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November 15, 2012 at 10:11 AM
British oil company BP agreed Thursday to pay $4.5 billion to the U.S. government in fines and other charges, including $525 million to the SEC–the third largest penalty ever assessed by the SEC–over the oil spill in the Gulf of Mexico.
Criminal charges account for $4 billion of that amount, according to a company statement, and BP also agreed to plead guilty to 14 criminal charges. Eleven people died in the Deepwater Horizon oilrig disaster, which flooded the gulf with millions of gallons of oil and contaminated beaches. Three BP employees also faced criminal charges from the Justice Department.
The Securities and Exchange Commission charged BP with misleading investors by significantly understating the flow rate of the oil gushing into the gulf in multiple reports filed with the SEC. Although BP repeatedly indicated in public statements that the flow rate was estimated at 5,000 barrels per day, its own internal data indicated that potential flow rates could be as high as 146,000 barrels of oil per day.
BP executives also made numerous public statements after the filings were made in which they stood behind the flow rate estimate of 5,000 barrels of oil per day even though they had internal data indicating otherwise. In fact, they criticized other much higher estimates by third parties as scaremongering.
According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of Louisiana, BP stated that the flow rate was estimated to be 5,000 barrels of oil per day (bopd) in three separate Forms 6-K filed with the SEC following the Deepwater Horizon oil rig explosion on April 20, 2010. In a 6-K filed on April 29, BP stated in part, “[e]fforts continue to stem the flow of oil from the well, currently estimated at up to 5,000 bopd[.]” BP filed another report the next day similarly referencing “[e]fforts to stem the flow from the well, currently estimated at up to 5,000 barrels a day are continuing[.]”
The SEC alleges that when the company made those statements, BP possessed at least five different flow rate calculations, estimates or data indicating a much higher flow rate. BP did not possess or generate any piece of data suggesting that 5,000 bopd represented a ceiling for the rate of oil flowing into the Gulf of Mexico or was the best estimate. The failure to disclose the existence of these higher estimates rendered BP’s statements in its Reports on Form 6-K materially false and misleading.
According to the SEC’s complaint, BP issued another 6-K on May 4 that stated, “Accurate estimation of the rate of flow is difficult, but current estimates by the U.S. National Oceanic and Atmospheric Administration (NOAA) suggest that some 5,000 barrels (210,000 US gallons) of oil per day are escaping from the well.”
