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Cause No.

_____________________________
RAYMOND D. VALLERGA, § IN THE DISTRICT COURT OF
Derivatively on Behalf of BP p.l.c., §
§
Plaintiff, §
v. §
§
ANTHONY B. HAYWARD, CARL- §
HENRIC SVANBERG, IAIN CONN, §
PAUL ANDERSON, LAMAR MCKAY, §
SIR WILLIAM M. CASTELL, ANDY §
INGLIS, ANTONY BURGMANS, § HARRIS COUNTY, TEXAS
BYRON E. GROTE, ROBERT DUDLEY, §
CYNTHIA B. CARROLL, GEORGE §
DAVID, IAN DAVIS, DOUGLAS FLINT, §
DEANNE S. JULIUS, §
§
Defendants, §
§
-and- §
§
BP p.l.c., an English Corporation, BP §
America, Inc., a Delaware Corporation, §
§ _____ JUDICIAL DISTRICT
Nominal Defendants. §

VERIFIED SHAREHOLDER DERIVATIVE PETITION

LEVEL THREE DISCOVERY CONTROL PLAN

1. Due to the complexity of this case, discovery will be conducted under a


Level 3 discovery control plan, pursuant to Rule 190.1 of the Texas Rules of Civil
Procedure.
SUMMARY OF THE ACTION
2. Because of the substantial damage to BP P.L.C. caused by the Defendants’
repeated violations of law, including breaches of fiduciary duty, abuse of control, gross
mismanagement and waste of corporate assets, Plaintiff files this shareholder derivative
action on behalf of BP p.l.c. and BP America, Inc. (“BP” or the “Company”) against
certain officers and directors of the Company.

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3. This action arises out of the repeated safety violations committed by BP, a

company with the worst safety record of any oil company in America. In just the last few

years, BP has paid $485 million in fines to the U.S. Government as well as has paid

settlements to the U.S. Government for environmental crimes and willful neglect of

worker safety rules and has paid penalties for manipulating energy markets. However,

that figure pales in comparison to the $20 billion fund set aside to pay victims of the now

infamous Gulf of Mexico catastrophe.

4. On April 20, 2010, a massive explosion occurred on a mobile offshore

drilling unit in the Gulf of Mexico operated by BP known as the Deepwater Horizon. This

explosion killed 11 and injured 17 others.

5. Although the Company initially stated that only 1,000 barrels of oil were

leaking per day, a BP executive later “conceded” the ruptured oil well could conceivably

leak as much as 60,000 barrels of oil per day into the Gulf, 10 times the estimates of the

current flow. However, even this “concession” was misleading. An internal company

memorandum circulated at the same time said that the worst case scenario was 100,000

barrels per day.

6. BP has conservatively estimated the spill is costing BP $6 million per day

in cleanup and remediation. This large figure grossly underestimates the total outlays BP

will need to make for this disaster, which will cost BP many billions of dollars—a disaster

that could have been avoided had BP employed several rudimentary safety devices to help

it stem the flow of oil. As of the day of this filing, BP said its costs of responding to the

spill had reached $2 billion. Regardless of the out-of-pocket costs, the long-term damage

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to the Company’s reputation – and possibly its future prospects for drilling in the Gulf of

Mexico – is likely to be far higher.

7. This action arises from Defendants causing BP p.l.c. to waste corporate

assets, subjecting BP to billions in liability, and from the breach of defendants’ fiduciary

duties. The Deepwater Horizon explosion, among the worst pollution and environmental

disasters to ever occur in the Western Hemisphere, is the latest example of BP and its

Board flaunting the laws of the United States concerning environmental regulation and

protection, worker and workplace safety and fair and honest trade practices. This reckless

conduct continues to cause BP substantial damage. Now BP is faced with billions in costly

lawsuits, fines, penalties, resources responding to civil and criminal investigations and

enforcement proceedings, increased operating costs due to burdensome requirements and

restrictions imposed by regulators, and lost revenues and profits due to operational

shutdowns or curtailments. This is not even to mention the serious harm to BP’s business

reputation and goodwill, due to the adverse publicity resulting from the oil spill.

8. Ironically, Defendants undertook a massive public relations campaign to

present BP as progressive, ethical and environmentally sensitive. BP stresses safety in its

operations. BP even braded itself as “Beyond Petroleum.” But the facts concerning BP’s

commitment to safety and to the environment are far different than BP represents. BP has

aging production and refining facilities. The Company’s reserves are declining.

Significantly, because of competition in BP’s energy markets, the Company often

encouraged and permitted BP’s managers to resort to imprudent, improper and even illegal

activities to cut costs, boost revenues and temporarily boost BP’s reported results from

operations.

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9. These improper activities include refusing to make, or curtailing, necessary

plant and equipment maintenance, skimping on required inspections, and reducing

maintenance and renewal expenditures for its refineries and pipelines—including those in

Louisiana and the Deepwater Horizon offshore rig. BP’s actions had the desired effect of

cutting BP’s costs while increasing revenues and profitability.

10. Defendants have repeatedly shown that they lack the oversight to correct or

remedy the dangerous conditions created by BP. Despite numerous warnings and “red

flags” concerning BP’s improper and even illegal safety and pollution conduct,

Defendants refused to stop the conduct or adopt adequate policies. The damaging

consequences of Defendants’ misconduct have manifested repeatedly in recent years:

• The April 20, 2010 explosion on the Deepwater Horizon rig—and


resultant enormous oil spill in the Gulf of Mexico—is only the
latest in a series of catastrophic failures arising from BP’s energy
business in the United States. It has recently been reported BP was
warned the rig failed a key pressure test hours before it exploded.
But, as has always been the case with BP, defendants put profit
before safety by refusing to shut down the Deepwater Horizon
when it learned of the problems, and now eleven workers are dead
and the consequences to BP and the United States are catastrophic.

• The Department of Homeland Security and the Department of the


Interior have launched a joint investigation “into the marine
casualty, explosion, fire, pollution and sinking of mobile offshore
drilling unit Deepwater Horizon, with loss of life in the Gulf of
Mexico 21-22 April 2010.” According to their joint investigative
release, “any information warranting further evaluation for potential
civil violations or criminal activity shall be referred in accordance
with applicable procedures.” Hence BP once again faces likely civil
penalties, and possible criminal sanctions, for the Gulf of Mexico
disaster.

• BP has suffered major operating problems at its Alaska Prudhoe


Bay oil field, including an enormous crude oil leak in March 2006
due to defective pipeline maintenance, curtailed inspection
programs and inadequate worker training procedures, and
emergency response plans and procedures. This has resulted in

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numerous fines and penalties; an unusually high number of
employee injuries; a significant curtailment of field production;
civil and criminal investigations and prosecutions; governmental
directives forcing increased pipeline inspection and maintenance
activities; and public relations problems, all of which continue to
harm BP.

• BP suffered unusually and unacceptably large numbers of accidents


and worker injuries at BP’s Texas City, Texas refinery, culminating
in a huge 2005 explosion. Causing 15 deaths and 170 injuries, the
explosion shut down the plant. The explosion resulted from BP’s
failure to properly maintain the plant and the use of outmoded and
ill-maintained equipment. Lawsuits and governmental
investigations and prosecutions ensued, resulting in BP pleading
guilty to both a felony and, due to the Company’s egregious and
willful safety violations, the largest U.S. Occupational Safety and
Health Administration (“OSHA”) fine in U.S. history. This was
exacerbated by revelations that similar failures and operating
deficiencies plague other BP refineries in the U.S.

• BP has been targeted by widespread government accusations of and


investigations into illegal price manipulation and fixing in the
propane market. A BP employee pleaded guilty. In addition, the
crude oil over-the-counter market and the market for unleaded
gasoline still burden BP with investigations and substantial costs,
which expose BP to criminal indictment and fines and penalties.

• On October 25, 2007, BP issued a press release entitled “BP


America announces resolution of Texas City, Louisiana, propane
trading, law enforcement investigations.” BP admitted it was
grossly negligent in failing to mitigate hundreds of millions of
dollars in damages, fines and penalties, remedial costs,
misdemeanor and felony convictions, and had badly damaged BP’s
corporate image and reputation. Not surprisingly, during recent
years BP’s ordinary shares have significantly underperformed the
stock of its peers in the oil and gas industry.

• As of September 30, 2006, BP had taken over $1 billion in charges


related to settling personal injury lawsuits and related litigation
concerning the Texas explosion. Also, BP pleaded guilty on
October 25, 2007, to a felony criminal violation of the Clean Air
Act and paid a $50 million fine, the largest criminal fine ever under
that Act.

• Also, on April 24, 2006, OSHA issued two new OSHA citations to
the BP Products’ Toledo, Ohio refinery, fined BP, and put it in the
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Enhanced Enforcement Program because of BP’s repeated safety
failures and violations.

• Among major oil companies, BP has one of the worst


environmental, safety, and pollution records in the world.

11. Without question, BP has become one of the U.S.’s largest polluters and

environmental law violators, an operator of unsafe work facilities and a fixer/manipulator

of oil and propane products. BP’s conduct was undertaken to enrich Defendants by

boosting short-term profits and by paying themselves grossly excessive compensation and

benefits, with knowing or reckless disregard their actions hurt BP in the longer term.

12. At the time this action was filed on June 25, 2010, demand on BP’s

directors to bring this lawsuit or vigorously pursue it would have been a futile and useless

act. To file suit, BP’s Board would have had to sue themselves and people they hired and

supervised. But such action by BP’s Board would not only expose the Individual

Defendants’ own incompetent and illegal behavior, but also expose them to enormous

uninsured liabilities. For the facts to be uncovered and proved, and the harm to BP

remedied, with future harm ameliorated or prevented, this action must be pursued by the

Plaintiffs derivatively on behalf of and for the benefit of BP. This action is brought in

good faith for the benefit of BP and it is respectfully requested this Court permit this

action to proceed.

P ARTIES

13. Plaintiff Raymond Vallerga is, and was at the time of the commission of

the wrongful acts complained of herein, a BP stockholder. Plaintiff brought this action

derivatively in the right of and for the benefit of BP. He will fairly and adequately

represent the interests of BP and its shareholders in enforcing the rights of BP.

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14. Nominal defendant BP is a public limited company registered in England

and Wales. BP was created in 1998 following the merger of Amoco Corporation and the

British Petroleum Company. BP has its main headquarters in London. However, its

American Headquarters is in Houston, where the company employs more people and has

more assets than any other place in the world. According to its 2009 report to

shareholders, over 40% of BP’s fixed assets are in the United States. BP markets

petroleum products in the United States and this County. Nominal defendant BP is one

of the largest non-U.S. based companies listed on the New York Stock Exchange. BP is

the largest oil and gas producer in the U.S., and the third largest oil company in the world.

