BP Crisis Manager Traded on Inside Oil Spill Info, SEC Says
NEW YORK ( MainStreet) Keith Seilhan must have had a lot on his mind in April 2010. He was an operations manager for BP America, and as oil gushed into the Gulf of Mexico after the explosion of the Deepwater Horizon drilling rig, Seilhan was made incident commander, responsible for directing the cleanup and containment efforts in the water and along the coast. He would serve in an on-scene capacity, coordinating the company's response from Houma, La.
On April 29, in filings to the Securities and Exchange Commission, BP said that the flow rate of the spill was up to 5,000 barrels of oil per day (bopd). According to the SEC, this "public estimate was significantly less than the actual flow rate, which was estimated later to be between 52,700 and 62,200 bopd." As an incident commander, Seilhan had access to the company's internal data and calculations, which indicated the true scale of the disaster -- far worse than the public was being told.
Seilhan had worked at BP in various management roles for 20 years, and his family owned a portfolio of company stock worth $1 million. There was much to do: when the well was finally capped after 84 days of gushing, the disaster turned out to be the largest accidental marine oil spill in world history, fouling the ocean with more than 200 million gallons of crude (exceeded only by the intentional release of hundreds of millions of gallons of oil into the Persian Gulf by Iraqi forces during Operation Desert Storm). Containment booms, skimmers, and aircraft all had to be deployed; controversial actions were taken, like the heavy use of Corexit oil dispersant, including unprecedented underwater application (with environmental consequences still being debated).
Seilhan, whom the SEC calls "an experienced crisis manager," found time to take additional action: on April 29 and 30, having received a week's worth of confidential information about the leak, he sold all the BP securities he and his family owned, emptying retirement accounts and exercising stock options. According to an SEC complaint , with these trades "Seilhan realized unjust profits and avoided losses in excess of $100,000." As the truth about the spill emerged, and oil continued to flow into the Gulf, BP's share price dropped by 48%, bottoming out in June 2010.
Seilhan dumped his BP stock just after the first indications that the spill might be worse than the company and the government first said -- but well before the full severity of the problem, or the official deception, became widely known. (As late as May 18, BP CEO Tony Hayward told Sky News , "I think the environmental impact of this disaster is likely to have been very, very modest.") The initial public estimate of the flow rate, released on April 24 (the day after the leak was discovered), was 1,000 bopd. On the evening of April 28, it was announced at a press conference that the flow rate "could be as much as 5,000 barrels" per day. The next day, a senior BP executive went on morning television and gave a range of 1,000 to 5,000 bopd. At noon, the SEC says, Seilhan sold 87,512 units of BP stock, "resulting in proceeds of $984,697.01." Early the next morning, he sold three different stock option grants in his brokerage account, netting $47,561.54.