UPDATE 2-Goldman, BP sued over alleged SemGroup conspiracy

Tue May 18, 2010 4:23pm EDT

* Oil and gas producers allege they were defrauded

* Plaintiffs claim owed millions

* Goldman accused of using SemGroup ties to own advantage (Adds comment by plaintiff lawyer, updates second paragraph)

By Jonathan Stempel

NEW YORK, May 18 (Reuters) - Several dozen oil and gas producers have sued Goldman Sachs Group Inc (GS.N) and BP Plc (BP.L), alleging they conspired with SemGroup LP to defraud the plaintiffs of money for oil and gas delivered just before the energy trader's 2008 bankruptcy.

More than 20 defendants, including Chevron Corp (CVX.N), were named in the four lawsuits filed earlier this month in Kansas and Oklahoma state courts. Goldman, BP and Chevron did not return requests for comment.

Once the 14th-largest privately held U.S. company, SemGroup filed for Chapter 11 protection on July 22, 2008, in the wake of $3.2 billion of losses on energy futures and derivatives trades. It emerged on Nov. 30, 2009, as SemGroup Corp, and this month said it plans to become publicly traded.

The 82 Kansas, Oklahoma and Texas producers are seeking millions of dollars owed on contracts in June and July 2008 to deliver millions of dollars of crude oil and gas to SemGroup.

GOLDMAN ROLE

According to two of the lawsuits, Goldman and its J. Aron & Co commodities trading unit took advantage of the bank's capacity as a SemGroup banker, lender and trading partner to enter transactions with the Tulsa, Oklahoma-based company.

SemGroup hedged its stored products with J. Aron, but soon faced a large margin call as oil and gas prices soared, the lawsuits said. This led to J. Aron's declaring a default and deciding to liquidate trading positions, they said.

J. Aron has been linked in media reports, including an April 13, 2009, Forbes article, to allegations it profited from knowledge of SemGroup trading positions through Goldman's role as an investment banker for the company.

According to the two lawsuits, "through their various relationships with ... SemGroup, J. Aron and Goldman Sachs gained access to confidential financial information, which J. Aron then used to its own advantage."

Peter Goodman, a principal at McKool Smith representing the producers, in an interview said: "We're saying that at a time J. Aron was undercollateralized in its trading relationship with SemGroup, it knowingly purchased crude oil and gas from SemGroup that it knew was coming from our clients, the producers, and knew it wasn't going to have to pay."

John Tucker, a partner at Rhodes, Hieronymus, Jones, Tucker & Gable who represents former SemGroup Chief Executive Thomas Kivisto, said he is looking into Goldman's role as he pursues claims his client may have over losses tied to the bankruptcy.

"It is correct to say that J. Aron and Goldman did have access to confidential trading information and strategies at SemGroup, and J. Aron became a significant counterparty," he said. "We are continuing our investigations along those very same issues."

BP SETOFF

The producers separately contended that BP Oil Supply Co conspired to allow SemGroup to satisfy its contractual obligations by delivering the producers' crude oil and gas.

"Through this setoff scheme, BP was able to take possession of large quantities of crude oil and gas produced by plaintiffs without ever tendering payment," two of the lawsuits said.

The lawsuits seek compensatory, equitable and punitive damages, including damages from J. Aron and BP for conspiracy to commit fraud and conversion.

The cases are Anstine & Musgrove Inc et al v. Calcasieu Refining Co et al, and Anstine & Musgrove Inc v. J. Aron & Co, Pratt County, Kansas District Court, Nos. 2010 CN 34 and 2010 CN 35; and Arrow Oil & Gas Inc et al v. J. Aron & Co et al, and Arrow Oil & Gas Inc et al v. Calcasieu Refining Co, Pottawatomie County, Oklahoma District Court, Nos. CJ-2010-239 and CJ-2010-240. (Reporting by Jonathan Stempel; Additional reporting by Matt Daily and Chelsea Emery; editing by John Wallace, Matthew Lewis and Bernard Orr)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.