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Lead Plaintiffs, LaGrange Capital Partners, LP and LaGrange Capital Partners Offshore

Fund, Ltd. (together, “LaGrange” or “Lead Plaintiffs”), through their attorneys, bring this action

on behalf of themselves and all others similarly situated, and allege as follows. The allegations

herein are based on personal knowledge as to the Lead Plaintiffs and the Named Plaintiffs

(collectively, “Plaintiffs”) as to their own acts and upon information and belief as to all other

matters. Plaintiffs’ information and belief is based on, inter alia, the investigation of Plaintiffs’

Counsel. This investigation has included a review of: (1) Tronox Incorporated’s (“Tronox” or

the “Company”) public filings with the Securities and Exchange Commission (“SEC”); (2) Kerr-

McGee Corporation’s (“Kerr-McGee”) public filings with the SEC; (3) Anadarko Petroleum

Corporation’s (“Anadarko”) public filings with the SEC; (4) the pleadings and papers on file in

the pending Chapter 11 bankruptcy case captioned In re Tronox, Incorporated, et al., No. 09-

10156 (ALG) (Bankr. S.D.N.Y.); (5) securities analyst reports regarding Tronox and Kerr-

McGee; (6) transcripts of quarterly earnings conference calls with Tronox management; (7)

publicly available trading information regarding Tronox securities; (8) articles in the general and

financial press; (8) interviews with confidential witnesses; and (9) consultation with experts.

Many of the allegations set forth herein are based on the Adversary Complaint (Tronox Inc., et

al. v. Anadarko Petroleum Corporation, et al., No. 09-01198 (ALG) (Bankr. S.D.N.Y. May 12,

2009)) filed by Tronox Inc. against Kerr-McGee and Anadarko in Tronox’s pending bankruptcy

case, which allegations are based on Tronox’s access to and review of internal Tronox business

records and access to and interviews with Tronox executives.

The investigation of Plaintiffs’ Counsel into the factual allegations contained herein is

continuing. Many of the relevant facts are known only by the Defendants, or are exclusively

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within their custody or control. Plaintiffs believe that substantial evidentiary support will exist

for the allegations set forth herein after a reasonable opportunity for discovery.

INTRODUCTION AND OVERVIEW

1. This is a federal securities class action on behalf of purchasers of the publicly

traded equity and debt securities of Tronox between November 21, 2005 and January 12, 2009,

inclusive (the “Class Period”). The Defendants are: Tronox’s officers and directors during the

Class Period; its controlling entity, Defendant Kerr-McGee and certain of its officers; Anadarko,

the successor-in-interest to Kerr-McGee; and Tronox’s outside public accounting firm during the

Class Period, Ernst & Young LLP (“E&Y”).

2. During the Class Period, Defendants misled Tronox’s public investors by

disseminating a series of materially false and misleading statements concerning Tronox’s

financial condition. In particular, as further alleged herein, Tronox improperly recorded and/or

failed to record on its publicly issued financial statements material liabilities for environmental

remediation obligations and related tort claims in violation of Generally Accepted Accounting

Principles (“GAAP”). Tronox also failed to provide sufficient disclosure to investors to permit a

meaningful evaluation of the true scope and extent of these environmental remediation and

related tort liabilities, which were associated with decades of environmental pollution. These

materially misleading misstatements and omissions regarding the Company’s financial results

occurred, in large part, because of Defendants’ knowing or reckless failure to: (1) record

appropriate reserves as required by GAAP; (2) disclose a range of possible reserves for probable

and reasonably estimable environmental remediation and tort liabilities as required by GAAP;

and (3) properly estimate known and probable environmental remediation obligations as required

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by GAAP. By knowingly or recklessly failing to record adequate reserves as required under

GAAP, Defendants depicted Tronox in a misleadingly positive light.

3. Indeed, from the moment it was spun-off from its long-time parent, Defendant

Kerr-McGee, in 2005 (the “Tronox IPO”), Tronox faced significant economic pressures as a

stand-alone enterprise. Specifically, Tronox was heavily burdened with massive environmental

and other liabilities (the “Legacy Liabilities”) without adequate cash and assets to fund these

obligations. In fact, as was ultimately revealed, Tronox was unable to survive as an independent

company due, in material part, to the magnitude and extent of its Legacy Liabilities.

