BP Manager Allegedly Learned Scale of Spill, Dumped Stock

McClatchy Washington BureauApril 17, 2014 


Fires burn around the site of the BP Deepwater Horizon rig site in the Gulf of Mexico, June 19, 2010.

CAROLYN COLE — Los Angeles Times/MCT

Speaking of oil slicks …

Federal securities investigators say that the man that BP initially put in charge of cleaning up the oil from its massive 2010 Macondo well blowout in the Gulf of Mexico used nonpublic information to safely dump $1 million of his family’s company stock before the share price nosedived.

In a federal court suit filed in U.S. District Court in New Orleans, the Securities and Exchange Commission charged Keith A. Seilhan, 47, of Tomball, Texas, with insider trading. Without admitting or denying the allegations, Seilhan agreed to settle the charges for the negotiated sum of $223,000, including $105,409 in civil penalties. He is no longer with the company.

“Corporate insiders must not misuse the material nonpublic information they receive while responding to unique or disastrous corporate events, even where they stand to suffer losses as a consequence of those events,” said Daniel Hawke, chief of the Market Abuse Unit in the SEC’s Division of Enforcement.

In November of 2012, BP paid what then was the third-largest penalty in SEC history -- $525 million -- to settle charges that the company misled investors by grossly understating to the public the extent of the oil flow from the breached well while concealing internal data that indicated it was actually more than 10 times higher.

An experienced crisis manager, Seilhan was pressed into action soon after the company’s Deep Horizon oil rig exploded on April 20, 2010, causing the well cap on the ocean floor to fail to seal.

He was tapped to coordinate BP’s oil collection and cleanup in the gulf and along the coast. From BP’s Incident Command Center in Houma, La., Seilhan directed BP’s oil skimming operations and its efforts to contain expansion of the spill.

The SEC’s suit alleges that on April 29, BP was publicly estimating that the oil was gushing from the well at the rate of up to 5,000 barrels per day, as it reported to the SEC.

The actual flow rate was later estimated to be between 52,700 and 62,200 barrels per day, news that helped send the company’s share prices plunging from over $52 to close as low as $26.83, trading records show.

But Seilhan and his family didn’t suffer the consequences.

“Seilhan received material, nonpublic information indicating that the magnitude of the oil spill, and in turn BP’s potential liability and financial exposure, was likely greater” than what the company was stating publicly, the suit alleges. He was privy to worst-case company estimates on April 22, 2010 that the spill rate could range as high as 64,000 to 110,000 barrels per day and an array of other data showing the breadth of the disaster, the suit said.

On April 29 and 30, the suit alleges, Seilhan sold his family’s retirement accounts in the BP Stock Fund, which consisted “almost entirely” of BP American Depository Shares. In doing so, he exercised three sets of options and immediately sold the underlying shares. It was on those very days, the 2012 SEC suit alleged, that the company was stating in SEC filings that the oil flow was “currently estimated at up to 5,000 barrels a day.”

On May 5, 2010, the complaint against Seilhan says, he and a number of other BP employees were notified by a company attorney that they were prohibited from selling their share prices. Seilhan never discussed his sale with BP attorneys, the suit says.

On July 21, 2010, after the well was capped, Seilhan reinvested $733,000 of his family’s money back into the BP fund.

BP’s shares closed that day at $36.13.

Email: ggordon@mcclatchydc.com; Twitter: @greggordon2.

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