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Offshore petroleum driller Transocean Ltd. inflated its stock price by misleading shareholders about the effectiveness of a key piece of safety equipment, a federal court suit alleges.
Lug, Switzerland-based Transocean owned the ill-fated Deepwater Horizon that exploded on April 20 and later sank in the Gulf. The rig's blowout preventer -- a piece of equipment considered to be a last-ditch mechanism to cap a leaking well -- failed to activate.
Oil has been gushing from the BP PLC site since then, leading to a major environmental disaster.
In a suit seeking class-action status under federal securities laws, two Transocean shareholders from New York City, Thomas Yuen and Sumni Ahn, claim that the company made misleading statements about the effectiveness of blowout preventers and attempted to hide potential problems from stock owners.
The suit would cover stockholders who obtained Transocean stock between Aug. 5, 2009 and May 7, 2010. After hitting a high of $94.88 on Jan. 11, the stock has since dropped to around $62.
Transocean CEO Steven Newman is also named as a defendant. In an appearance before a U.S. Senate committee on May 11, Newman said the explosion was caused by a failure of drilling cementing, casing or perhaps both. He dismissed suggestions that the blowout preventer, or BOP, owned by Transocean may have been a cause.
The suit alleges that Transocean was aware of studies showing potential problems with BOPs. In addition, another BP project being drilled by Transocean in June 2000 was shut down for several months because of a problem with a BOP, the suit said.
Transocean also was issued citations in 2005 and 2006 by regulators in Great Britain for failing to maintain a BOP properly and for problems with testing BOPs, the suit alleges.
"Defendants failed to disclose the serious risks Transocean faced as a result of its ongoing utilization of deficient BOPs," the suit says. "Defendants also omitted to disclose that on numerous prior occasions, Transocean had been censured or otherwise disciplined for BOP failures and problems."
Two Transocean spokesmen did not respond immediately to an e-mail asking for comment.
The suit, filed May 13, was assigned to U.S. District Judge Jay Zainey in New Orleans.