A BP Employee Sold All His Stock Right After Learning How BP Downplayed Gulf Spill Estimates
A press release from the Securities and Exchange Commission alleges that 20-year BP employee Keith Seilhan used inside knowledge about the scale of the Deepwater Horizon disaster to avoid losing money on his BP stock.
A press release from the Securities and Exchange Commission alleges that 20-year BP employee Keith Seilhan used inside knowledge about the scale of the Deepwater Horizon disaster to avoid losing money on his BP stock. Seilhan — whose LinkedIn page describes his role at the company as Operations Director — agreed to pay a civil penalty without admitting wrongdoing.
According to the SEC, in April 2010 Seilhan was told that the oil company's official, public estimate of the rate of flow from the broken pipe at the bottom of the Gulf of Mexico was an order of magnitude too low. The public thought 5,000 barrels of oil per day was leaking. BP discovered — and Seilhan learned — that the rate was instead over 50,000 barrels. "The information that Seilhan obtained," the SEC release reads, "indicated that the magnitude of the oil spill and thus, BP’s potential liability and financial exposure, was likely to be greater than had been publicly disclosed."
Allegedly after learning that fact, Seilhan sold all of his stock. "Seilhan directed the sale of his family’s entire $1 million portfolio of BP securities over the course of two days in late April 2010," the SEC alleges. "The trades allowed Seilhan to avoid losses and reap unjust profits as the price of BP securities dropped by approximately 48 percent after the sales on April 29 and April 30, 2010, reaching their lowest point in late June 2010." In other words, Seilhan sold securities for $1 million that were worth $520,000 a few days later.
Without admitting or denying insider trading, the SEC says, Seilhan agreed to return about $105,000 in profits plus interest and to pay a penalty to the SEC for the same amount.
The explosion on the offshore rig in 2010 killed 11 people and severed its connection to the ocean floor, allowing oil to leak into the Gulf of Mexico for months. On Wednesday, BP announced that it had completed its cleanup efforts; the Coast Guard, however, disagreed. By December of last year, the company had paid $13 billion in fines and settlements. In 2010, the company had almost $30 billion in gross income.
Correction: This post originally referred to Seilhan as an executive with BP.