BP P.L.C. FORMER EMPLOYEE CHARGED WITH INSIDER TRADING AFTER DEEPWATER HORIZON OIL SPILL

FROM:  SECURITIES AND EXCHANGE COMMISSION 

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.  “Corporate insiders must not misuse the material nonpublic information they receive while responding to unique or disastrous corporate events, even where they stand to suffer losses as a consequence of those events.”

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 as the price of BP securities dropped by approximately 48 percent after the sales on April 29 and April 30, 2010, reaching their lowest point in late June 2010.

Without admitting or denying the allegations, Seilhan consented to the entry of a final judgment permanently enjoining him from future violations of federal antifraud laws and SEC antifraud rules.  Seilhan, of Tomball, Texas, also agreed to return $105,409 of allegedly ill-gotten gains, plus $13,300 of prejudgment interest, and pay a civil penalty of $105,409.  The settlement is subject to court approval.

The SEC’s investigation was conducted by Matthew S. Raalf, Brian P. Thomas, John S. Rymas, Kelly L. Gibson, Brendan P. McGlynn, G. Jeffrey Boujoukos, Michael J. Rinaldi, and Christopher R. Kelly in the Philadelphia Regional Office.  The SEC appreciates the assistance of the U.S. Department of Justice’s Deepwater Horizon Task Force.

BROTHERS FOUND GUILTY OF INSIDER TRADING

FROM:  SECURITIES AND EXCHANGE COMMISSION 
Jury in Cleveland Finds Brothers Engaged in Insider Trading

The Securities and Exchange Commission has obtained a favorable verdict from a jury in the Northern District of Ohio finding that Andrew W. Jacobs of Lancaster, Pa., and his brother Leslie J. Jacobs II of Cleveland, Ohio, committed insider trading in connection with the December 2009 tender offer for Chattem Inc., a Chattanooga, Tenn.-based distributor of pharmaceutical products.

In its complaint, the SEC alleged that A. Jacobs provided L. Jacobs material nonpublic information about the tender offer and that L. Jacobs then traded on the basis of the information he received from his brother.  A. Jacobs learned of the tender offer in a confidential conversation with his brother-in-law, who at the time was a Chattem executive.  The executive, with whom A. Jacobs had been friends since business school, requested that A. Jacobs keep their discussion confidential, and he agreed to do so.  Nonetheless, the next day, A. Jacobs called his brother L. Jacobs and told him that Chattem was going to be acquired.  A few days later, L. Jacobs purchased 2000 shares of Chattem, and he sold those shares after the public announcement of the acquisition for an illicit profit of $49,457.21.

After a six-day trial, the jury yesterday found in favor of the SEC on the claims under Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3 thereunder.  These provisions prohibit insider trading in connection with a tender offer.  The jury found in favor of the defendants on the claims under Sections 10(b) of the Exchange Act and Rule 10b-5 thereunder.

The trial was presided over by U.S. District Judge Solomon Oliver Jr.  The court will now decide what remedies are warranted based on the jury’s verdict.  In its complaint, the SEC sought permanent injunctions, disgorgement with prejudgment interest, and civil monetary penalties pursuant to Section 21A of the Exchange Act.  The SEC also sought an officer and director bar against A. Jacobs, who was a high-level executive of a public company at the time of the tip.  The case was tried by Kristin B. Wilhelm and Joshua A. Mayes of the SEC’s Atlanta Regional Office and Stephan J. Schlegelmilch of the SEC’s headquarters in Washington, D.C.