4. As alleged more fully below, the Tronox IPO was a scheme orchestrated by

Defendant Kerr-McGee to foist the vast majority of its enormous environmental remediation and

related tort liabilities, accumulated over decades, onto Tronox, so that Kerr-McGee could

thereafter present itself for sale as a pure oil and gas exploration and production company free of

the toxic financial by-products of its seventy (70) year history as an oil and gas, chemicals, and

uranium mining concern. Defendant Kerr-McGee’s fraudulent plan reaped massive and almost

immediate benefits when, on August 10, 2006, Defendant Anadarko acquired Kerr-McGee for

$18 billion in cash and assumption of debt purportedly free and clear of any obligation (save for

a small, and largely illusory, indemnity) for what had become, as of that date, Tronox’s

environmental remediation and tort liabilities. Certain senior Kerr-McGee executives, including

Defendants Luke R. Corbett, Robert M. Wohleber, and Gregory L. Pilcher, each of whom had

been instrumental in planning and effectuating the transfer of the environmental remediation and

tort liabilities to Tronox prior to the IPO, reaped huge personal windfalls from this transaction.

Defendant Kerr-McGee controlled all aspects of this transaction. Anadarko, having acquired

Kerr-McGee, subsequently continued to dominate and control Tronox through the Class Period

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by virtue of the agreements that had been entered into as the time of the Tronox IPO between

Kerr-McGee and Tronox. Kerr-McGee accomplished this fraud not only by developing the

unlawful plan, but also by putting in place as officers and directors of Tronox individuals who

had served as Kerr-McGee officers and who themselves knew of, or recklessly disregarded, the

extent of the environmental remediation and tort liabilities facing Tronox, and who were willing

to sign off on the inappropriate accounting treatment and lack of disclosure regarding these

liabilities to serve the interests of Defendant Kerr-McGee.

5. While the fraudulent spin-off freed Kerr-McGee from its Legacy Liabilities and

cleared the way for its sale to Anadarko, Tronox was left broke and overburdened with millions

of dollars of environmental remediation costs and liabilities. As a result, Tronox was forced to

file for bankruptcy protection on January 12, 2009. In its bankruptcy petition, Tronox revealed

for the first time that it had spent more than $118 million to satisfy the Legacy Liability

obligations and still faced hundreds of millions of dollars in additional claims. The bankruptcy

also revealed for the first time the existence of “secret sites” representing additional undisclosed

and material environmental remediation liabilities that would cost Tronox hundreds of millions

of dollars to remediate and that Defendants had known about, or recklessly disregarded, during

the Class Period. The revelations of Tronox’s several hundreds of millions of dollars in Legacy

Liability obligations were in stark contrast to the approximately $200 million Tronox

consistently reported as constituting an appropriate environmental remediation reserve

throughout the Class Period.

6. Tronox also has admitted that it repeatedly and materially misstated its financial

results throughout the Class Period based on its improper reserving methodology. On May 4,

2009, Tronox filed a Form 8-K with the SEC stating that the financial statements it had

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published throughout the Class Period could no longer be relied upon and would require

restatement:

[O]n May 4, 2009, the Chief Executive Officer of [Tronox], in consultation with and consistent with the conclusion reached by the Board of Directors, concluded that the financial statements included in the Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K filed with the Securities and Exchange Commission should no longer be relied upon because the Company failed to establish adequate reserves as required by applicable accounting pronouncements. The financial statements that would be affected by any restatement related to the methodology previously employed in establishing and maintaining the company’s environmental and other contingent reserves [and] are the Company’s previously issued financial statements for the years ended December 31, 2005, 2006, and 2007 along with affected Selected Consolidated Financial Data for 2003 and 2004 and the financial information for the first three quarters of 2008. The Company has not yet completed a review of contingency reserves related to all known sites where the company may have environmental remediation and other related liabilities and therefore the amount of any increase to its reserves that may need to be taken is not known at this time. However, the adjustments will be material. (Emphases added).

7. Tronox has not released any restated financials covering the periods in question,

and likely will not do so in light of its bankruptcy. However, by announcing that its Class Period

financial statements could not be relied upon and require restatement, Tronox has admitted that

the publicly-issued financial statements for each of the reported periods during the Class Period

were not prepared in conformity with GAAP, and that Tronox and the officers and directors who

signed the SEC filings containing these misstated financial results, materially misrepresented the

Company’s financial condition and results of operations.

8. The public dissemination of the materially false and misleading financial

information with regard to reserves caused Tronox’s publicly traded shares and debt obligations

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to trade at artificially inflated prices during the Class Period. Tronox’s stock price traded as high

as $17.43 per share during the Class Period. As the fraud was revealed and assimilated by the

marketplace, the price of Tronox’s stock declined to a low of $0.13 on the date of its bankruptcy.

Plaintiffs and all other members of the Class sustained substantial damages as the full and true

extent of Tronox’s environmental remediation and related tort liabilities slowly came to light.

