In particular, as detailed above, BP's 2005 annual report, filed with the SEC,
stated that "On March 2, 2006, a transit pipeline in the Prudhoe Bay field was discovered to have
spilled an estimated 4,200 to 4,800 bbls of crude oil over approximately two acres ." The annual
report went on to assure that "The processing facility that feeds into the transit line wa s
immediately shut down. An investigation team has determined that the leak was caused by
internal corrosion . Spill clean-up is complete and business operations have resumed using a
separate bypass line ." However, neither the annual report nor any other public statement by BP
disclosed that BP had an inadequate pipeline maintenance and corrosion inspection program, and
that BP had been aware for years that Pipeline corrosion was a serious issue with potentially
grave consequences . The disclosure of a relatively minor corrosion incident without disclosure
of the fact that the Pipeline was under-inspected, under-maintained, and subject to a severe risk
CLASS ACTION COMPLAINT - 13Case Na .
6610 :12-n l3so2l V I
HAGENS HERMA NSQBOL SHAPIRO LL P
13 0 1 Fum Avewu, . SUrE 2910 • 2 AI!L . WA 4A I61
TELEPHONE 12061 623-7292 • FACSIMILE 12061 623-0594
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of corrosion-related failure constituted a material omission by defendants that was misleading t o
the investing public .
43. With respect to defendants' misstatements and omissions , plaintiff relies upon the
group pleading doctrine that creates the "presumption that statements in prospectuses,
registration statements , annual reports , press releases , or other group -published information are
the collective work of those individuals with direct involvement in the everyday business of the
company ." In re Oxford Health Plans, Inc., 187 F.R.D. 133, 142 (S .D.N.Y . 1999) . Thus, all of
the misstatements and omissions made by BP are attributable to the defendants .
44. As a result of the dissemination of the materially false and misleading informatio n
failure to disclose material facts, as set forth herein, the market price of BPT securities was
artificially inflated during the Class Period . In ignorance of the fact that market prices of BPT
securities were artificially inflated, and relying directly or indirectly on the false and misleading
statements made by defendants, or upon the integrity of the market in which the securities trade,
and the truth of any representations made to appropriate agencies as to the investing public, at
the times at which any statements were made, on the absence of material adverse information
that was known to or recklessly disregarded by defendants but not disclosed in public statements
by such defendants during the Class Period, plaintiff and the Class purchased or otherwise
acquired for value BPT securities during the Class Period at artificially high prices and were
damaged thereby when the shares declined in price in reaction to the corrective disclosures ,
45 . At the time of such misstatements and omissions , plaintiff and the Class were
ignorant of their falsity, and believed them to be true . Had plaintiff and the Class and the
marketplace known of the true financial condition of BP, including the production outlook for
Prudhoe Bay and in particular the condition of, and state of maintenance of, the Pipeline, all of
which were not disclosed by defendants, plaintiff and the Class would not have purchased o r
otherwise acquired their BPT securities during the Class Period, or, if they had purchased or
CLASS ACTION COMPLAINT - 1 4Case No. PLO
HAGENS BERMAN50501SHAPSRO U
1301 FI,TH AVEwuE. SUITL 2966 • Se4I Lr . WA 411161
W1932-11 135021 VI TELEPHONLJ206) 623-7272 • FACSIMILE X204) 623-0594
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otherwise acquired such securities during the Class Period, they would not have done so at the
artificially inflated prices which they had paid .
46. By virtue of the foregoing, defendants have violated § 10(b) of the 1934 Act, an d
Rule lOb-5 promulgated thereunder
47. As a direct and proximate result of defendants ' wrongful conduct , plaintiff and
the Class suffered damages .
SECOND CLAIM FOR RELIEF
CONTROL PERSON LIABILITYAGAINST INDIVUDUAL DEFENDANT S
48. Plaintiff repeats and realleges the preceding allegations as if fully set forth herein .
This claim is asserted against all defendants , and each ofthem .
49. Defendant Malone was Chairman and President of BP America at all relevant
times,
50. Defendant Woollam was manager for corrosion, inspection and chemicals at BP
Alaska at relevant times until he was reassigned in January 2005 .
51 . Defendant Marshall was president of BP Alaska at all relevant times .
52. Defendant Johnson was senior vice president of the Greater Prudhoe Bay Unit .
53, The defendants acted as controlling persons of BP, BP America and/or BP Alaska
within the meaning of the 1934 Act, as alleged herein, By virtue of their executive positions,
each had the power to influence and control and did influence and control, directly or indirectly,
the statements of the corporations, including the content and dissemination of the various
statements which plaintiff contends are false and misleading . The defendants were provided
with or had unlimited access to copies of the corporations' internal reports, press releases, public
filings, and other statements alleged by plaintiff to be misleading prior to and shortly after these
statements were iss+ied and had the ability to prevent the issuance of the statements or cause th e
statements to he corrected .
CLASS ACTION COMPLAINT - 15Case No .
