For the past 70 days, BP has been under attack from all quarters because of the massive oil spill in the Gulf—but not from its own ranks. Until now.
Upset that their company’s stock has plunged almost 50 percent since the start of the spill on April 20, a group of BP employees who are enrolled in the employee savings plan slammed the company with a class-action lawsuit yesterday in Chicago federal court. Their savings plan, which feeds into retirement savings accounts, had more than $2 billion invested in BP stock.
While it’s unclear how many employees are participating in the suit—both BP and the law firms representing the plaintiffs declined comment—the website of Milberg LLP, one of the firms involved, addresses the case. The group is "investigating possible breaches of fiduciary duties relating to the BP 401(k) plan," says the site. As of Monday, BP incurred costs totaling $2.65 billion related to the oil spill.
State Street, the Boston-based financial services firm and a trustee of the plan, is cited as a co-defendant. Arlene Roberts, a spokesperson, said, "State Street is confident that it has at all times acted in accordance with its obligations as trustee and investment manager for the company’s stock fund in the BP plan. State Street denies the claims set out in the complaint and will vigorously defend itself in this matter."
The notion of employees suing their own companies when falling stock prices drag down their investments is not altogether new, though in some of the more famous cases, such as Enron, the companies were well into bankruptcy at the time of the suit. In 2004, more than 20,000 Enron workers were awarded $85 million as a result of a 2001 lawsuit alleging that Enron violated the Employee Retirement Income Security Act (ERISA) by not alerting its workers that their retirement-plan investments were at risk. Enron employees said they lost about $2 billion.
It remains to be seen how BP weathers the mounting costs of the cleanup, and the possibility of bankruptcy has already been floated by some. The company's expenses averaged $100 million a day over this past weekend, according to a Monday SEC filing, and Credit Suisse recently estimated that the cleanup will ultimately cost about $23 billion, with another $14 billion in claims by businesses and individuals.
A panel of bankruptcy and legal experts certainly did not discount the idea during a conference call Tuesday held by the American Bankruptcy Institute. "If they are going to be asked to pay an unlimited amount of civil claims, I think the decision [to file bankruptcy] is pretty easy," said Peter S. Kaufman, who is overseeing the restructuring at investment firm Gordian Group LLC.