BP’s shares have lost half their value since the leak began. The Company operates

approximately 10,000 miles of pipelines, making it the second largest liquids pipeline

company in the U.S. BP is also the second largest refiner in the U.S., the second largest

fuels marketer and the second largest gasoline marketer, employing tens of thousands of

persons in the United States. Since the rig explosion, over $90 billion in shareholder value

has been eviscerated in BP stock.

15. BP also has noted in the past:

• Approximately 40% of BP’s worldwide shareholders reside in


the U.S.

• BP has approximately 29,000 employees in the U.S., has $48


billion in fixed assets in the U.S., and sells more than 15 billion
gallons of gasoline in the U.S. every year.

• BP says, “Today, BP is the number one producer of oil and gas


offshore in the deepwater Gulf of Mexico. Equally important are
our onshore gas operations, which have enabled the company to
become one of the largest gas producers in the U.S.”

• BP operates around 10,000 miles of pipelines, making BP the


second-largest liquids pipeline company in the United States.
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• BP produces more crude oil in the U.S. than in any other
country.

• BP produces more natural gas in the U.S. than in any other


country.

• BP’s capital expenditures in the U.S. are larger than in any other
country and BP has more operating capital employed in the U.S.
than in any other country.

It may be served with process at 501 Westlake Park Boulevard, Houston, TX

77079.

16. Nominal Defendant BP America, Inc., is a Delaware corporation registered

to do business in the State of Texas. It is a subsidiary of BP, p.l.c. BP America’s

registered agent is located at 350 N. St. Paul Street, Ste. 2900, Dallas, TX 75201.

17. Nominal Defendant BP Corporation North America (formerly BP Amoco

Corporation and Standard Oil Company), is an Indiana corporation with its principal place

of business in Houston, Texas. BP Corporation North America, Inc. is a subsidiary of BP

America, Inc. Its registered agent for service is located at Prentice Hall Corp System, 211

E. 7th Street, Ste. 620, Austin, TX 78701.

18. Defendant Anthony B. Hayward (“Hayward”) has served as BP’s Group

Chief Executive since 2007. Defendant Hayward has served as an Executive Director of

BP since 2003. Prior to serving as Group Chief Executive of BP, defendant Hayward has

held a series of roles in exploration and production with BP, including Chief Executive

Officer of Exploration and Production. Hayward, a U.K. citizen, received £2.5 million in

2008 and £3.15 million in 2009. He may be served with process at 501 Westlake Park

Boulevard, Houston, TX 77079.

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19. Defendant Carl-Henric Svanberg (“Svanberg”) has served as Chairman of

BP since January 2010. Defendant Svanberg has served as a director of BP since

September 2009 and is a citizen of the United Kingdom. He may be served with process at

501 Westlake Park Boulevard, Houston, TX 77079.

20. Defendant Iain C. Conn (“Conn”) has been an Executive Director of BP’s

Board since 2004. In 2000 Conn became the Group Vice President of BP’s refining and

marketing business. From 2002 to 2004, Conn served as BP’s Chief Executive of

petrochemicals. In 2007, he was appointed Chief Executive of refining and marketing.

Conn is a citizen of the United Kingdom. He may be served with process at 501 Westlake

Park Boulevard, Houston, TX 77079.

21. Defendant Paul Anderson (“Anderson”) has served as a director of the

Company since February 2010. In addition, Defendant Anderson serves on BP’s Safety,

Ethics and Environment Assurance Committee. Anderson is a citizen of the state of Texas.

He may be served with process at 501 Westlake Park Boulevard, Houston, TX 77079.

22. Defendant Lamar McKay (“McKay”) has served as Chairman and

President of BP America, Inc. since February 2009. McKay is a citizen of the state of

Texas. Mr. McKay resides at 11715 Empress Oaks Ct, Houston, TX 77082. He may be

served with process at 501 Westlake Park Boulevard, Houston, TX 77079.

23. Defendant Andy Inglis (“Inglis”) has served as BP’s Chief Executive of

Exploration and Production and as Executive Director since 2007. Prior to serving as

Chief Executive of BP’s Exploration and Production Group, defendant Inglis was

responsible for leading BP’s activities in the deepwater Gulf of Mexico. Inglis is a citizen

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and resident of the state of Texas. He may be served with process at 501 Westlake Park

Boulevard, Houston, TX 77079.

24. Defendant Byron E. Grote (“Grote”) has served as BP’s Chief Financial

Officer since 2002. Prior to serving as CFO of BP, defendant Grote served as an Executive

Vice President of Exploration and Production. Defendant Grote has served as an

Executive Director of the Company since 2000. Grote is a citizen of the United Kingdom.

He may be served with process at 501 Westlake Park Boulevard, Houston, TX 77079.

25. Defendant Robert Dudley (“Dudley”) has served as an Executive Vice

President and Executive Director with BP since April 2009. Dudley is a citizen of the

United Kingdom. He may be served with process at 501 Westlake Park Boulevard,

Houston, TX 77079.

26. Defendant Sir William M. Castell (“Castell”) has served as a director of the

Company since July 2006. In addition, Defendant Castell serves as Chairman of BP’s

Safety, Ethics and Environment Assurance Committee. Castell is a citizen of the United

Kingdom. He may be served with process at 501 Westlake Park Boulevard, Houston, TX

77079.

27. Defendant Ian Davis (“Davis”) has been a BP Director since April 2010,

and he sits on the chairman’s remuneration and audit committees. Davis is a citizen of the

United Kingdom. He may be served with process at 501 Westlake Park Boulevard,

Houston, TX 77079.

28. Defendant Antony Burgmans (“Burgmans”) has served as a director of the

Company since February 2004. In addition, Defendant Burgmans serves on BP’s

Remuneration and Safety, Ethics and Environment Assurance Committees. Burgmans is a

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citizen of the Netherlands. He may be served with process at 501 Westlake Park

Boulevard, Houston, TX 77079.

29. Defendant Cynthia B. Carroll (“Carroll”) has served as a director of the

Company since June 2007. In addition, Defendant Carroll serves on BP’s Safety, Ethics

and Environment Assurance Committee. Carroll is a citizen of the United Kingdom. She

may be served with process at 501 Westlake Park Boulevard, Houston, TX 77079.

30. Defendant George David (“David”) has served as a director of the

Company since February 2008. In addition, Defendant David serves on BP’s Audit and

Remuneration Committees. David is a citizen of Connecticut. He may be served with

process at 501 Westlake Park Boulevard, Houston, TX 77079.

31. Defendant Douglas Flint (“Flint”) has served as a director of the Company

since January 2005. In addition, Defendant Flint serves on BP’s Audit Committee. Flint is

a citizen of the United Kingdom. He may be served with process at 501 Westlake Park

Boulevard, Houston, TX 77079.

32. Defendant DeAnne S. Julius (“Julius”) has served as a director of the

Company since November 2001. In addition, Defendant Julius serves as Chairman of BP’s

Remuneration Committee. Julius is a citizen of the United Kingdom. He may be served

with process at 501 Westlake Park Boulevard, Houston, TX 77079.

33. Defendants McKay, Inglis, Conn, Grote, Dudley, Hayward, Svanberg,

Castell, Anderson, Burgmans, Carroll, David, Davis, Flint, and Julius are collectively

referred to herein as the “Director Defendants.”

JURISDICTION AND VENUE

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34. Nominal Defendant, BP p.l.c., is a foreign corporation registered to do

business in Texas and has a primary place of business located at 501 Westlake Park

Boulevard, Houston, TX 77079. The Company claims that the Westlake campus is the US

Headquarters of BP and “home to the largest concentration of BP people and assets in the

world.” Additionally, several members of the Board of Directors live in and are citizens

of Harris County. CEO Anthony Hayward operated out of the Houston headquarters

when the Company made misstatements about its ability to contain the spill.

35. This Court has jurisdiction over this Petition pursuant to the Texas Civil

Practice & Remedies Code § 15.002(a) because certain of the defendants reside in Harris

County and a substantial part of the events or omissions giving rise to the breaches of

fiduciary duties occurred in Harris County.

36. This Court has subject matter jurisdiction over this matter because the

amount in controversy exceeds the Court’s minimum jurisdictional requirements.

DEFENDANTS’ DUTIES

37. By reason of their positions as officers, directors, and fiduciaries of BP and

because of their ability to control the business and corporate affairs of BP, Defendants

owed BP and its shareholders fiduciary obligations of good faith, loyalty, and candor, and

were and are required to use their utmost ability to control and manage BP in a fair, just,

honest, and equitable manner. Defendants were and are required to act in furtherance of

the best interests of BP and its shareholders so as to benefit all shareholders equally and

not in furtherance of their personal interest or benefit. Each director and officer of the

Company owes to BP and its shareholders the fiduciary duty to exercise good faith and

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diligence in the administration of the affairs of the Company and in the use and

preservation of its property and assets, and the highest obligations of fair dealing.

38. Defendants, because of their positions of control and authority as directors

and officers of BP, were able to and did, directly and/or indirectly, exercise control over

the wrongful acts complained of herein. Because of their advisory, executive, managerial,

and directorial positions with BP, each of the Defendants had knowledge of material non-

public information regarding the Company.

39. To discharge their duties, the officers and directors of BP were required to

exercise reasonable and prudent supervision over the management, policies, practices and

controls of the Company. By virtue of such duties, the officers and directors of BP were

required to, among other things:

a) exercise good faith to ensure BP’s affairs were conducted in an efficient,


business-like manner so as to make it possible to provide the highest
quality performance of their business;

b) exercise good faith to ensure BP operated in a diligent, honest and prudent


manner and complied with all applicable federal and state laws, rules,
regulations and requirements, and all contractual obligations, including
acting only within the scope of its legal authority; and

c) when put on notice of problems with BP’s business practices and


operations, exercise good faith in taking appropriate action to correct the
misconduct and prevent its recurrence.

45. In addition, the BP Defendants had duties under section 172 of the British

Companies Act of 2006 as follows:

(1) A director of a company must act in the way he considers, in good faith, would be

most likely to promote the success of the company for the benefit of its members as a

whole, and in doing so have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term,

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(b) the interests of the company’s employees,

(c) the need to foster the company’s business relationships with suppliers,

customers and others,

(d) the impact of the company’s operations on the community and the

environment,

(e) the desirability of the company maintaining a reputation for high standards of

business conduct, and

(f) the need to act fairly as between members of the company.