THE LEGACY LIABILITY FRAUD BANKRUPTS TRONOX

9. Over its more than 70-year history, and because of the nature of its operations and

acquisitions, Defendant Kerr-McGee had become obligated for massive actual and contingent

environmental remediation and tort liabilities (defined above as the “Legacy Liabilities”). The

Legacy Liabilities were accumulated by Defendant Kerr-McGee through its various businesses

including, but not limited to the manufacture of chemicals, treatment of wood products,

production of rocket fuel, refining and marketing petroleum products, and the mining, milling,

and processing of nuclear materials. In its SEC filings, Tronox identified certain – but not all –

of the Legacy Liabilities. Specifically, Tronox identified environmental remediation at the

following sites: Henderson, Nevada; West Chicago, Illinois; Ambrosia Lake, New Mexico;

Crescent, Oklahoma; Lakeview, Oregon; Soda Springs, Idaho; Milwaukee, Wisconsin; the New

Jersey Wood-Treatment Site (Manville, New Jersey); Sauget, Illinois; Hattiesburg, Mississippi;

Cleveland, Oklahoma; Cushing, Oklahoma; Jacksonville, Florida; Riley Pass, South Dakota; and

Hanover, Massachusetts. However, Tronox failed to disclose certain other Legacy Liabilities,

including environmental costs for “certain other sites” related to wood-treatment, chemical

production, landfills, mining, and oil and gas refining, distribution and marketing. Specifically,

Tronox failed to disclose that the Legacy Liabilities included approximately eleven additional

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wood-treatment sites (the “Secret Sites”)1 and approximately 260 agricultural chemical sites,2

five undisclosed former chemical manufacturing sites, two former fertilizer manufacturing sites,

and several other undisclosed sites.

10. To rid itself of the Legacy Liabilities, Kerr-McGee’s management (including

individuals who became officers of Tronox) devised a scheme to foist its Legacy Liabilities onto

a subsidiary business. This fraudulent scheme was executed as follows: First, Kerr-McGee

transferred all of its valuable oil and gas assets – but none of its costly Legacy Liabilities – into a

new entity, Kerr-McGee Corporation (referred to herein as “New Kerr-McGee”). Second, New

Kerr-McGee tried to sell off the businesses which had the Legacy Liabilities. When that failed,

New Kerr-McGee placed the Legacy Liabilities in a newly formed entity it would subsequently

spin-off in an attempt to purportedly immunize New Kerr-McGee from these liabilities. Tronox

was the newly incorporated entity which would initially be managed by several senior Kerr-

McGee executives who themselves had knowledge of the materiality of the Legacy Liabilities.

11. The code-name given to this plan was “Project Focus.” In addition to the new

“clean” parent company (New Kerr-McGee), a new “clean” subsidiary (Kerr-McGee Oil and

Gas Corporation) (hereafter, the “Oil and Gas Business”) into which all of the valuable oil and

gas assets were transferred was formed. Most of the liabilities created by those oil and gas

1 As used herein, “Secret Sites” means the following wood treatment sites that Kerr-McGee transferred to Tronox through the Spin-Off, including Birmingham, Alabama; El Dorado, Arkansas; Edwardsville, Illinois; Marion, Illinois; Bloomington, Indiana; Worthington, Kentucky; Bogalusa, Louisiana; Jackson, Mississippi; Bayonne, New Jersey; Hugo, Oklahoma; and Rome, New York. These Secret Sites were not disclosed during the Class Period and no reserves were taken for these sites. 2 These include agricultural chemical sites involved in chemical manufacturing, fertilizer manufacturing, and related sites that were transferred by Kerr-McGee to Tronox. These agricultural chemical sites were not disclosed during the Class Period and no reserves were taken for these sites. They are listed on Appendix A hereto.

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assets, however, remained with the liabilities of all of Kerr-McGee’s other, non-oil and gas

businesses, including the chemicals businesses in which Tronox was involved (“Old Kerr-

McGee”). Thus, Old Kerr-McGee, which became Tronox, was initially a subsidiary of New

Kerr-McGee and remained under the control of Kerr-McGee, and subsequently, Anadarko.

Several of the Legacy Liabilities foisted on Tronox were unrelated to the chemical business

operations to be conducted by Tronox after the IPO, as they included the environmental

liabilities created by the oil and gas operations of Old Kerr-McGee.

