1. News Articles
  2. Related News Articles
News Article Details

Law Firm Looking into Whether BP 401(k) Plan Broke Law

Source: AP

Posted on 24 Jun 2010

Facebook LinkedIn Twitter Google

A law firm known for shareholder lawsuits on Wednesday said it is investigating whether the agents who ran BP PLC's employee savings plan violated federal law by buying BP stock.

New York-based Milberg LLP, which has sued dozens of companies on behalf of investors in many prominent companies, including scandal-plagued Enron, Worldcom and Tyco, said it is looking into whether the fiduciaries of the BP Employee Savings Plan may have violated the Employee Retirement Income Security Act by buying and holding on to the oil company's shares "when it was imprudent to do so."

There are four BP Employee Savings Plans, which collectively had nearly $8.27 billion invested at the end of 2009, according to a filing with the Securities and Exchange Commission submitted last week. About $2.45 billion of that was in U.S.-traded shares of BP.

BP stock has plunged since its Deepwater Horizon rig in the Gulf of Mexico exploded nine weeks ago and began spewing up to 2.5 million gallons of oil a day. The stock closed at $60.48 in the session before the blast, and ended Wednesday trading at $29.67, a 51 percent dive

Milberg maintained the devastating effects of the spill extend to the BP plan participants. It is looking into whether the fiduciaries of the 401(k) plan knew or should have known of BP's problematic safety record, including safety measures used on the Deepwater Horizon, which would have made the stock fund an imprudent investment for participants.

David Wray, president of the Profit Sharing/401(k) Council of America, said such suits have been filed before in cases of corporate fraud and wrongdoing. "In most cases where you see these severe stock drops, you see a similar suit filed on behalf of the plan participants, and in virtually all those cases there have been settlements," he said.

Wray noted that each case must be decided on the facts particular to that company. The question in this case, he said, would be whether the fiduciary, the person or company that administered the plan, would have any reason to believe something like the Deepwater explosion and subsequent spill would happen. "BP is certainly one of the most studied stocks," he noted. In fact, Wall Street analysts still favor the hugely profitable company, and some have upgraded the stock because of the share price drop.

Milberg, formerly known as Milberg Weiss, was implicated in a lawsuit kickback scheme in 2008. Authorities said the firm made about $250 million over two decades by filing legal actions on behalf of professional plaintiffs who received $11.3 million in kickbacks. The firm's co-founder pled guilty to a racketeering conspiracy charge and was fined and sentenced to 30 months in prison for his role.

Separately, New York State Comptroller Thomas P. DiNapoli said Wednesday he hired the law firm of Cohen Milstein Sellers & Toll to represent the New York State Common Retirement Fund in a suit stemming from the explosion and spill.

"BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we're going to hold it accountable," said DiNapoli, who serves as trustee of the $132.6 billion fund. DiNapoli is seeking to lead a class action against BP. The fund held more than 19 million shares at the time of the explosion.