SUBSTANTIVE ALLEGATIONS

40. Despite BP’s public pronouncements and purported risk management and

safety efforts, BP’s safety and pollution record have, time and again, imperiled the

Company and its reputation.

BP’s Troubling Safety and Pollution History

41. BP’s empty promises concerning its focus on safety and on the

environment are belied by a troubling history of pollution and safety disasters.

42. The oil rig disaster is but the latest in a series of troubling safety and energy

failures at BP. To prevent the current disaster, BP could have installed a well-known

backup safety mechanism, a remote switch to stop the flow of oil. Although not mandated

under U.S. law, the practice in the industry favors its use. In many other parts of the world

where BP drills, the device is required by law.

43. Prior to the Deepwater Horizon explosion, BP has had a history of similar

disasters that could have been avoided if BP had followed prudent safety regulations.

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44. In March 2005, an explosion at a BP refinery in Texas City, Texas killed

15 workers and injured thousands. A subsequent investigation by the U.S. Chemical

Safety and Hazard Investigation Board revealed BP ignored its own safety protocols. After

BP pled guilty to federal charges, the Company was fined upwards of $50 million for

failing to correct safety hazards at the Texas plant.

45. Despite the hefty fine, BP refused to put safety before cutting costs. In

March 2006, a hole in BP’s Prudhoe Bay pipeline leaked more than 200,000 gallons of oil

into Alaska’s North Slope. Internal corrosion in BP’s pipeline went undetected until it

formed a gaping hole. It should be noted the Prudhoe Bay spill occurred four years after

BP had been warned about corroded pipelines.

46. BP’s own internal investigation revealed the use of a “smart pig”—an

industry-recognized practice—could have discovered the internal corrosion in BP’s

pipelines. After a congressional committee found BP had failed to seize opportunities that

would have prevented the leak, the Company paid about $20 million in fines for the

Prudhoe Bay spill.

47. In recent years, near-explosions at BP’s gas and oil pipelines on Alaska’s

North Slope have occurred due to incomplete maintenance and faulty equipment. In 2009,

three BP gas and oil pipelines on Alaska’s North Slope ruptured or clogged, significantly

increasing the risk of explosions.

48. On October 10, 2009, a staging valve failed to operate at a large BP gas

compressor plant, causing the buildup of gas. The risk of a devastating explosion was

enhanced because backup equipment intended to burn off the collection of gas and

monitor the valve was not installed properly.

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49. Robert Bea, a professor at University of California Berkeley’s department

of civil and environmental engineering who has worked for BP on Alaska’s North Slope,

called the situation at BP’s compressor station “a ticking bomb.”

50. On January 15, 2009, a cleaning pig—a bullet shaped device that runs

diagnostics inside the pipeline—got stuck and let large amounts of gas leak into a pump

station. On November 29, 2009, an 18-inch pipe carrying a mixture of oil, natural gas, and

waste water ruptured, spraying flammable contents.

51. In the past year, BP has paid nearly $2 million in fines for failing to operate

with proper equipment at oil fields along the North Slope.

52. At the time BP executives admitted BP “fell short.” A former BP corrosion

monitor pleaded the Fifth concerning the Prudhoe Bay disaster. BP’s top executives told

the U.S. BP had stumbled by failing to prevent a major pipeline from becoming crippled

by corrosion.

53. “BP’s operating failures are unacceptable,” former BP America Chairman

Bob Malone told members of a House panel. “They have fallen short of what the

American people expect of BP and they have fallen short of what we expect of ourselves.”

Similarly, president of BP expoloration in Alaska, Steve Marshall, told Congress, “I

deeply regret this situation occurring on my watch.”

54. Foreshadowing the current Gulf spill, years ago BP was criticized for

advertising as environmentally friendly while failing to prevent damaging oil spills. “If the

company spent as much on maintenance as it does on advertising and lobbying for tax

cuts, none of us would have to be here today,” said Schakowsky. Focusing on BP’s slogan

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of “Beyond Petroleum,” at the time Rep. Ed Markey, D-Mass., said, “BP stands for a

company with bloated profits that failed to fix bad pipelines.”

BPs Long History of Safety Violations and Conducting Internal Investigations


in Bad Faith

55. According to a Washington Post article co-published with ProPublica, the

Company has a significant history of safety violations, the article stated in pertinent part:

A series of internal investigations over the past decade warned senior BP


managers that the company repeatedly disregarded safety and
environmental rules and risked a serious accident if it did not change its
ways.

The confidential inquiries, which have not previously been made public,
focused on a rash of problems at BP's Alaska oil-drilling unit that
undermined the company’s publicly proclaimed commitment to safe
operations. They described instances in which management flouted safety
by neglecting aging equipment, pressured or harassed employees not to
report problems, and cut short or delayed inspections in order to reduce
production costs. Executives were not held accountable for the failures, and
some were promoted despite them.

Similar themes about BP operations elsewhere were sounded in interviews


with former employees, in lawsuits and little-noticed state inquiries, and in
e-mails obtained by ProPublica. Taken together, these documents portray a
company that systemically ignored its own safety policies across its North
American operations - from Alaska to the Gulf of Mexico to California and
Texas.

Tony Hayward, BP's CEO, has committed himself to reform since taking
the top job in 2007. Top BP officials would not comment for this story, but
spokesman Tony Odone said that in March an independent expert reported
that BP has made "significant progress" toward meeting goals set in 2007
in response to a deadly Texas refinery explosion. Odone said the notion
that BP has ongoing problems addressing worker concerns is "essentially
groundless."

Because of its string of accidents before the recent blowout in the Gulf, BP
already faced a possible ban on its federal contracting and on new U.S.
drilling leases several senior former Environmental Protection Agency
debarment officials told ProPublica. That inquiry has taken on new
significance in light of the Gulf accident. One key question the EPA will
consider is whether the company's leadership can be trusted and whether

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BP's culture can change.

The reports detailing BP's Alaska investigations -- conducted by outside


lawyers and an internal BP committee in 2001, 2004 and 2007 -- were
provided to ProPublica by a person close to BP who believes the company
has not yet done enough to eradicate its shortcomings.

A 2001 report noted that BP had neglected key equipment needed for
emergency shutdown, including safety shutoff valves and gas and fire
detectors similar to those that could have helped prevent the fire and
explosion on the Deepwater Horizon rig in the Gulf.

A 2004 inquiry found a pattern of intimidating workers who raised safety


or environmental concerns. It said managers were shaving maintenance
costs with the practice of "run to failure," under which aging equipment
was used as long as possible. Accidents resulted, including the 200,000-
gallon Prudhoe Bay pipeline spill in 2006, the largest ever spill on Alaska's
North Slope.

During the same period, similar problems surfaced at BP facilities in


California and Texas.

In 2002, California officials discovered that BP had falsified inspections of


fuel tanks at a Los Angeles-area refinery and that more than 80 percent of
the facilities didn't meet requirements to maintain storage tanks without
leaks or damage. Inspectors were forced to get a warrant before BP allowed
them to check the tanks. The company eventually settled a civil lawsuit
brought by the South Coast Air Quality Management District for more than
$100 million.

In 2005, an emergency warning system failed before a Texas City refinery


exploded in a ball of fire. BP's investigation of that deadly accident --
conducted by a committee of independent experts -- found that "significant
process safety issues exist at all five U.S. refineries, not just Texas City." It
said "instances of a lack of operating discipline, toleration of serious
deviations from safe operating practices, and apparent complacency toward
serious process safety risk existed at each refinery." BP spokesman Odone
said that after the accident the company adopted a six-point plan to update
its safety systems worldwide. But last year the Occupational Safety and
Health Administration fined BP $87 million for failing to make safety
upgrades at that same Texas plant.

It is difficult to compare safety records among companies in industries like


oil exploration. Some companies drill in harsher environments. And bad
luck can play a role. But independent experts say the pervasiveness of BP's
problems, in multiple locales and different types of facilities, is striking.

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“They are a recurring environmental criminal and they do not follow U.S.
health safety and environmental policy,” said Jeanne Pascal, a former EPA
debarment attorney who led the investigations into BP. “At what point are
we going to say we are not going to do business with you any more, bye?
None of the other supermajors have an environmental criminal record like
they do.”

Response efforts get underway as more than 200,000 gallons of oil spill out
of a corroded hole in the Prudhoe Bay pipeline into the snow in March
2006. (BPXA)

Since the late 1960s, BP has pulled oil from underneath Alaska, usually
without problems. But when the company pleaded guilty to a felony
conviction in 1999 for illegal dumping at an offshore drilling field there it
drew fresh scrutiny to its operations and set off a cascading cycle of
attempted -- and seemingly failed -- reforms that continued over the next
decade.

To avoid having its Alaska division debarred -- the official term for a
cancellation of contracts with the federal government -- BP agreed to a
five-year probationary plan with the EPA. The company would reorganize
its environmental management, establish protections for employees who
speak out about safety issues, and reform its approach to risk and
regulatory compliance. The company pledged to improve its conduct and
reform its safety and maintenance programs.

Less than a year later, employees complained to an independent arbitrator


that BP was letting equipment and critical safety systems languish at its
Greater Prudhoe Bay drilling field. BP, in the spirit of reform, hired a panel
of independent experts to examine the allegations.

The panel identified systemic problems in maintenance and inspection


programs -- the operations that keep the drilling in Prudhoe Bay running
safely -- and warned BP that it faced a "fundamental culture of mistrust" by
its workers, in part because senior management lacked a structure of
accountability.

"There is a disconnect between GPB (Great Prudhoe Bay) management's


stated commitment to safety and the perception of that commitment," the
experts said in their 2001 operational integrity report. "Correcting these
underlying causes is essential ... for ensuring long term operational
efficiency and mechanical integrity. Without a concerted effort to address
these basic issues, any other action will provide only temporary relief."

According to the report, "unacceptable" maintenance backlogs ballooned as


BP tried to sustain profits in the aging North Slope even though production

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was declining. The consultants concluded that BP had neglected to clean
and check pressure valves, emergency shutoff valves, automatic emergency
shutdown mechanisms and gas and fire safety detection devices essential to
preventing a major explosion. It warned management of the need to update
those systems, which "have a potential immediate safety impact or that
pose an environmental threat."

It also warned that emergency shutdown systems would need to be


operated manually, that there may not be enough staff to do so, and said
that even if closed, the isolation valves were known to leak.

"Workers believe internal leak-through of isolation valves is a significant


problem and under certain circumstances may pose a potential hazard to
workers and equipment," the report stated.