12. As has been disclosed in the Adversary Complaint filed in the bankruptcy

proceeding, which was based on the review of internal Tronox documents and interviews with

Tronox executives, in the spring of 2005, New Kerr-McGee tried to sell or spin-off the

businesses that would become Tronox in a package deal together with the Legacy Liabilities. At

least four (4) potential purchasers refused to participate in such a deal because of the sheer

magnitude of the Legacy Liabilities they were asked to assume. These entities were Apollo

Investment Corporation, Inc. (“Apollo”), Bain Capital LLC, J.P. Morgan Partners, and Madison

Dearborn Partners LLC. In fact, as recently revealed in the Adversary Complaint, one potential

deal partner stated that the amount of Legacy Liabilities that New Kerr-McGee was attempting to

impose on the buyer was “criminal.” Another potential purchaser reduced its proposed $1.2

billion purchase price by $900 million if the Legacy Liabilities were to be included. Despite

recording a total environmental remediation reserve of only $200 million throughout the Class

Period, Tronox has alleged in its Adversary Complaint that Kerr-McGee offered Apollo an

approximately $400 million indemnity – more than double Tronox’s reserve – if it would take all

of the Legacy Liabilities.

13. New Kerr-McGee’s desire to include the Legacy Liabilities in any deal was an

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insuperable barrier to a transaction being concluded with a third party. Indeed, among other

things, New Kerr-McGee had learned that the EPA was demanding $178.8 million for

remediation costs incurred through December 2004 for the wood-treatment site in Manville, New

Jersey. When Kerr-McGee’s efforts to sell to a third party foundered – because these third

parties were able to conduct due diligence and thereby uncovered and refused to assume the

Legacy Liabilities – New Kerr-McGee went to Plan B: transferring Kerr-McGee’s environmental

remediation and tort liabilities to an unknowing investing public through an IPO. The Tronox

IPO allowed New Kerr-McGee to exercise complete control over the transaction, including being

able to unilaterally dictate the terms of the Tronox IPO, while avoiding any third-party due

diligence, and even eliminating the need for standard representations and warranties regarding

the massive Legacy Liabilities. Absent truthful and honest disclosure in the IPO by the issuer

(Tronox), its controlling person (Kerr-McGee), their common auditor, Defendant E&Y, Tronox’s

officers and directors and their control persons, which were New Kerr-McGee and its senior

executives, there was no way for the investing public to know the true extent and impact of the

Legacy Liabilities.

14. To effectuate the IPO, on November 21, 2005, pursuant to a Registration

Statement and Prospectus, the common stock of Tronox Worldwide held by Kerr-McGee was

converted into approximately 22.9 million shares of Tronox Class B common stock. Tronox

thereupon offered and sold to the investing public 17,480,000 shares of Tronox Class A common

stock at an initial offering price of $14.00 per share for proceeds of $225.4 million. Tronox

concurrently made a joint private offering through two wholly-owned subsidiaries, Tronox

Worldwide and Tronox Finance Corp., of $350 million in aggregate principal amount of 9 1/2%

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senior unsecured notes due 2012 (the “Bonds”).3 At the time of the IPO, Tronox Worldwide also

entered into a secured credit facility consisting of a $200 million loan and a $250 million

revolving credit line. All proceeds of the IPO, the Bonds offering, the term loan facility, and

cash on hand at Tronox, less $40 million – a total of $804 million – were then distributed to

Defendant Kerr-McGee upon the closing of these transactions.

15. In addition, Tronox and Defendant Kerr-McGee entered into a Master Separation

Agreement made effective as of November 21, 2005. This agreement provided, among other

things, that Defendant Kerr-McGee’s potential responsibility for environmental remediation

costs would be capped at $100 million for a period of seven (7) years, a de minimus amount and

time period given the nature and size of the exposures transferred to Tronox. It also provided

that to be reimbursed pursuant to this indemnity, Tronox had to obtain Kerr-McGee’s approval in

advance for any deviation from the environmental remediation reserving policies that were in

place prior to the IPO. And in a highly unusual provision which reversed the flow of the usual

indemnities, this agreement required Tronox to indemnify Kerr-McGee for any material

misstatements in the IPO Registration Statement, even though it was essentially a Kerr-McGee

offering. The Master Separation Agreement further incorporated an Assignment, Assumption,

and Indemnity Agreement, made effective as of December 31, 2002, between Kerr-McGee

Chemicals Worldwide LLC (essentially what became Tronox) and Kerr-McGee Oil & Gas.

Other than a limited number of listed sites, this agreement imposed on Kerr-McGee Chemicals

(i.e. Tronox) all other environmental remediation obligations that were known to exist or may

arise in the future as a result of the operations of any of the Kerr-McGee Chemicals and Kerr-

McGee Oil & Gas businesses. Following these transactions, New Kerr-McGee owned 56.7% of

3 On or about June 7, 2006, the Bonds were exchanged on a one-for-one basis for identical publicly traded Bonds.

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the outstanding Tronox Class B shares and 88.7% of the total voting power of all classes of

Tronox common stock. On March 31, 2006, New Kerr-McGee distributed all of the Tronox

Class B common stock that it owned to its stockholders (the “Spin-Off”). As of that date, New

Kerr-McGee held no shares in Tronox, had taken more than $800 million out of the transaction,

and purported to have avoided liability for the massive Legacy Liabilities.

