Baker Hughes 2009 Annual Report Download - page 136

62 Baker Hughes Incorporated
Under the terms of the settlements with the DOJ and the
SEC, the Company and BHSII paid, in the second quarter of
2007, $44 million ($11 million in criminal penalties, $10 mil-
lion in civil penalties, $20 million in disgorgement of profits
and $3 million in pre-judgment interest) to settle these investi-
gations. In the fourth quarter of 2006, we recorded a financial
charge for the potential settlement.
Derivative Lawsuits
On May 4, 2007 and May 15, 2007, the Sheetmetal Work-
ers’ National Pension Fund and Chris Larson, respectively, insti-
tuted shareholder derivative lawsuits for and on the Company’s
behalf against certain current and former members of the
Board of Directors and certain current and former officers, and
the Company as a nominal defendant, following the Compa-
ny’s settlement with the DOJ and SEC in April 2007. On
August 17, 2007, the Alaska Plumbing and Pipefitting Industry
Pension Trust also instituted a shareholder derivative lawsuit
for and on the Company’s behalf against certain current and
former members of the Board of Directors and certain current
and former officers, and the Company as a nominal defen-
dant. On June 6, 2008, the Midwestern Teamsters Pension
Trust Fund and Oppenheim Kapitalanlagegesellschaft mbH
instituted a shareholder derivative lawsuit for and on the Com-
pany’s behalf against certain current and former members of
the Board of Directors and certain current and former officers,
and the Company as a nominal defendant. The complaints in
all four lawsuits allege, among other things, that the individual
defendants failed to implement adequate controls and compli-
ance procedures to prevent the events addressed by the settle-
ment with the DOJ and SEC. The relief sought in the lawsuits
includes a declaration that the defendants breached their fidu-
ciary duties, an award of damages sustained by the Company
as a result of the alleged breach and monetary and injunctive
relief, as well as attorneys’ and experts’ fees. On May 15, 2008,
the consolidated complaint of the Sheetmetal Workers’ National
Pension Fund and the Alaska Plumbing and Pipefitting Industry
Pension Trust was dismissed for lack of subject matter jurisdic-
tion by the Houston Division of the United States District Court
for the Southern District of Texas. The lawsuit brought by Chris
Larson in the 215th District Court of Harris County, Texas was
dismissed on September 15, 2008. The lawsuit brought by the
Midwestern Teamsters Pension Trust Fund and Oppenheim
Kapitalanlagegesellschaft mbH in the Houston Division of the
United States District Court for the Southern District of Texas
was dismissed on May 26, 2009. The time period for plaintiffs
to file a Notice of Appeal in each of the cases has expired.
BJ Services Merger Related Stockholder Lawsuits
Delaware Cases
On September 1, 2009, three purported stockholder
class action lawsuits styled Laborers Local 235 Benefit Fund v.
Stewart, et al., The Booth Family Trust v. Huff, et al., and Dug-
dale v. Huff, et al., were filed in the Court of Chancery of the
State of Delaware (the “Delaware Chancery Court”) on behalf
of the public stockholders of BJ Services, with respect to the
Merger Agreement, dated as of August 30, 2009, among
Baker Hughes, its wholly owned subsidiary, BSA Acquisition
LLC, a Delaware limited liability company (“Merger Sub”) and
BJ Services, whereby, subject to satisfaction of the conditions
to closing, BJ Services will merge with and into Merger Sub
(the “Merger”), with Merger Sub continuing as the surviving
entity after the Merger. Each action names BJ Services, the
current members of the BJ Services Board of Directors (the
“BJ Services Board”) and the Company as defendants (collec-
tively the “Defendants”).
In these Delaware actions, and the follow-on actions dis-
cussed below, the plaintiffs allege, among other things, that
the members of the BJ Services Board breached their fiduciary
duties by failing to properly value BJ Services, failing to take
steps to maximize the value of BJ Services to its public stock-
holders, and avoiding a competitive bidding process. The
actions each allege that the Company aided and abetted the
purported breaches by the BJ Services Board. The plaintiffs in
each lawsuit seek, among other things, injunctive relief with
respect to the Merger.
To date, six additional purported class action lawsuits have
been filed in the Delaware Chancery Court on behalf of the
public stockholders of BJ Services against the Company, BJ
Services and the BJ Services Board, including: Myers, v. BJ Ser-
vices, et al., which was filed on September 4, 2009, Garden
City Employees’ Retirement System v. BJ Services, et al., which
was filed on September 8, 2009, Saratoga Advantage Trust-
Energy & Basic Materials Portfolio v. Huff, et al., which was
filed on September 8, 2009, Stationary Engineers Local 39
Pension Trust Fund v. Stewart, et al., which was filed on Sep-
tember 11, 2009, Jacobs v. Stewart, et al., which was filed on
September 23, 2009, and Lyle v. BJ Services Company, et al.,
which was filed on October 1, 2009.
On September 25, 2009, the Delaware Chancery Court
entered an order consolidating the lawsuits filed in the Dela-
ware Chancery Court. On October 6, 2009, the Delaware Chan-
cery Court entered an order implementing a bench ruling of
October 5, 2009, resolving competing motions for appointment
of lead counsel in the Delaware Chancery Court and designat-
ing the law firm of Faruqi & Faruqi, LLP of New York, New York
as lead counsel and Rosenthal, Monhait & Goddess, P.A. of
Wilmington, Delaware as liaison counsel. On October 14, 2009,
the Delaware Chancery Court entered a supplemental consoli-
dation order adding the October 1, 2009 Lyle complaint to the
consolidated action.
On October 16, 2009, lead counsel for plaintiffs in the
consolidated class action, In re: BJ Services Company Share-
holders Litigation, C.A. No. 4851-VCN, served a Verified Con-
solidated Amended Class Action Complaint (the “Amended
Complaint”) in the Delaware Court of Chancery. The Amended
Complaint, among other things, adds an officer of BJ Services
(Jeffrey E. Smith, the Executive Vice President – Finance and
CFO of BJ Services) as a defendant, contains new factual alle-
gations about the negotiations between BJ Services and the
Company, and alleges the Form S-4 Registration Statement and
preliminary joint proxy statement/prospectus, filed with the
Securities and Exchange Commission on October 14, 2009,
omits and misrepresents material information.