In May 2002 -- less than seven months later -- Alaska state regulators
underscored the panel's critical findings in a tersely worded order warning
BP that it had failed to maintain its pipelines. Alaska struggled for two
years to make BP comply with state laws and clear the pipeline of
sedimentation that could interfere with leak detection systems.

Soon after, BP hired another team of outside investigators to check


complaints made by workers on the North Slope. The resulting 2004 study
by the law firm Vinson & Elkins warned that pipeline corrosion
endangered operations on the Slope.

"Due to corrosive conditions present at the Greater Prudhoe Bay oilfield


and the age of the field, corrosion control is and has been a major issue for
BPXA," the study said.

It also offered a harsh assessment of BP's management of health, safety and


environment concerns raised by employees. According to the report,
workers accused BP of allowing "pencil whipping," or falsifying inspection
data. The report quoted an employee who said BP workers felt pressure to
skip key diagnostics, including pressure testing, cleaning of pipelines and
checking for corrosion, in order to cut costs.

"To reduce staff workload it was suggested by BPXA management not to


rebuild the pulling equipment as often ... and possibly not pressure test the
equipment," BP employee Marc Kovac wrote in a safety complaint filed
with the company. "This obviously would increase the potential for
equipment failure resulting in equipment damage, environmental spills and
injury to workers."

The report said that the manager in charge of corrosion safety in Alaska at
the time, Richard Woollam, had "an aggressive management style" and

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subverted inspectors' tendency to report problems on the pipeline.

"Pressure on contractor management to hit performance metrics (e.g. fewer


OSHA recordables) creates an environment where fear of retaliation and
intimidation did occur."

Woollam was soon transferred, but the damage was done.

Two years later, in March 2006, disaster struck. More than 200,000 gallons
of oil spilled out of a corroded hole in the Prudhoe Bay pipeline into the
snow, the largest spill ever on the North Slope. Inspectors found that the
steel pipe -- the inside of which hadn't been inspected in years -- had been
corroded to dangerously thin levels along nearly 12 miles of pipeline. It
was exactly the kind of situation BP's auditors and Alaska officials had
feared.

When Congress held hearings into the cause of the spill later that year,
Woollam pleaded the Fifth Amendment. He now works in BP's Houston
headquarters. Reached at his home in Texas this week, Woollam referred
questions to the BP press office, which declined to comment on the matter.

In August 2006, just five months after the spill at Prudhoe Bay, a pipeline
safety technician for a BP contractor in Alaska discovered a two-inch
snaggle-toothed crack in the steel skin of an oil transit line. Nearby,
contractors were grinding down metal welds, sending a fan of sparks
shooting across the work site. The technician, Stuart Sneed, feared the
sparks could ignite stray gases, or the work could make the crack worse, so
he ordered the contractors to stop working.

“Any inspector knows a crack in a service pipe is to be considered


dangerous and treated with serious attention,” Sneed told ProPublica. “The
crack could have created a hellacious leaker with people grinding on it.”

Sneed believed that the Prudhoe Bay disaster had made BP management
more amenable to listening to workers concerns about potential safety
problems. The company had replaced its chief executive for North America
with Robert Malone and had ordered him to make fundamental changes.
Malone quickly focused on reforming the company's culture in Alaska.

But instead of receiving compliments for his prudence, Sneed -- who had
also complained that week that pipeline inspectors were faking their reports
-- was scolded by his supervisor for stopping the work. According to a
report from BP's internal employer arbitrators, Sneed's supervisor, who
hadn't inspected the crack himself, said he believed it was superficial.

The next day, according to multiple witness accounts and the report, that

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supervisor singled out Sneed and harassed him at a morning staff briefing.
Within a couple of hours, the supervisor sent emails to colleagues soliciting
complaints or safety concerns that would justify Sneed's firing. Two weeks
later, after a trumped up safety infraction, he was gone.

During the investigation BP inspectors substantiated Sneed's concerns


about the cracked pipe. The arbiter also investigated Sneed's account of
what happened when he reported the problem. Not only did the report
confirm his account, but it determined that he was among the best at his
job.

The investigators interviewed dozens of workers and according to most of


them Sneed "was likely to be the most careful technician on the Slope with
respect to safety and quality of his inspections. If there was corrosion in
existence... he would find it," said the report, which was authored by
Washington, D.C., attorney Billie Garde and environmental investigator
Paul Flaherty and delivered to BP executives in late 2006.

So why would BP want to get rid of one of its most effective inspectors?
The report echoed BP's internal investigations from 2001 and 2004,
finding, once again, that BP pressured its contractors and employees in
order to save money.

"Many of the people interviewed indicate that they felt pressured for
production ahead of safety and quality," the report stated.

Contractors received incentives to list large numbers of completed


inspections, the report found, something Sneed said routinely led workers
to falsify their reports. Contractors also received a 25 percent bonus tied to
BP's production numbers. With fewer delays, more oil would be pumped,
and more cash would flow to companies executing the work under BP
supervision.

The message to workers was clear.

“They say it's your duty to come forward,” said Sneed of BP's corporate
policies and public statements, “but then when you do come forward, they
screw you. They'll destroy your life.”

“No one up there is ever going to say anything if there is something they
see is unsafe,” he added. “They are not going to say a word.”

The following year saw another shakeup at BP. The company had already
replaced its chief executive of Alaskan operations with Doug Suttles -- the
man now in charge of offshore operations and cleanup of the disaster in the
Gulf. In May 2007 it also named a new global CEO, Tony Hayward, a 25-

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year BP veteran.

But worker harassment claims continued to be made in Alaska and


elsewhere, and more problems with the Alaska pipeline systems also
emerged.

In September 2008, a section of a high pressure gas line on the Slope blew
apart. A 28-foot-long section of steel -- the length of three pickup trucks --
flew nearly 1,000 feet through the air before landing on the Alaskan tundra.
Sneed had raised concerns about the integrity of segments of the high-
pressure gas line system before he left the company. If the release had
caught a spark the explosion could have been catastrophic, said Robert Bea,
a University of California Berkeley engineering professor who has worked
for BP on the North Slope.

Three more accidents rocked the same system of pipelines and gas
compressor stations in 2009, including a near explosion that could have
destroyed the entire facility. According to a letter that members of
Congress sent to BP executives, obtained by ProPublica, the near miss was
the result of malfunctioning safety and backup equipment.

BP spokesman Tony Odone said BP is continuing to roll out a company-


wide operating management system that helps track and implement
maintenance. He said the company reduced corrosion and erosion-related
leaks in Alaska by 42 percent between 2006 and 2009.

As BP battled through the decade to avoid accidents in Alaska, another


facility operating under a different business unit, BP West Coast Products,
was having similar problems.

For years the BP subsidiary that refined and stored crude oil was allowed to
inspect its own facilities for compliance with emission laws under the
South Coast Air Quality Management District, the agency that regulates air
quality in Los Angeles. The thinking was that companies had the technical
knowledge and that self-inspection was cheaper and more efficient.

But in 2002, eight years after the program began, inspectors with the
management district thought BP's inspection results looked too good to be
true. Between 1999 and 2002, BP's Carson Refinery had nearly perfect
compliance, reporting no tank problems and making virtually no repairs.
The district began to suspect that BP was falsifying its inspection reports
and fabricating its compliance with the law.

The management district sent its own inspectors to investigate, but when
they tried to enter BP's plant, the company turned them away. According to
Joseph Panasiti, a lawyer for the management district, the agency had to get

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a search warrant to conduct inspections required by state law.

When the regulators did finally get in, they found equipment in a disturbing
state of disrepair. According to a lawsuit the management district later filed
against the company, inspectors discovered that some tanker seals had tears
that were nearly two feet long. Tank roofs had gaps and pervasive leaks,
and there were enough major defects to lead to thousands of violations.

“They had been sending us reports that showed 99 percent compliance, and
we found about 80 percent noncompliance,” Panasiti told ProPublica. “It
was clear that no matter what was said, production was put ahead of any
kind of environmental compliance.”

Panasiti sued BP for $319 million, alleging, among other things, that
emissions from the refinery forced nearby schools to be evacuated on two
separate occasions. After 24 months of litigation, BP settled out of court,
agreeing to pay more than $100 million without admitting guilt. Colin
Reid, the plant's operations manager during the prosecution, was later
promoted to a vice president position at a BP office in the United Kingdom.
Reid recently left BP; he did not respond to requests for comment.

Allegations that BP or its contractors falsified safety and inspection reports


are a recurring theme. Similar allegations were attributed to workers in
BP's 2001 and 2004 internal reports on Alaska, but the internal auditors
stopped short of confirming that fraud had occurred. The 2004 Vinson &
Elkins report, titled "Report for BPXA Concerning Allegations of
Workplace Harassment From Raising HSE Issues and Corrosion Data
Falsification," says investigators did not thoroughly examine those
allegations and couldn't conclude whether fraud had occurred. But the
report extensively quoted workers who described how it was done.

As recently as 2006 a North Slope worker told a BP investigator that he


suspected tests had been faked after an inspection team produced 2,500
completed reports from a weekend's work in remote territory. In 2007
another North Slope safety engineer brought in to examine a pipeline
system quickly identified a pattern of problems in an area that had received
clear inspection reports for the previous five years.

In August 2008, Kenneth Abbott accepted a job with a BP contractor as a


project control leader on the Atlantis, a monstrous deepwater drilling rig in
the Gulf of Mexico that is significantly larger than the Deepwater Horizon
rig that sank in April. The Atlantis is capable of producing more than eight
million gallons of oil a day from the ocean floor.

Abbott supervised a staff of six charged with doing internal audits and
making sure the rig machinery was built to specifications and had the

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documents and instructions necessary to operate safely. It was an important
job on one of the world's most advanced drilling platforms.

Yet it quickly turned sour. In a debriefing with the person who last held the
post, Abbott was told that BP did not have final design drawings ready to
deliver to the crews that would operate the Atlantis in the Gulf, Abbott said
in an interview with ProPublica.

Final design drawings, called "as-built" drawings, are considered an


essential safety component. They prove that a piece of equipment -- say a
shutoff valve or an engine winch -- was built the way it was supposed to
be. Those drawings are thus the final checks to make sure the equipment
operates properly. They also serve as instruction manuals for emergencies.
If there is a fire on deck or a blowout, for example, operators under
extreme stress and danger can use the design drawings to find the hidden
kill lever that can shut an engine down before it explodes.

Abbott told ProPublica that as-built documents had been issued for only
274 of more than 7,100 pieces of equipment, the equivalent of constructing
a house without having an architect or engineer sign off on the blueprint.

