Pickens Agrees to Pay $7.2 Million to Settle Stock-Related Lawsuits
Corporate raider T. Boone Pickens Jr.’s Mesa Limited Partnership agreed to pay $7.2 million Thursday to settle two civil suits, including one by federal regulators alleging securities law violations.
Mesa will pay $2.3 million to settle Securities and Exchange Commission charges that the firm sold a mining company’s stock after it announced plans to acquire the concern. The announcement drove up the share price.
Without admitting or denying wrongdoing, Pickens and Mesa Limited Partnership, a Dallas energy concern, also agreed to put $2.3 million in alleged illegal profits into a fund to reimburse other investors.
In a separate development, Mesa announced that it had agreed to pay $4.9 million to settle a 6-year-old class-action suit that Phillips Petroleum Co. shareholders brought against Mesa and Phillips.
Mesa, Phillips and other defendants agreed to pay $6.7 million to settle the suit, which was brought by shareholders unhappy with how Phillips headed off a takeover bid by Pickens. The settlement is subject to a judge’s approval at federal court in Delaware.
In 1984, Mesa offered $60 a share in cash for up to 23 million of Phillips’ 154.6 million outstanding common shares and was considering offering $60 in securities for each of the remaining shares. But it dropped the bid under an agreement with Bartlesville, Okla.-based Phillips.
Under the agreement, Mesa was to sell back its 8.9 million shares of Phillips stock to the company for $53 a share in cash, giving Mesa a pretax profit of $89 million.
In some quarters, this is considered greenmail--threatening a takeover, then profiting by forcing a company to buy back its stock at a premium. That kind of behavior earned Pickens, who also launched unsuccessful bids against Unocal Corp. and Gulf Corp., the reputation of corporate raider.
In a statement, Mesa denied that it violated any laws but added that “the risk and expense of litigation make this settlement an appropriate resolution of these issues.”
A spokesman for Pickens in Washington said “in both cases Boone wanted to get these lawsuits behind him so he could concentrate on the energy market.”
The SEC’s civil complaint, filed in a federal court in Texas, charged Pickens and Mesa with alleged securities law violations involving the sale of common stock and call options of Homestake Mining Inc., a San Francisco gold mining company traded on the New York Stock Exchange.
Call options give an investor the right to buy shares at a fixed price at a later date. They are used in trading strategies that bet on a rise in the stock’s price.
The SEC contended that Mesa issued a news release that was “materially false or misleading” about its intention to acquire Homestake without revealing that it also intended to sell Homestake shares it already held.
The SEC charged that on Feb. 29, 1988, Mesa issued a press release stating its intention to acquire Homestake in a negotiated transaction. The price of Homestake’s shares rose nearly $4 per share to more than $18 on the news.
The same day, Mesa began selling shares without updating the press release.
Between that day and March 11, Mesa sold more than 3.3 million shares of Homestake stock and 3,331 Homestake call options.
The SEC complaint alleged that “as a result of the failure to state all facts necessary” to update the press release, Mesa and Pickens violated federal securities laws.
