Allegations from a former engineer for Anadarko Petroleum who now lives in Colorado are at the center of a federal lawsuit filed on Wednesday alleging the company engaged in a multibillion-dollar fraud against investors by misstating the value of an oil field it owned in the Gulf of Mexico.
Lawyers filed the investor fraud lawsuit against Anadarko, Colorado’s largest oil and gas driller over the last decade, in U.S. District Court in Houston. They are seeking to expand it to a class-action. The litigation follows disclosures in The Gazette about the allegations from the company’s former engineer, Lea Frye, now working as a wildlife photographer in Buena Vista.
She and her lawyer, David Minces, of Bellaire, Texas, have declined comment.
Gerard Pecht, legal counsel with Occidental Petroleum, which bought Anadarko for $38 billion last March, also declined comment on the litigation, brought this week.
The litigation is one of two shareholder lawsuits filed in the past three years to allege Anadarko misled investors. The other class-action lawsuit alleged the company set up conditions that led to a fatal home explosion in April 2017 in Firestone by violating safety rules and laws. That lawsuit, which helped propel Colorado legislators to overhaul regulations guiding oil and gas development, was dismissed last year.
The litigation filed this week claims Anadarko “made materially false and/or misleading statements, as well as failed to disclose material adverse facts, about the company’s business and operations.”
The lawsuit, filed on behalf of the Georgia Firefighters’ Pension Fund and other similarly situated investors, states the company fraudulently stated to investors that its holdings in the Shenandoah field, located in the Gulf about 170 miles off the coast of Louisiana, would produce lucrative profits.
In reality, the value of those assets were vastly overstated, which became apparent when the company wrote off hundreds millions of dollars of losses in the Shenandoah project, the shareholder lawsuit claims.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s common stock, plaintiff and other members of the class have suffered significant damages,” the lawsuit claims.
The shareholder litigation references allegations in a whistleblower lawsuit filed on behalf of Frye, which remains under seal. Frye was a senior reservoir engineer and team lead for the Shenandoah project, south of Louisiana’s Port Fourchon.
Reporting by The Gazette showed that Frye’s lawsuit contends Anadarko officials exaggerated findings from appraisal wells in the Shenandoah, according to court records, and excoriated her after she refused to falsify maps inflating the value of the oil field and appraisals.
She filed a lawsuit against Anadarko, claiming she was retaliated against for filing a complaint with the U.S. Securities and Exchange Commission contending her employer misled investors.
U.S. District Judge Lee Rosenthal dismissed her lawsuit, which claims the company’s retaliation became so severe she found the workplace intolerable and had to resign in 2016. She appealed.
A four-judge panel of the 5th Circuit Court of Appeals of New Orleans, in a ruling unsealed in January, upheld Rosenthal’s dismissal of Frye's lawsuit, but ordered Rosenthal to reconsider whether Frye can make public the complaint she filed with the U.S. Securities and Exchange Commission.
The appellate panel noted “the high value of the information at issue” as well as “potential liability” if the SEC complaint “is released and contains the information that Frye alleges.”
The lower court judge has given the lawyers representing Frye and Occidental Petroleum through the end of this month to “meet and confer” over whether the SEC complaint can be disclosed to the public.
Frye contends she fears she will be sued if she discloses what she wrote to the SEC because Anadarko had her sign a confidentiality agreement .
Also named as defendants in the shareholder litigation referencing Frye’s allegations were R. A. Walker, Anadarko’s former chief executive officer, who received a golden parachute payout of $98 million, following Occidental’s buyout of Anadarko; and Robert Gwin, Anadarko’s former president, who received a golden parachute of $55 million, following the company’s buyout. They could not be reached for comment. The shareholder lawsuit was filed by the Houston law firm Kessler Topaz Meltzer & Check, LLP.
A court order was issued on Thursday directing the lawyers to file a list of potential plaintiffs.
A pretrial conference has been scheduled for April 20 at U.S. District Court in Houston.