In May, Abbott filed a lawsuit against the Minerals and Management


Service in federal court in Texas aiming to force the regulatory agency to
stop Atlantis operations until BP could prove the documents are in place.
He is not seeking monetary damages or compensation.

In the court filings, he said that some of the most critical spill-protection
infrastructure, including the wellhead documents, hadn't been approved.
None of the sub-sea risers -- the pipelines and hoses that serve as a conduit
for moving materials from the bottom of the ocean to the facility -- had
been "issued for design." And the manifolds that combine multiple pipeline
flows into a single line at the sea floor hadn't been reviewed for final use.

Abbott -- an engineer with 30 years of experience completing design


documents for companies like Shell and General Electric -- said the
completion of "as-built" documents is standard for the industry. Machinery
is designed, approved for manufacturing, checked to make sure it was built
properly, and then approved for final use. If BP didn't provide the
documentation to its workers in the field, it would be a stark exception.

Yet to Abbott's surprise BP's engineers resisted completing the process.

"I just hit a lot of resistance form the lead engineers," Abbott told
ProPublica. "They got really angry with me. They wanted to shortcut the
system and not do the reviews, because they cut short the man hours."

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Abbott estimates BP saved $2 million to $3 million by streamlining the
process.

"There seemed to be a big emphasis to push the contractors to get things


done and that was always at the forefront of the operation," Abbott said. "I
felt there had to be balance. You had to have safety because peoples' life
depended on it. My management didn't see it that way."

Abbot's complaint wasn't the first time the company had been warned about
not maintaining as-built drawings. According to BP's internal 2001
operational integrity report conducted in Alaska, as-built documentation
wasn't being maintained at the company's Prudhoe Bay operations either.

It was among the issues BP executives were encouraged to fix after the
audit of their operations there nearly a decade ago.

BP declined to discuss Abbott's allegations, telling ProPublica it does not


comment on pending legal matters. In a previous statement made to federal
investigators, BP said the drawings were updated and in place before the
Atlantis began operating. The Minerals and Management Service is
reportedly investigating Abbott's claims and Congress has also launched an
inquiry that is still in progress.

A BP ombudsman letter written by Billie Garde and obtained by


ProPublica confirmed Abbott's allegation that the company had violated its
own safety and management protocol by not completing as-built
documentation. The ombudsman's office has not yet investigated Abbott's
claims about the specific pieces of equipment that lacked documentation
because Abbott didn't make that information available until he filed the
lawsuit last month.

Shortly after he raised his complaints to BP management, Abbott lost his


contract to work with BP.

The U.S. Coast Guard responds to the Deepwater Horizon disaster after it
exploded on April 20, 2010. (Deepwater Horizon Response)
Among the most important pieces of safety equipment that BP was
criticized for not having in place in Alaska, according to its own 2001
operational integrity report, were gas and fire detection sensors and the
emergency shutoff valves that they are supposed to trigger.

When gas leaks from a pipeline break or a blowout near a running engine,
it's a lot like stomping on the accelerator of a car: The engine will suck up
the fuel vapors and scream out of control. Gas sensors are critical to
preventing an explosion, because they can shut down a rig engine before
that happens.

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Now investigators are learning that similar sensors -- and the shutoff
systems that would have been connected to them -- were not operating in
the engine room of the Deepwater Horizon rig that exploded in the Gulf of
Mexico.

In sworn testimony before a Deepwater Horizon Joint Investigation panel


in New Orleans last month, Deepwater mechanic Douglas Brown said that
the backstop mechanism that should have prevented the engines from
running wild apparently failed -- and so did the air intake valves that were
supposed to close if gas enters the engine room. The influx of gas from the
well gave the engines "a more volatile form of burning mixture," he said,
and caused them to rev out of control. Another system was supposed to
kick in and shut the engines down, but that system also failed. He said the
engine room wasn't equipped with a gas alarm system that could have shut
off the power.

Minutes later, the Deepwater Horizon rig exploded in a ball of fire, killing
11 workers before sinking to the seafloor, where it left a gaping well pipe
that continues to gush oil and gas into the Gulf.

The Gulf Spill: Apocalyptic Failure

56. On April 20, 2010, an enormous blast on the Deepwater Horizon oil

drilling platform killed 11 people. The Deepwater Horizon rig burned for more than a day

after the massive explosion.

57. Since that time, a staggering 200,000 gallons of oil per day have been

pouring into the Gulf of Mexico from the oil wells BP was drilling on the Deepwater

Horizon.

58. The oil is now reaching the shores of other Gulf of Mexico states, has

closed down fisheries, and is one of the greatest manmade threats ever to endanger the

fragile Gulf ecosystem.

59. The enormity of the disaster cannot be overstated. Most troubling, the

disaster may have been avoided if BP had implemented rudimentary safety features-- such

as a remote “shutoff” valve—that are standard on other ocean water drilling platforms.

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60. As reported by an April 28, 2010 Wall Street Journal article, an “acoustic

switch” would have allowed BP to “trigger an underwater valve that shuts down the well

even if the oil rig itself is damaged or evacuated.” Notably, an acoustic trigger costs

around $500,000, an amount BP was unwilling to spend. The Deepwater Horizon cost

about $560 million to replace. And the containment, recovery, and environmental impact

mitigation will cost BP billions of dollars.

61. As troubling, BP lacked a “blowout scenario” plan to deal with the disaster.

As reported by the Associated Press:

A rule change two years ago by the federal agency that regulates offshore
oil rigs allowed BP to avoid filing a plan specifically for handling a major
spill from an uncontrolled blowout at its Deepwater Horizon project—
exactly the kind of disaster now unfolding in the Gulf of Mexico.

Oil rig operators generally are required to submit a detailed "blowout


scenario." But the federal Minerals Management Service issued a notice in
2008 that exempted some drilling projects in the Gulf under certain
conditions.

BP met those conditions, according to MMS, and as a result, the oil


company had no plan written specifically for the Deepwater Horizon
project, an Associated Press review of government and industry documents
found.

In a series of interviews, BP spokesman William Salvin insisted the


company was nevertheless prepared to handle a blowout at that project
because it had a detailed, 582-page regional plan for dealing with a
catastrophic spill anywhere in the central Gulf.

“We have a plan that has sufficient detail in it to deal with a blowout,"
Salvin said. Still, the lack of a specific plan for the Deepwater Horizon
project raises questions about whether the company could have been better
prepared to deal with the oil leak, which is still spewing out of control at a
rate estimated at more than 200,000 gallons a day.

MMS, which is part of the Interior Department, has long been criticized as
too cozy with the industry it regulates.

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Robert Wiygul, an Ocean Springs, Miss., environmental lawyer, said the
lack of a blowout scenario “is kind of an outrageous omission, because
you're drilling in extremely deep waters, where by definition you're looking
for very large reservoirs to justify the cost.”

* * *

In its 2009 exploration plan, BP strongly discounted the possibility of a


catastrophic accident . . .

Defendants Concealed repeated Warnings Associated With Its Drilling


Operations

1. The Deepwater Horizon Operations

62. BP's reckless inattention to safety and maintenance issues culminated in the

Deepwater Horizon disaster. Like the Texas City disaster and others, BP had ample

warning of problems and ignored them.

63. The risks of offshore drilling were well known to BP, and are especially

high in the Gulf, where floating rigs are used, unlike the permanent rigs used in other

areas such as the North Sea. Permanent rigs are anchored to the ocean floor and cannot

sink, while floating rigs are far more precarious and subject to serious accidents.

64. At the time of the disaster, the Deepwater Horizon was not producing any

oil. The Deepwater Horizon had drilled a well in the sea floor and was in one of the last

phases of the exploratory operation prior to turning the well into a production well. In this

final phase, Halliburton workers on the Deepwater Horizon, under the supervision and

control of BP's employees, were attempting to create a cement seal to plug off the

wellhead. BP's employees under the supervision and control of one or more of the BP

Defendants had authority over the Halliburton workers to determine the type and amount

of cement used.

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65. According to one of the survivors of the Deepwater Horizon, BP had

known about potential problems on the Deepwater Horizon for months prior to the

accident. The survivor informed 60 Minutes that BP had initially estimated work to take

21 days (3 weeks). However, as the time for setting up the latest well extended to 6

weeks, BP managers became agitated and ordered workers to speed up the schedule. An

earlier problem with the well that later exploded had cost BP $25 million. BP managers

told this to the workers on the oil rig in order to pressure them to speed up work in order

to make up that loss. The Deepwater Horizon survivor told 60 Minutes that BP was always

pressuring them to do their work quickly but when the timeline for the Deepwater Horizon

well extended into 6 weeks and with the loss of $25 million in an earlier incident, BP

managers ordered the drillers to speed up the rate of penetration. In other words, BP told

the drillers to work faster.

66. Approximately four to five weeks prior to the Deepwater Horizon incident,

chunks of the annular on the blowout preventer had broken off and floated to the surface.

The annular is a critical part of the blowout preventer used to ensure that explosive gas

does not escape to the surface. BP also knew in the weeks and months prior to the incident

that the battery on the blowout preventer was weak and one of the control pods on the

blowout preventer was broken. According to engineering expert Robert Bea, he described

the malfunctioning control pod as "like losing one of your legs."

67. While this information was known to BP in the weeks and months leading

up to the Deepwater Horizon disaster, BP officials were publically representing to

shareholders that it would be able to deliver strong growth in the company in a safe and

VERIFIED SHAREHOLDER DERIVATIVE PETITION Page - 30 -


reliable manner. For example, at a March 22, 2010 Howard Weil Conference in New

Orleans, Defendant Hayward stated that:

"We are currently planning to make final investment decisions for 24 new major
projects in the next two years. Each project has been highgraded through our
project selection and progression process. They are concentrated in the Gulf of
Mexico, the North Sea, Azerbaijan and Angola - high-margin production areas
that improve the portfolio and enable profitable growth."

"Safety and operational integrity underpins everything we do, and we are now
in the final phase of rolling out our operating management system that provides a
single, consistent framework for our operations, covering all areas from personal
and process safety to environmental performance. And I am pleased to say that in
2009 we saw continuing improvement in all aspects."

68. On March 25, 2009, Defendant McKay stated:

"You are investing in your future."


"There's no better example of what technology can do than the deep waters of the
Gulf of Mexico."
"By the way, let me add that managing costs down does not mean BP will be
skimping when it comes to ensuring our operations remain safe, reliable and
compliant in the years ahead. "Safety will continue to have first call on the
company resources."

69. BP's atrocious approach to safety was never disclosed to the public or BPs

shareholders, a fact that would have been material to them and the market.

