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By Jef Feeley
Jan. 15 — Freeport-McMoRan Inc. agreed to pay $137.5 million to resolve investor lawsuits alleging that executives of the largest publicly traded copper producer had conflicts that tainted the 2012 buyouts of two oil and natural gas companies.
The settlement resolves claims that Phoenix-based Freeport-McMoRan overpaid McMoRan Exploration Co. and Plains Exploration & Production Co. because of executives' and directors' conflicts of interest in the deals, according to filings in the Delaware Chancery Court. Freeport-McMoRan paid $9 billion for the two companies.
Amalgamated Bank and other Freeport shareholders objected in the lawsuit that investors were denied the right to an approval vote on the buyout. Freeport shareholders will receive money from the settlement in the form of a special dividend, according to court filings.
The accord “returns value directly to the shareholders who were denied the opportunity to vote on these deals,” Keith Mestrich, president and chief executive officer of Amalgamated Bank, said in a statement.
Eric Kinneberg, a Freeport spokesman, said the settlement will be covered by the company's D&O insurance.
Freeport officials “deny all allegations of wrongdoing and fault and believe that they acted properly at all times,” Kinneberg said in an e-mailed statement.
The deal gave Freeport access to oil and gas deposits onshore and in the U.S. Gulf of Mexico. Houston-based Plains spent $6.1 billion for Gulf assets owned by BP Plc and Royal Dutch Shell Plc in September. McMoRan was spun off from Freeport-McMoRan Inc. in 1994.
Disgruntled investors alleged that Freeport executives concocted the buyouts to benefit themselves and had conflicting interests that called the deals into question.
They said in court filings that McMoRan CEO James Moffett also served as chairman of Freeport's board while Freeport's CEO, Richard Adkerson, doubled as a McMoRan director and co-chairman of its board. Investors also contended that nine Freeport directors held a combined 6 percent stake in McMoRan at the time of the buyout.
By overpaying for the companies, Freeport's board wasted corporate assets and hurt the value of investors' shares, according to the lawsuit.
Adkerson and other Freeport directors also are being sued separately over the board's decision to award the CEO more than $35 million in stock related to the McMoRan and Plains buyouts.
Freeport's acquisition of the energy companies didn't trigger a clause in Adkerson's compensation agreement that entitled him to 1 million shares of restricted stock, a shareholder contends in the lawsuit.
The Delaware Chancery Court's John Noble will decide whether to give the settlement final approval at a hearing slated for Mar. 16 in Dover.
To contact the reporter on this story: Jef Feeley in Wilmington, Del. at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com
©2015 Bloomberg L.P. All rights reserved. Used with permission.
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