June 8, 2003

What Happens If Your Lead Plaintiff Gets Involved In Running The Company?

There was an interesting Associated Press story on Friday about the ongoing proxy battle and securities class action involving El Paso Corp., a Houston-based provider of natural gas services. Oscar Wyatt, Jr. is the founder of Coastal Energy, which was sold to El Paso in 2001. As a result of the sale, Wyatt owns 5 million shares of El Paso. Currently, Wyatt is both helping to finance the attempt to oust the current board and acting as the lead plaintiff in a shareholder class action accusing "the company of hiding debt, reporting revenue from so-called 'wash' energy trades and defrauding investors." If the dissident slate of directors wins, however, can Wyatt continue as the lead plaintiff in the class action (even if he will not be a board member)? A court might find that Wyatt's interests are no longer sufficiently aligned with the interests of the rest of the class.

Addition: The Associated Press has a follow-up story about a full-page ad criticizing El Paso's management that Wyatt ran in the Sunday edition of the Houston Chronicle.

Addition: The June 9 edition of Fortune has a lengthy profile of Wyatt and El Paso. The story states: "People familiar with the matter say that even if Wyatt wins [the proxy battle], he'll continue to push forward with the lawsuit."

Posted by Lyle Roberts at June 8, 2003 12:15 AM | TrackBack
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