A former Exxon Mobil Corp. employee filed a lawsuit against the energy company alleging it breached its fiduciary duties by continuing to offer its company stock fund as an investment option in the ExxonMobil Savings Plan, Irving, Texas.
The class-action lawsuit, filed last week in a U.S. District Court in Houston, alleges that Exxon officials “knew or should have known that Exxon's stock had become artificially inflated in value (from Nov. 1, 2015 to Oct. 28) due to fraud and misrepresentation, thus making Exxon stock an imprudent investment under ERISA and damaging the plan and those plan participants who bought or held Exxon stock.”
The lawsuit argues that Exxon officials overstated the value of the company's oil and gas reserves, artificially inflating the price of Exxon stock to a high of more than $95 per share in mid-July.
When it was revealed weeks later that federal regulators were looking into Exxon's reserve accounting, and that the company may be forced to write down nearly 20% of its oil and gas assets, the value of Exxon stock in the 401(k) plan dropped, costing plan participants millions of dollars in retirement savings, the lawsuit claims. The stock closed at $84.78 on Oct. 28.
As of Dec. 31, the ExxonMobil Savings Plan had $19.8 billion in assets, including $10.7 billion invested in company stock.
“Allegations in this frivolous lawsuit are false and completely without merit. We will defend ourselves and are confident our financial reporting and communications with investors fully comply with all legal and accounting requirements,” said an Exxon spokesman in an e-mailed statement. “This lawsuit misstates our financial reporting and repeats the same tired allegations pushed by activists and inaccurate media reports that claim we reached definitive conclusions about climate change decades before the world's experts and while climate science was in an early stage of development. This is simply not credible.”
The lawsuit claims Exxon's overstatements were driven in part by its failure to “acknowledge the impact of climate change on the value of its reserves,” and failure to “properly account for the declining price of oil and its impact on the value of its reserves.”
An earlier lawsuit filed Nov. 7 contains similar charges.