70. Cementing a wellhead, particularly in deep water, is delicate work that,

under normal circumstances, carries the risk of a blowout or an uncontrolled release of oil

and/or natural gas from the well. Indeed, BP knew that the work being performed at the

Deepwater Horizon was especially risky. In 2007, MMS raised concerns about oil rig

blowouts associated with the exact type of cementing work the Deepwater Horizon was

doing when it exploded.

71. According to a 60 Minutes report, based on interviews with a survivor of

the Deepwater Horizon and the government's expert tasked with investigating the

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Deepwater Horizon disaster, BP issued orders that greatly heightened the risk of a disaster.

These orders were issued by senior BP managers. BP knew that it was operating in a

dangerous formation in which extra safety precautions were required, not less.

Immediately before the disaster, BP ordered that the drillers begin extracting the mud

from the well before all of the concrete plugs were put into place. This would speed up the

process but meant that pressure in the well would be highly unstable. According to Robert

Bea, if the mud had been left in place, the Deepwater Horizon accident would likely not

have occurred.

72. Nevertheless, with a broken blowout preventer, BP ordered a dangerous

procedure be performed that jeopardized the workers on the Deepwater Horizon, the

public and the environment. This directive was given by BP in order to save money. The

results were catastrophic.

73. Not only did the blowout preventer on the Deepwater Horizon fail to stop

the flow immediately after the explosion on the evening of April 20th, but repeated

attempts to engage the blowout preventer in the days and weeks that followed have been

similarly abortive. Worse, BP failed to install at least two pieces of back-up safety

equipment that would have stopped the leak even without the blowout preventer.

74. First, BP consciously elected not to install an acoustically activated remote-

control shut-off valve, costing only $500,000. Indeed, such acoustic switches are

mandated in countries like Brazil and Norway and are employed by companies such as

Royal Dutch Shell and Total SA, but have not been legally required in the U.S. due to the

lobbying efforts of BP and other oil companies.

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75. Second, BP chose to not install a deep-water valve that would have been

placed about 200 feet under the sea floor. BP ignored these precautions despite being well

informed by deep-sea operators of the increased risk of a failure f the blowout preventer, a

primary blowout safety mechanism.

76. A 2004 study by federal regulators showed that blowout preventers may

not function in deepwater drilling environments because of the increased force needed to

pinch and cut the stronger pipes when drilling at such great depths. Only three of 14 rigs

studied had blowout preventers able to squeeze off and cut the pipe at the water pressures

present at the equipment's maximum depth. "This grim snapshot illustrates the lack of

preparedness in the industry to shear and seal a well with the last line of defense against a

blowout," the study said. By contrast, the replacement cost of the Deepwater Horizon is

$560 million. BP has so far incurred $350 million in costs because of the incident and is

incurring at least an additional $6 million per day trying to contain the spill. The total

expenses of containment and clean-up could reach $20 billion or more.

77. Over ten years ago, the federal Minerals Management Service (“MMS”)

sent out an industry-wide safety alert ordering companies drilling in deep water in the

outer continental shelf to have effective backup systems. The March 2000 notice stated:

"The MMS considers a backup [blowout preventer] actuation system to be an essential

component of a deepwater drilling system, and therefore expects OCS operators to have

reliable back-up systems for actuating the [blowout preventer]."

78. MMS, however, left it up to the individual companies to decide what kind

of backup system to use. BP chose the cheapest method, electing not have a back-up

system for activating the blowout preventer on the Deepwater Horizon.

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79. BP's direction of the completion operations of the well, in particular the

installation of the final cement casing at the wellhead prior to the conclusion of the

exploratory phase of the well, was carried out by Halliburton and BP with extreme

recklessness. As the New York Times reported on May 3, 2010:

More than a half-dozen workers who were on the rig at the time of the
explosion told the lawyers that the rig operator had seemed to be rushing
to finish and detach from the well - a possible factor that could have
contributed to the explosion. The explosion that sank the drilling rig came
less than a day after workers finished pumping concrete into the well, a
step toward closing it off temporarily. BP planned to return to the well
later to set up a permanent rig and start producing oil.

Encasing a well in concrete is one of the most critical aspects of oil


drilling, and presents many risks. The concrete involved is highly
specialized. It needs to be blended and stirred properly. It also must be
pumped down into the well so that it comes out the bottom and oozes back
up around the well casing, forming a tight seal.

The concrete work apparently did not achieve a complete seal., and natural
gas started seeping into the well in the late stages, the lawyers said. But
idling a rig to address such a problem can cost huge sums...[L]awyers said
that supervisors either missed or ignored the signals and proceeded with
the job.

When workers released the last valves that were holding back the natural
gas that had built up inside the well, the gas shot up the pipe and sprayed
into the drilling rig, igniting the fireball that caused the deaths of 11
workers, injured others and sank the rig ....

Employees working on the Deepwater Horizon experienced recurring


problems with pockets of highly flammable natural gas forcing its way up
the drilling pipes. Prior to the Deepwater Horizon incident, BP did not
view these incidents as problematic, but instead stated that the gas was
likely to only create a "negligible" risk. The government, however,
cautioned the company that gas buildup was a genuine concern and that
BP should take note and "exercise caution." In the weeks leading up to the
Deepwater Horizon incident, so much natural gas rose to the surface that
an emergency announcement called for a stop to all "hot work," meaning
any welding, cooking or any other use of fire or igniters.

Smaller emissions of gas also slowed work at the Rig on other occasions
too.

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80. Despite the dangers posed by the extreme gas build up, BP allowed

Halliburton to employ a risky technique of mixing nitrogen gas into the cement to create a

mousse-like compound. Employees on the Deepwater Horizon have suggested that

workers were motivated to finish early in order to earn bonuses for finishing the job ahead

of schedule.

81. The New York Times has also reported that: "At least one worker who was

on the oil rig at the time of the explosion on April 20, and who handled company records

for BP, said the rig had been drilling deeper than 22,000 feet, even though the company's

federal permit allowed it to go only 18,000 to 20,000 feet deep . . ."

Earlier Incidents Provided Warnings of Identical Risks

82. An MMS study noted that blowouts during cementing work were

continuing with alarming regularity, particularly in the Gulf of Mexico. Cementing was a

factor in 18 of 39 well blowouts in the Gulf of Mexico between 1992 and 2006.

83. BP was aware of an August 2009 blowout in the Timor Sea off the coast of

Australia, which was found to have been caused by careless cementing work. During that

incident, which bears a strong resemblance to the Deepwater Horizon disaster, oil leaked

from the site for ten weeks, spreading damage over 200 miles from the well site.

DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS

84. Plaintiff brings this action derivatively in the right of and for the benefit of

BP to redress injuries suffered by BP as a direct result of Defendants’ wrongdoing.

85. Plaintiff is, and at all relevant times was, a BP common stockholder.

86. Plaintiff will adequately and fairly represent the interests of BP and its

shareholders in enforcing and prosecuting their rights.

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87. At the time this action was initiated, BP’s Board consisted of the following

15 directors: Anthony B. Hayward, Carl-Henric Svanberg, Ian Davis, Sir William M.

Castell, Lamar McKay, Paul Anderson, Andy Inglis, Antony Burgmans, Iain Conn, Byron

E. Grote, Robert Dudley, Cynthia B. Carroll, George David, Douglas Flint, and Deanne S.

Julius. Plaintiffs have not made any demand on the Board to institute this action because

such demand would be a futile, wasteful and useless act, for the following reasons.

Governance: BP’s Safety, Ethics and Environment Assurance


Committee

88. BP has a “Governance Framework” flowchart which shows BP’s safety

committee, SEEAC, reports directly to the Board of Directors. The Audit Committee also

directly reports to the Board:

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89. Director Defendants Anderson, Burgmans, Carroll, Castell and Davis are

active members of BP’s Safety, Ethics and Environment Assurance Committee (SEEAC).

Defendant Castell serves as Chairman of the committee. The SEEAC is a board-level

committee that reports directly to the full Board of Directors, as BP’s own flowchart

confirms. Employees of BP’s internal Safety and Operations function report directly to the

SEEAC.

90. In a 2009 SEEAC report, BP describes the SEEAC’s primary responsibility

as follows:

The role of the SEEAC requires us to look at the processes adopted by the
executive management to identify and mitigate significant non-financial
risks and receive assurance that they are appropriate in design and effective
in implementation. Following the tragic incident at the Texas City refinery
in 2005 the committee has observed a number of key developments,
including: the establishment of a safety & operations (S&O) function with
the highest caliber of staff; development of a groupwide operating
management system (OMS) which is being progressively adopted by all
operating sites; the establishment of training programmes in conjunction
with MIT that are teaching project management and operational excellence;
the dissemination of standard engineering practices throughout the group;
and the formation of a highly experienced S&O audit team formed to
assess the safety and efficiency of operations and recommend
improvements. Throughout this time the group chief executive has made
safety the number one priority. The committee’s focus in S&O will now be
to monitor how these advances are interpreted into the culture of day-to-
day operations.

As in all years the committee has not focused solely on S&O. Our main
tasks include:

• monitoring and obtaining assurance that the management or


mitigation of significant BP risks of a non-financial nature is
appropriately addressed.

• reviewing material to be placed before shareholders which address


BP’s environmental, safety and ethical performance and making
recommendations to the board about their adoption and publication.

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• reviewing BP’s internal control systems as they relate to non-
financial risk.

• reviewing reports on the group’s compliance with its code of


conduct and on the employee concerns programme (OpenTalk) as it
relates to non-financial issues.

The full list of the tasks and requirements of the SEEAC are set out in BP’s
board governance principles.

The committee reviews its tasks and processes on a regular basis and seeks
to learn from the challenges and issues of the previous year when setting its
future agenda. Following the committee evaluation in 2009, which was an
integral part of the external evaluation undertaken by the board, it was
concluded that the SEEAC’s tasks and requirements remained appropriate.

91. The SEEAC Committee defendants, Anderson, Burgmans, Carroll, Davis,

and Chairman Castell, are personally implicated in BP’s disastrous safety performance.

These defendants are responsible for BP’s safety and environmental law compliance.

They also are responsible for mitigating the safety and environmental risks BP faces.

92. These directors have failed in their duties to BP. Because these defendants

are personally implicated, they cannot independently and disinterestedly determine

whether BP p.l.c. should assert these claims against themselves and the rest of BP’s

board. These directors lack independence, rendering them incapable of impartially

considering a demand to commence and vigorously prosecute this action.

Governance: BP Board’s Responsibilities For “Monitoring” and “Risk


Management”

93. Pursuant to the BP Board of Governance Principles, BP’s Board “believes

that the governance of BP is best achieved by the delegation of its authority for the

executive management of BP to the Group Chief Executive (GCE) subject to defined

limits and monitoring by the Board.”