061932 .11 133021 VI
DO-HAGENS BERMA N
$4BOL 5-1APII O LL P1301 FIFTHAWEr1LE, SUITE 2966 • SewsIL . WA96101
ILLEPHONE ( 206) 623,7292 • FACSIMILE 12f7S1 E23-0594
54. The defendants' primary liability and controlling person liability arise from the
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following facts, (i) they were high-level executives of the corporations during the Class Period
(with the exception of Woollam, who was a high-level executive for a relevant period of time
prior to the Class Period) and were members of the corporations' management team; (ii) by
virtue of their responsibilities and activities as senior officers of the corporations, they were
privy to and participated in the drafting, reviewing, approving the misleading statements,
releases, reports, and other public representations of and about the corporations' business and
operations, and in particular about the operation and production outlook of Prudhoe Bay and the
condition and maintenance of the Pipeline, and signed the corporations' public filings with the
SEC, which public filings contained the materially misleading statements ; (iii) they knew or had
access to the material adverse non-public information about the corporations' business and
operations, including the operation and production outlook of Prudhoe Bay and in particular
about the condition and maintenance of the Pipeline ; and (iv) they were aware of the
corporations' dissemination of information to the investing public which they knew or recklessly
disregarded was materially false and misleading .
55, In particular, each of the defendants had direct involvement in the day-to-da y
operations of the corporations and therefore, is presumed to have had the power to control o r
influence the particular transactions giving rise to the securities violations as alleged herein ,
especially by virtue of their senior positions, and exercised the same .
56 . As set forth above, defendants violated § 10(b) of the1934 Act and Rule I Ob-5 b y
their acts and omissions as alleged herein . By virtue of their positions as controlling persons of
BP or its American subsidiaries , each of the defendants is liable pursuant to § 20(a) of the 1934
Act .
57. As a direct and proximate result of the defendants' conduct, plaintiff and the Clas s
suffered damages.
CLASS ACTION COMPLAINT - 16Case No .
W7912-11 135021 VI
I-01FIAGENS GERMA N
SQSOL 5MAPIRO LL P1 :1Q1 Flaw A VEr4UE , SUITE 2460 + .En11 LE. W A 9!! 101
TELEPHONE ( 206) 623-7192 • FACSIMILE 120h) 623-0594
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VIII. JURY DEMAND
Plaintiff hereby demands a trial by jury as to all issues .
WHEREFORE, plaintiff respectfully requests that the Court enter j udgment in favor of
the plaintiff and the Class as follows:
A . Determining that the instant action is a proper class action maintainable under
Rule 23 of the Federal Rules of Civil Procedure ;
B . Awarding compensatory damages, jointly and severally against all defendants ;
awarding interest on the foregoing amounts as allowed by law ;
C: . Awarding attorneys' fees and the costs and disbursements of this action ; and
D. Granting such other and further relief as the court may deem just and proper .
DATED this 18th day of October, 2006 .
CLASS ACTION COMPLAINT - 17Case No .
O 1932-IL 135021 Vi
HAGENS BERMAN SOROL SHAPIRO LLP
BySteve W . Berman, WSBA #12536
1301 Fifth Avenue, Suite 2900Seattle, Washington 98101Telephone: (206) 623 -7292Facsimile: (206) 623-0594
Lawrence P . Eage lBRAGAR WEXLER & EAGEL PC885 Third Avenue, Suite 304 0New York, NY 10022Tel : (212) 308-5858Fax : (212) 486-0462
Jeffrey H. SquireKIRBY MCINERNEY & SQUIRE, LLP830 Third AvenueNew York, NY 10022Tel : (212) 371-6600Fax : (212) 751-2540
Attorneys for Plaintiff
DO-HAGEN$ BFRMA I
SOBOL SHAPIko LL P
1301 1 iri AYewue , SLJFIE 29pp $ .SEAigE, WA 49101
TELEPHONE 12Q61 698-72F2 • FAC$IMILL 1268) 623 0594
GFRTIFICATXUN
I. Steph Rabin hereby c ifiet. that-
I have reviewed the complaint and have authorized its filing .
I did not purchase the securities of BP' Prudhoe Bay Royalty Trust that are thesubject of the complaint at the direction of my counsel or in order to participate in anyprivate action arising under the Securities Exchange Act of 1934, as amended by thePrivate Securities Litigation Reform A of 1995 .
I am willing to serve as a representative party on behalf of a class, includingproviding testimony at deposition and trial, if necessary .
During the Class Period, I engaged in the following transaction(s) involving thesecurities of BP Prudhoe Day Royalty Trust :
TRANSACTION TRADE DATE N OP SHARES PRICESHARE
v o f1
`C R& t
I have sought to serve or served as a representative party on behalf of a class in thefollowing action(s) brought under th e, federal securities laws that was filed during thethree-year period preceding the date of this certification :
Rabin v. Scottish Re Group Ltd., et at., 06-CV-6414 (S .N.Y Aug . 23, 2006) .
I will not accept any payment for serving as a representative party on behalf of theClass beyond my pro rata share of any recovery, except such reasonable costs andexpenses (including lost wages) directly relating to the representation of the Class andmy activities in the lawsuit, as ordered or approved by the Court .
Nothing herein shall be construed to be or constitute a waiver of my atto rney-client privilege .
I certify under penalty of perjury that the foregoing is true and correct .
Executed on September 25, 2006,
s
1, t phen Rabin