Corporate Crime File: Oil Giant BP Faces Multiple Charges

BP has spent millions of dollars branding itself as kinder, gentler and more socially conscious than its competitors. In 1997, it announced that it would become the world's first "green" energy company, a move that the firm followed up by dutifully changing the color scheme in their signage to a rather attractive shade of green.

Of course, in the energy biz, social responsibility is hard to come by, and the firm's deeds have not exactly matched its rhetoric; corporate watchdogs named the firm one of the "ten worst corporations in 2001 and again last year based on its human rights and environmental records.

The company has been under criminal investigation for its role in a toxic spill in Prudhoe Bay, Alaska, it's been accused of hiring right-wing paramilitary killers in Colombia and criticized for a host of issues surrounding the Baku-Tbilisi-Ceyhan, which environmentalist Hannah Ellis described thusly:
BP is the lead shareholder in the 1,100-mile long oil pipeline, which runs from Baku, Azerbaijan, through Georgia to the Turkish seaport of Ceyhan. In addition to opening up an alternative supply to the US (which has long been in search of an oil source outside the Middle East), the project has led to allegations of human rights abuses, sparked regional conflict, and deprived local people of their livelihoods and land. By 2010, The pipeline is scheduled to deliver an estimated one million barrels of oil a day, predominantly to the already saturated Western markets.
The pipeline legal agreements also give BP effective governing power over a strip of land 1,750 miles long, where the company will likely override all national environmental, social, human rights laws for the next 40 years.
In August, the Chicago Tribune reported that BP, the nation's 100th largest political campaign donor, had received an exemption from EPA rules that would allow it to increase the amount of ammonia and toxic sludge it dumps in Lake Michigan from its Whiting, Indiana refinery. The plant was already among the lake's leading industrial polluters, and the move prompted the Chicago Sun-Times to call for a boycott, saying: "At this point, the only clear message BP is sending is that it wants to have its cake and eat it too. BP executives want their company to be known as the greenest -- as suggested by its logo, meant to resemble a sunflower and show its commitment to the environment. But they also want to dump in our lakes. They can't have it both ways…"

On Tuesday, the company announced that its 3rd quarter profits were down by 45 percent. BP also announced this week that it would cut about a sixth of the workforce in its North Sea oil biz. The firm's stock rose slightly, however, because the news was actually not as bad as analysts had projected.

But if traders thought the firm's troubles were all in the past, they got a surprise this week, as two new stories of malfeasance came out about the energy giant, adding to its already long corporate-crime rap-sheet.

U.S. to Seek Indictments of Ex-BP Traders: Reports

The U.S. Justice Department is expected to seek indictments of up to four former BP Plc traders as early as Thursday, the Wall Street Journal reported in its online edition on Wednesday.

The indictments are expected in federal district court in Chicago, the Journal reported, citing people familiar with the case.

BP could not be reached for immediate comment.

The indictments are expected to be brought against former members of BP's propane-trading desk, and will come on the same day that the Justice Department and federal market and environmental regulators are expected to announce that BP has agreed to pay hundreds of millions of dollars to settle criminal and civil probes into a fatal refinery explosion and alleged market manipulation, the Journal said.

On Wednesday, the chairman of the powerful Energy and Commerce Committee in the U.S. House of Representatives said the committee will probe whether the U.S. government extracted sufficient penalties from London-based BP Plc for allegedly manipulating U.S. propane markets.

BP has agreed to pay $303 million to settle civil price-fixing charges brought by federal investigators and "in light of this settlement, the Energy and Commerce Committee will investigate whether government agencies acted appropriately during pricing negotiations with BP," said Rep. John Dingell of Michigan, the committee's chairman.

Dingell's committee has in the past probed a series of mishaps at BP including a leaky pipeline in Alaska to a deadly explosion at a Texas refinery in 2005.

Here is some background, via AP business correspondent Brad Foss
Federal investigators said Wednesday that BP energy traders cornered the U.S. propane market in the winter of 2004 and illegally manipulated prices, driving up heating and cooking costs for rural consumers.
The charges come at a time when oil and gas companies are under intense scrutiny from consumers and Congress over soaring energy prices and record profits, and analysts said the entire industry's credibility could be damaged. While BP denied any wrongdoing, a former employee admitted taking part in a conspiracy and agreed to cooperate with criminal prosecutors.
The Commodity Futures Trading Commission said that BP traders - with the consent of senior management - "purchased enormous quantities of propane to establish a dominant" position in the market and then withheld fuel from the market in order to drive prices higher.
Details of the alleged scheme, compiled with help from internal company documents and recorded conversations, were outlined in a civil lawsuit the CFTC filed against BP Products North America Inc., a Warrenville, Ill.-based unit of London-based BP PLC.
"It's pretty clear as to what they were doing," CFTC attorney Paul Hayeck said in an interview.
One former BP trader, 34-year-old Dennis N. Abbott of Houston, pleaded guilty in federal district court in Washington on Wednesday to partaking in a conspiracy "to manipulate and corner the propane market." Abbott, who has agreed to cooperate with law enforcement in an ongoing criminal investigation being conducted by the Federal Bureau of Investigation, faces up to five years in prison and a fine of $250,000, according to the Justice Department.
According to the CFTC lawsuit, which was filed in the U.S. District Court for the Northern District of Illinois, the plan to manipulate prices and pump up profits began to take shape in early 2004 amid declining propane prices that were particularly painful to BP because its traders had made significant bets that prices would rise.
The CFTC paints trading manager Mark Radley as a key architect of the plan to turn the situation around and potentially net the company $20 million in profit. In one recorded conversation, Radley boasted that the propane market was "vulnerable to a squeeze." In another he said the market was "tight enough that if someone wanted to play games with it, potentially they could."

From the beginning of the month to Feb. 27, the cost of propane skyrocketed by more than 40 percent to about 90 cents per gallon - "a price that would not otherwise have been reached under the normal pressures of supply and demand," investigators said.
Source: BP to Plea in Refinery Explosion

British energy giant BP reportedly reached a deal with U.S. officials to settle criminal allegations from a fatal explosion at a BP refinery in Texas in 2005.

The agreement, scheduled to be announced this week, would end a U.S. Justice Department investigation into the company's actions leading to and surrounding the 2005 disaster, a source told the Houston Chronicle. The 2005 blast at BP's Texas City refinery killed 15 people and injured scores more.

The person familiar with the negotiations said the company agreed to plead guilty to a crime and pay a fine, the Chronicle reported Wednesday. Other details were unavailable.

BP has settled at least 3,000 lawsuits arising from the explosion, but hundreds remain pending. The company set aside $1.6 billion to resolve that litigation.

The company is investing $1 billion into upgrades at the 73-year-old refinery.

The revelation about the settlement in the plant explosion case is in addition to a reported settlement of more than $300 million on unrelated civil charges that BP manipulated the price of propane three years ago. In this plea, BP reportedly agreed to make changes to its compliance operations to avoid criminal prosecution.

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