SEC Accuses Former BP Employee Of Insider Trading During Deepwater Horizon Spill

The Securities and Exchange Commission charged a former 20-year veteran of BP with insider trading during the immediate aftermath of the Deepwater Horizon rig explosion and subsequent oil spill, alleging the employee avoided more than $100,000 in losses as BP's share price dropped by nearly 50% as news of the spill's magnitude emerged.  Keith A. Seilhan, a senior responder for BP during the Deepwater Horizon oil spill, agreed to settle claims that he violated federal securities laws by selling his family's entire $1 million portfolio of BP securities after he learned that the public estimations of the spill's magnitude were grossly understated.  Without admitting or denying the allegations, Seilhan agreed to pay (i) $105,409 of ill-gotten gains; (ii) $13,300 in prejudgment interest; and (iii) a civil penalty of $105,409.

According to the Commission, after the explosion on the Deepwater Horizon oil rig on April 20, 2010, Seilhan was designated to BP's Incident Command Center in Houma, Louisiana, where he was responsible for overseeing the initial oil collection and clean-up operations.  In his position as Incident Commander, Seilhan learned of nonpublic information relating to the seriousness of the disaster, including initial oil flow estimates from the sunken rig that were significantly greater than the public estimate of  5,000 barrels per day.  Indeed, those private estimates were between 52,700 and 62,200 barrels per day - a 10x increase than that provided to the public.

After he learned of this information, Seilhan sold his and his family's entire $1 million portfolio of BP securities, including common shares and options.  By doing so, Seilhan and his family were able to avoid over $100,000 in losses as BP's share price eventually declined 48%.  Later, after BP announced it had successfully capped the well, Seilhan  repurchased shares of the BP Stock Fund (composed nearly entirely of BP shares) at a lower basis.

While the Commission acknowledged the assistance of the Department of Justice's Deepwater Horizon Task Force, there is no indication that criminal charges will be filed.

Jordan Maglich is a securities law attorney in Tampa, Florida.  Follow Jordan on Twitter at@Ponzitracker.

A copy of the SEC's Complaint is here and embedded below: