US Oil Price Manipulation Lawsuit Settled
Oil traders have reached a $16.5 million settlement of a U.S. class action lawsuit accusing Arcadia Petroleum Ltd, its Parnon Energy unit and two traders of illegally manipulating the price of crude oil in early 2008.
The preliminary settlement was filed late Wednesday night in Manhattan federal court and requires court approval.
It resolves charges that the companies, Arcadia trader Nicholas Wildgoose and Parnon trader James Dyer violated federal antitrust and commodities laws by using futures and options to benefit financially from an artificial crude oil shortage they created at a key hub in Cushing, Oklahoma.
None of the defendants admitted wrongdoing.
The settlement came after the U.S. Commodity Futures Trading Commission last August imposed a $13 million civil fine against them in a related case, and limited Parnon's ability to trade oil for three years.
According to a filing in the class action, an expert for the plaintiffs estimated that up to $1.05 billion of damages could be proven at trial.
But the plaintiffs' lawyers found "significant risks" to further litigation, including the need to establish liability and damages, and the potential difficulty of collecting damages from the defendants, several of which are foreign.
Christopher Lovell, a partner at Lovell Stewart Halebian Jacobson representing the plaintiffs, said the $16.5 million settlement was "reasonable" in light of such risks.
Arcadia is based in the United Kingdom, and controlled by John Fredriksen, who is worth $10.4 billion according to Forbes magazine. Wildgoose is also from the United Kingdom, and Dyer from Australia.
Timothy Carey, a Winston & Strawn partner representing the defendants, was unavailable for comment.
In the class action, traders said that in early 2008, as oil prices were nearing $100 a barrel, the defendants amassed huge crude oil positions to create a sense of tight supply, and then sold out of contracts to benefit from higher prices.
The defendants later allegedly entered "short" positions to benefit from falling prices, and then dumped oil they had amassed back onto the market, causing prices to crash.
The settlement covers traders in New York Mercantile Exchange and Intercontinental Exchange (ICE) light sweet crude oil (WTI) futures and options from Jan. 1 to May 15, 2008.
Much of the settlement may cover litigation costs. The plaintiffs' lawyers plan to seek up to $5.5 million for fees, and up to $4.6 million for expenses, a court filing shows.
The case is In re: Crude Oil Commodity Futures Litigation, U.S. District Court, Southern District of New York, No. 11-03600.
(Reporting by Jonathan Stempel in New York; Editing by Paul Simao, Bernard Orr)