94. Concerning “monitoring,” BP’s Board says:

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Monitoring

The Board will satisfy itself that:

the material risks to BP are identified and understood and that systems of
risk management, compliance and control are in place to mitigate such
risks; . . .

95. BP’s Board also has a “General Limitations” clause, which says in part:

General Limitations

The GCE will not engage in or cause or permit any practice, activity
or decision to be taken:

without having regard to:


the health, safety and environmental consequences . . .

96. Concerning risk management—which BP utterly failed to do in the instant

case—BP has defined reporting functions and procedures.

BP’s Risk and Internal Control

The GCE will not cause or permit BP to operate without a comprehensive


system of controls and internal audit to identify and manage the risks that
are material to BP, to protect BP’s assets and to monitor the application of
BP’s resources in a manner which meets the standards of external auditors.

* * *

The GCE will report to the Board at each meeting and advise the Board (or
the relevant Board Committee) in a timely manner of all material matters
currently or prospectively affecting BP and its performance including,
among others:

a) any potential strategically or politically significant development


prospects;

b) progress on the development and implementation of the Strategy


and the Plan;

c) BP’s business and financial performance including any materially


under-performing business activities and proposals to remedy the
situation;

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d) any action or project that represents a material deviation from the
Strategy or the Plan;

e) any action or project (otherwise than permitted by the Strategy or


the Plan) that takes BP into a new country;

f) any action or project (otherwise than permitted by the Plan) that


will involve capital investment or revenue commitments exceeding
the amounts determined by the Board from time to time;

g) any failure to observe the Executive Limitations;

h) the identification of the material risks to BP and an assessment of


the effectiveness of the controls in place to assess and manage such
risks;

i) any material political, economic or other developments in the


markets where BP operates;

j) any material developments or issues concerning the skills and


capability of the BP business;

k) all material matters currently or prospectively affecting the


shareholders and the markets in which the shareholders’ interests
are traded;

l) anything which may have a material adverse impact on BP’s


reputation; and

m) the outcome of any agreed actions or significant developments


relating to any material agenda items considered at previous Board
meetings.

97. During the Relevant Period, all the Director Defendants failed miserably in

their responsibilities for “monitoring” and “risk management” as delineated at BP p.l.c. As

previously alleged, BP’s Board and SEEAC committee failed to have a blowout

prevention and response plan for the Deepwater Horizon platform. Worse, BP’s Board and

committees failed to purchase and install a remote acoustic blowout shutoff device that—

for a mere fraction of the costs BP now faces—could have stopped the flow of oil. And,

BP failed to have a containment dome at the ready in case a deepwater well blowout

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occurred. Instead, BP’s Board utterly failed to implement even a preliminary deepwater

containment system, wasting precious time to build the dome only after the disaster had

occurred, oil threatened all the Gulf states, and the financial and goodwill damage had

already imperiled BP. These multiple, repeated failures simply contradict the Director

Defendants’ fiduciary duties to BP.

98. All Director Defendants are interested because they likely face substantial

liability for their systemic failure to properly exercise their fiduciary duties as members of

BP’s Board and committees. This inference is strongly supported by the Director

Defendants’ failure to design and implement adequate safety protocols and controls

throughout the Relevant Period, and the Director Defendants’ failures led to the disaster.

99. Their duties specifically included reviewing the scope, adequacy, and

effectiveness of BP’s safety and risk management controls. Yet all the Director

Defendants breached their fiduciary duties of due care, loyalty, and good faith to the

Company and its stockholders because of the failures detailed herein. Notably, the

Deepwater Horizon failure comes on the heels of the other major safety and environmental

disasters at BP’s Prudhoe Bay and Texas facilities, as well as the consent decrees and

responsibilities to which BP had agreed concerning the prior events.

100. In light of these facts, there is no doubt BP’s Board of Directors simply

cannot disinterestedly determine whether BP p.l.c. should assert these claims against the

Board, i.e. the Board cannot in good faith determine whether it should sue itself. All

Director Defendants have demonstrated their unwillingness and inability to act in

compliance with their fiduciary obligations and to sue themselves or their fellow directors

and allies in the top ranks of the Company for the violations of law complained of herein.

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As alleged above, although the Board has not yet admitted it failed to design and to

implement adequate safety and environmental protocols and controls, these failures render

all of their Relevant Period actions and statements inherently unreliable.

101. These directors lack independence, rendering them incapable of impartially

considering a demand to commence and vigorously prosecute this action. In such

circumstances, Louisiana law does not require a stockholder to make a pre-suit demand on

a board of directors. Thus, demand is excused.

Governance: BP’s Audit Committee

102. Director Defendant Flint chairs BP’s Audit Committee, and Director

Defendants David and Davis sit on the Audit Committee. The Audit committee is

supposed to “review” the effectiveness of BP’s “internal control and risk management.”

BP’s Audit Committee also is charged with “monitoring and obtaining assurance the

management and mitigation of significant risks of a financial nature facing BP are

appropriately addressed.” And BP’s audit committee is supposed to monitor and review

the “effectiveness of BP’s internal audit function.”

103. For the reasons alleged above and herein, Director Defendants Flint, David

and Davis failed in their duties as Audit Committee members. These Director Defendants

cannot disinterestedly determine whether BP p.l.c. should file suit against the Board for

breach of fiduciary duty and waste of corporate assets, as they are personally implicated

by their repeated failures to properly carry out the audit function. These directors lack

independence, rendering them incapable of impartially considering a demand to

commence and vigorously prosecute this action.

BP’s “Inside” Directors and BP’s Remuneration Committee

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104. By the Board’s own admission per BP’s most recent filings, Director

Defendants Hayward, Inglis, Grote, Conn, and Dudley are executive officers, or “inside

directors,” of BP. Their salaries, future and livelihood are entirely dependant on BP.

105. The money awarded to these inside directors is set by the Remuneration

Committee. According to the committee,

The remuneration committee sets the measures and targets for the annual
bonus element of variable pay at the beginning of the year, based on the
strategy and annual plan accepted by the board. The strategy is built around
safety, people and performance. The measures included key safety
measures (15% of bonus), staff numbers and survey results to reflect the
people priorities (15%) and a set of financial and operational targets to
measure performance (70%).

106. BP’s inside directors are very handsomely rewarded, earning tens of

millions of dollars in salary and bonus in 2009 alone. According to BP’s public

disclosures, their remuneration in 2009:

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107. Notably, “safety” comprises 15% of the inside directors’ salary and bonus,

and meeting financial objectives comprises 70%. The Deepwater Horizon disaster is

guaranteed to seriously affect the compensation awarded these inside directors. Plainly,

these inside directors cannot disinterestedly determine whether to sue themselves for the

Gulf disaster. These inside directors lack independence, rendering them incapable of

impartially considering a demand to commence and vigorously prosecute this action.

108. BP’s Remuneration Committee is chaired by Director Defendant DeAnne

S. Julius, and Director Defendants Burgmans, David and Davis currently service on the

Committee. (Director Defendant Davis served on the Remuneration Committee until April

2009.) Notably, Director Defendants David and Davis also sit on BP’s Audit Committee.

And Director Defendant Bergmans sits on BP’s Safety, Ethics and Environment

Assurance Committee.

BP Currently Is On Probation For Safety and Environmental


Disasters In the United States, and Faces Deferred Prosecution For
Fraud, Confirming Demand Upon BP’s Board Is Futile

109. Further evidencing the BP Board’s inability to disinterestedly consider a

shareholder demand, BP faces significant liability—and even criminal prosecution—for

its numerous safety and environmental failings, as alleged above and herein.

110. These facts are confirmed by the written record. On October 25, 2007, the

United State Department of Justice announced:

BRITISH PETROLEUM TO PAY MORE THAN $370 MILLION


IN ENVIRONMENTAL CRIMES, FRAUD CASES

Charges Result from 2005 Texas Refinery Explosion,


Alaska Pipeline Leaks and Attempt to Manipulate Markets

WASHINGTON—British Petroleum and several of its subsidiaries have


agreed to pay approximately $373 million in fines and restitution for

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environmental violations stemming from a fatal explosion at a Texas
refinery in March 2005, leaks of crude oil from pipelines in Alaska, and
fraud for conspiring to corner the market and manipulate the price of
propane carried through Texas pipelines, the Department of Justice
announced today.

The total payments agreed to by BP include:

- $50 million in criminal fines to be paid as part of an agreement to plead


guilty in the Southern District of Texas to a one-count felony violation of
the Clean Air Act. The agreement resulted from the prosecution of BP by
the Department of Justice for a catastrophic explosion that occurred at the
BP Texas City refinery on March 23, 2005, that killed 15 contract
employees and injured more than 170 others;

- $12 million in criminal fines, $4 million in payments to the National Fish


and Wildlife Foundation, and $4 million in criminal restitution to the state
of Alaska, as part of an agreement to plead guilty by British Petroleum
Exploration (Alaska), Inc. (BPXA) to a violation of the Clean Water Act to
resolve criminal liability relating to pipeline leaks of crude oil onto the
tundra as well as a frozen lake in Alaska;

- A criminal penalty of $100 million, a payment of $25 million to the U.S.


Postal Inspection Consumer Fraud Fund, and restitution of approximately
$53 million, plus a civil penalty of $125 million to the Commodity Futures
Trading Commission, as part of an agreement to defer the prosecution of a
one-count criminal information filed in the Northern District of Illinois
charging BP America Inc. with conspiring to violate the Commodity
Exchange Act and to commit mail fraud and wire fraud.

In addition, a 20-count indictment returned by a federal grand jury in


Chicago today charges four former employees of a subsidiary of BP
America, Inc. with conspiring to manipulate and corner the TET propane
market in February 2004, and to sell TET propane at an artificially inflated
index price in violation of federal mail and wire fraud statutes, along with
substantive violations of the Commodity Exchange Act and wire fraud.

* * *

“The Texas and Alaska cases illustrate the twin pillars of environmental
enforcement: first, protecting human life and health and, second, protecting
our natural resources,” said Acting Assistant Attorney General Ronald J.
Tenpas of the Environment and Natural Resources Division. “BP cut
corners with disastrous consequences for both and is being held to
account.”

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* * *

“This case demonstrates that criminals aren’t just found on unsafe streets . .
. they could be in corporate board rooms or on trading desks as well,” said
Kenneth R. Jones, Deputy Chief Postal Inspector, U.S. Postal Inspection
Service. “This prosecution and settlement agreement underscores the Postal
Inspection Service’s steadfast commitment to aggressively investigate
corporations and their employees who undermine the integrity of American
businesses, and ultimately, the American consumer.”

