This lawsuit filed by employees and former employees of Exxon Mobil Corporation, and its predecessor companies, claims that Exxon Mobil Savings Plan fiduciaries violated their ERISA duties by continuing to offer company stock within the Plan when it was not prudent to do so. The defendants knew or should have known that Exxon stock had become “artificially inflated in value due to fraud and misrepresentation.”
Exxon emphasized the strength of its business model, reporting integrity, and transparency, especially concerning the value of its oil and gas reserves. Plaintiffs allege that the company misled through the failure to disclose risks of global warming and climate change on the ability to extract hydrocarbon reserves and the failure to consider the cost of regulations when evaluating the value of future oil and gas prospects, thus, purposefully overstating the value of its reserves. In the late summer/early fall of 2016, it was reported that federal regulators were reviewing Exxon’s reserve accounting relating to climate change and global warming, and Exxon’s refusal to write down its oil and gas reserves despite the decrease in global oil prices. Exxon stock, once at a high of $95/share in July 2016, closed at $82.54/share on the news. Then, in late October 2016, Exxon announced the possibility of writing down 20% of its oil and gas assets. As a result of that news, the stock price then fell more than $2 per share.
Plaintiffs claim that the Plan’s trustees could have stopped purchases into the stock or possibly directed the Plan to “divert some of its holdings into a low-cost hedging product” that would have served to dilute some of the damage expected once the fraud was exposed. Plaintiffs also argue that Exxon could have issued corrective disclosures so that Exxon stock would return to being a prudent investment.
www.plansponsor.com; December 5, 2016.