Status: Ongoing Case
Labaton Sucharow represents clients as liaison counsel in an action against Saipem S.p.A. (Saipem), an Italian oil and gas industry contractor. The case stems from Saipem’s failure to timely and adequately inform investors of the true nature of its finances, which caused its stock price to drop considerably.
In 2012, Saipem company officials were accused of bribing officials from Sonatrach, Algeria’s government-owned oil and gas company, in exchange for ensuring local development deals. Despite these bribery allegations, throughout 2012, Saipem’s then CEO, Pietro Franco Tali, touted stable margins and 2013 earnings that were expected to be similar to those of 2012. On December 5, 2012, Tali suddenly resigned to allow the company “to better respond to the Milan Prosecutor’s inquiry” into bribery payments in Algeria. The company then installed a new management team that promised to provide greater transparency to the public.
The new management team uncovered misreporting dating back to 2012. The company issued a profit warning on January 29, 2013, announcing a 50 percent drop in earnings before interest and taxes (EBIT) from €1.5 billion to €750 million. Another profit warning was issued in June, in which the expected 2013 EBIT was further reduced to zero. Saipem’s stock price fell by 34 percent and 29 percent, respectively, on these two disclosure dates. The new management team’s operational review revealed weaknesses and “serious deficiencies” in the company’s internal organization, risk management, and reporting mechanisms. CEO Umberto Vergine admitted the company faced “major legacy issues, which have proved to be of greater magnitude than we envisaged.”
In August 2013, Italian regulatory authorities brought charges against Saipem regarding the timing of the profit warning and the 2012 accounts, and, in September of that year, Italian investigators began investigating allegations of insider trading and market manipulation.
On April 28, 2015, Deminor filed a lawsuit on behalf of a group of 64 institutional investors against Saipem in the Court of Milan (Tribunale di Milano) to seek compensation for losses suffered on purchases of the company’s shares.
This case is still in the early stages with the judge evaluating whether powers of attorneys presented by the plaintiffs are acceptable. That issue should be resolved at a hearing in April 2017.