* * *

Texas City Oil Refinery Explosion

BP Products North America Inc., today agreed to plead guilty to a felony


violation of the Clean Air Act for its conduct that resulted in the fatal
explosion on March 23, 2005 at their Texas City Refinery. As part of the
guilty plea BP has agreed to pay a $50 million criminal fine, the largest
ever assessed under the Clean Air Act, and serve three years of probation.

The catastrophic explosion, which resulted in the death of 15 contract


workers and injuries of over 170 others, was the result of hydrocarbon
liquid and vapor being released from a “blowdown stack” and igniting
during the startup of a unit that is used to increase octane content in
unleaded gasoline. The unit had been shut down for nearly a month for
maintenance and repairs. BP admitted that from 1999 up until the morning
of March 23, 2005, several procedures required by the Clean Air Act for
ensuring the mechanical integrity and a safe startup had either not been
established or were being ignored.

* * *

Clean Water Act Violations in Alaska

British Petroleum Exploration (Alaska ), Inc., (BPXA) today agreed to


plead guilty to a violation of the Clean Water Act to resolve its criminal
liability relating to pipeline leaks of crude oil onto the tundra as well as a
frozen lake in Alaska. As part of the guilty plea BPXA has agreed to pay a
$12 million criminal fine, $4 million in community service payments to the
National Fish and Wildlife Foundation (NFWF) for the purpose of
conducting research and activities in support of the arctic environment in
the state of Alaska on the North Slope, and $4 million in criminal
restitution to the state of Alaska, and serve a three years of probation.

* * *

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Fraud, Market Manipulation Agreement and Charges

A criminal information was filed in the Northern District of Illinois today


charging BP America Inc. with one count of conspiring to violate the
Commodity Exchange Act, mail fraud, and wire fraud. Under the terms of
a deferred prosecution agreement, the government has agreed not to
prosecute BP for a period of three years for conduct charged in the
information if the company fully complies with the terms of the agreement.
Those terms include a requirement that BP America and named
subsidiaries cooperate with an independent monitor who will be appointed
for a three-year period, and with Department of Justice investigations into
the propane manipulation schemes.

TET propane, or propane transported in the Texas Eastern Products


Pipeline Company pipeline system, was the primary means by which
propane was delivered from the Gulf Coast to the Northeast and Midwest.
According to the criminal information, in February 2004, traders working
for a BP America Inc. subsidiary used the financial resources of BP to
purchase more than the available supply of TET propane. BP then sold a
portion of their supply to other market participants at an artificially inflated
price. It is estimated that the loss to other market participants exceeded $53
million dollars – the amount that BP has agreed to pay in restitution, along
with a criminal penalty of $100 million, and a $25 million payment to the
U.S. Postal Inspection Service Consumer Fraud Fund, plus a civil penalty
in the amount of $125 million to the Commodity Futures Trading
Commission.

111. Hence, as of the date of filing, BP remains on probation, and faces the

threat of criminal prosecution for safety, environmental, and fraud violations committed

by BP in the United States. These allegations precede the latest information that BP knew

the Deepwater Horizon rig was failing even before the oil rig exploded, yet BP failed to

shut the rig down.

112. These facts confirm a deeply troubling and disturbing pattern of corporate

malfeasance and criminality that reaches BP’s apex. Even with BP’s probation, deferred

prosecution, and empty promises to improve safety, risk management and environmental

impact of its operations, widespread malfeasance and wrongdoing continues at BP to this

day.

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BP Faces Likely Civil, and Possibly Criminal, Sanctions

113. The Department of Homeland Security and the Department of the Interior

have launched a joint investigation “into the marine casualty, explosion, fire, pollution and

sinking of mobile offshore drilling unit Deepwater Horizon, with loss of life in the Gulf of

Mexico 21-22 April 2010.”

114. According to their joint investigative release, “any information warranting

further evaluation for potential civil violations or criminal activity shall be referred in

accordance with applicable procedures.”

115. As with BP’s other safety and environmental disasters just a couple years

ago, BP once again faces likely civil penalties, and possible criminal sanctions, for the

Gulf of Mexico disaster. According to the joint investigative release, the Department of

Homeland Security and the Minerals Management Service “will co-chair the Joint

Investigation. The Joint Investigation team will investigate thoroughly the matter hereby

submitted to it in accordance with the provisions of 43 U.S.C. § 1348, 46 U.S.C. § 6301 et

seq. . . .”

116. Unquestionably, the Director Defendants cannot disinterestedly determine

whether BP p.l.c. should file suit against themselves for these myriad breaches of

fiduciary duty, abuses of control, and wasting of corporate assets. BP management already

is on probation and faces deferred prosecution, ¶¶ 136-139, supra. Now BP senior

executives face additional confirmed joint investigations by the U.S. government, with

likely civil action and the serious potential for criminal investigation and charges.

117. The Director Defendants are personally implicated by their repeated

failures to properly carry out safety, risk management, and audit functions, all of which is

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confirmed by the latest disaster, the troubling safety and environmental history of BP, the

deaths arising from BP’s systemic safety failures, and myriad civil and criminal penalties

arising therein. The Director Defendants’ lack of independence cannot be seriously

questioned\, rendering them incapable of impartially considering a demand to commence

and vigorously prosecute this action.

COUNT ONE
Breach of Fiduciary Duty
(against all defendants)
118. Plaintiffs incorporate by reference ¶¶1-115 as though fully set forth and

alleged herein.

119. Defendants are fiduciaries of BP and of all of its public shareholders and

owe to them the duty to conduct the business of the Company loyally, faithfully, carefully,

diligently and prudently. This cause of action is asserted based upon the defendants’ acts

in violation of applicable law, which acts constitute a breach of fiduciary duty.

120. Defendants, in their roles as executives or directors of the Company,

participated in the acts of mismanagement alleged herein and acted in gross disregard of

the facts or failed to exercise due care to prevent the unlawful conduct.

121. Defendants are responsible for the gross mismanagement of BP, for

abdicating their corporate responsibilities and mismanaging the Company in at least the

following ways:

they caused BP to violate applicable law, disregarding their duties as


fiduciaries;

they have caused BP to violate core worker safety and environmental laws
and exposed the Company and its shareholders to criminal liability and
unnecessary costs, fines, penalties and tort liability;

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they exposed the Company and its shareholders billions upon billions of
dollars in fines, penalties and compensatory damage awards for violations
of U.S. and Louisiana state environmental laws; and

they subjected BP to adverse publicity and loss of goodwill, greatly


increased its costs to raise capital, and impaired its earnings.

122. These issues have also put the company in the crosshairs of American

legislators.

123. Plaintiffs incorporate by reference and reallege each and every allegation

contained above, as though fully set forth herein.

124. As a result of the misconduct described above, and by failing to properly

consider the interests of the Company and its public shareholders, Defendants have caused

BP to incur (and BP may continue to incur) significant legal liability and legal costs to

defend itself as a result of Defendants’ unlawful actions.

125. As a result of this waste of corporate assets, Defendants are liable to BP.

126. Plaintiffs, on BP’s behalf, have no adequate remedy at law.

COUNT TWO
Gross Mismanagement
(against all defendants)
127. Plaintiffs incorporate by reference ¶¶1-124as though fully set forth and

alleged herein.

128. Defendants had a duty to BP and its shareholders to prudently supervise,

manage and control the operations, business and internal financial accounting and

disclosure controls of BP.

129. Defendants, by their actions and by engaging in the wrongdoing described

herein, abandoned and abdicated their responsibilities and duties with regard to prudently

managing the businesses of BP in a manner consistent with the duties imposed upon them
VERIFIED SHAREHOLDER DERIVATIVE PETITION Page - 50 -
by law. By committing the misconduct alleged herein, Defendants breached their duties of

due care, diligence and candor in the management and administration of BP’s affairs and

in the use and preservation of BP’s assets.

130. During the course of the discharge of their duties, Defendants knew or

recklessly disregarded the unreasonable risks and losses associated with their misconduct,

yet Defendants caused BP to engage in the scheme complained of herein which they knew

had an unreasonable risk of damage to BP, thus breaching their duties to the Company. As

a result, Defendants grossly mismanaged BP.

COUNT THREE
Waste of Corporate Assets
(against all defendants)

131. Plaintiffs incorporate by reference ¶¶ 1-128 as though fully set forth and

alleged herein.

132. Plaintiffs incorporate by reference and reallege each and every allegation

contained above, as though fully set forth herein.

133. As a result of the misconduct described above, and by failing to properly

consider the interests of the Company and its public shareholders, Defendants have caused

BP to incur, and BP will continue to incur, billions upon billions of dollars of costs,

expenses, and legal liability, including cleanup, remediation, fines, penalties, and civil,

criminal and other suits arising from this disaster, all of which stems from the Director

Defendants’ unlawful actions.

134. As a result of this waste of corporate assets, Defendants are liable to BP.

135. Plaintiff, on BP’s behalf, has no adequate remedy at law.

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136. Plaintiff incorporates by reference and realleges each and every allegation

contained above, as though fully set forth herein.

PRAYER FOR RELIEF

FOR THESE REASONS, Plaintiffs, on BP’s behalf, prays for judgment against

the Director Defendants as follows:

A. against Defendants and in favor of nominal defendant BP for the amount of


damages sustained by the Company as a result of the Defendants’ breaches
of fiduciary duties;

B. declaring BP’s directors violated and aided and abetted in the breach of
their fiduciary duties to the Company and its shareholders;

C. removing and replacing BP’s directors, instituting a new election of


directors and appointing a receiver for the management of the Company
until a new election of directors is called and determined;

D. ordering appropriate equitable relief to remedy Defendants’ misconduct;

E. awarding to Plaintiffs the costs and disbursements of the action, including


reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and
expenses; and

F. granting such other and further relief as the Court deems just and proper.

DEMAND FOR JURY TRIAL

Plaintiff demands trial by jury on all issues so triable.

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Respectfully Submitted,

_/s/ Charles W. Branham, III______


Charles W. Branham, III
Texas Bar No. 24012323
tbranham@goldfarbbranham.com
Hamilton Lindley
Texas Bar No. 24044838
hlindley@goldfarbbranham.com
GOLDFARB BRANHAM LLP
Saint Ann Court
2501 N. Harwood Street, Suite 1801
Dallas, TX 75201
Phone: 214.583.2333
Fax: 214.583.2234

VERIFIED SHAREHOLDER DERIVATIVE PETITION Page - 53 -