16. On June 22, 2006, less than ninety (90) days after successfully effectuating the

foregoing transactions, including dumping the massive Legacy Liabilities onto Tronox,

Anadarko offered to acquire New Kerr-McGee for $18 billion. The transaction was approved

and New Kerr-McGee became a wholly-owned subsidiary of Anadarko on August 10, 2006. A

primary architect of the fraud, New Kerr-McGee Chairman and Chief Executive Officer

Defendant Luke R. Corbett, personally profited by more than $270 million from the Anadarko

deal. New Kerr-McGee Senior Vice President and Chief Financial Officer Defendant Robert M.

Wohleber, who also served as Chairman of the Board of Tronox until the completion of the Spin-

Off, garnered more than $26 million. New Kerr-McGee Senior Vice President and General

Counsel Defendant Gregory F. Pilcher, another moving force behind the fraudulent plan,

obtained more than $32 million.

17. While the “clean break” from the Legacy Liabilities allowed New Kerr-McGee to

complete an $18 billion sale with massive personal benefits for its senior executives, Tronox was

left with the Legacy Liabilities and no means to recover from this burden. The New Kerr-

McGee executives who had filled senior corporate positions at Tronox up until the completion of

the Spin-Off resigned their positions as of March 31, 2006. In a vain effort to keep itself afloat

following the Spin-Off, Tronox’s officers and directors repeatedly misled the market throughout

the Class Period as to the true scope of its environmental remediation and tort liabilities by

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understating necessary reserves and repeating the false mantra as to Tronox’s alleged inability to

make reliable estimates as to liabilities because they purportedly could not determine that such

liabilities were “probable and reasonably estimable.” To the contrary, Tronox’s officers and

directors during the Class Period, many of whom held senior positions within Kerr-McGee’s

chemicals businesses prior to the Tronox IPO, had sufficient information available to them as to

the potential scope of required reserves or were recklessly indifferent to such information.

Indeed, as admitted in Tronox’s restatement announcement, “[Tronox] failed to establish

adequate reserves as required by applicable accounting pronouncements.” (Emphasis

added). Moreover, based on their senior positions within the businesses that would become

Tronox, these individuals were fully aware of the details of and reasons for Kerr-McGee’s

elaborate scheme to offload the Legacy Liabilities onto Tronox. As a result, Tronox, its officers

and directors, and its auditor, Defendant E&Y, materially understated the required environmental

remediation reserve over an almost four (4) year period, the entire history of the Company, either

intentionally or, at a minimum, as a result of their recklessness.

18. Ultimately, Defendants could no longer conceal that the environmental and tort

liabilities which had been imposed on Tronox by Defendant Kerr-McGee were far in excess of

the amount that they had represented the liabilities to be. As a result, Tronox was in financial

ruin and needed the protection of the bankruptcy laws. The securities purchased by Tronox’s

public investors became virtually worthless.

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JURISDICTION AND VENUE

19. The claims asserted herein arise under and are brought pursuant to Sections 10(b)

and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§78j(b) and

78t(a), and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. §240.10b-5.

20. This Court has jurisdiction over the subject matter of this action pursuant to

28 U.S.C. §§1331 and 1337, and Section 27 of the Exchange Act, 15 U.S.C. §78aa.

21. Venue is proper in this District pursuant to Section 27 of the Exchange Act,

15 U.S.C. §78aa, and 28 U.S.C. §1391(b). Much of the conduct complained of herein occurred

within this District and Tronox was listed on the New York Stock Exchange (“NYSE”) and its

shares traded on the NYSE until September 30, 2008 when it began trading on the OTC Bulletin

Board. Furthermore, the Tronox bankruptcy case is pending in this District.

22. In connection with the acts, conduct and other wrongs alleged in this Complaint,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

including but not limited to, the United States mails, interstate telephone communications and

the facilities of a national securities exchange.

PARTIES

A. Plaintiffs

23. Lead Plaintiffs purchased the Class A and Class B common stock of Tronox

during the Class Period as set forth in the certification attached hereto and sustained damages as

a result of the violations of law alleged herein.

24. Named Plaintiff The Fire and Police Pension Association of Colorado purchased

units of Tronox’s 9 ½ percent Senior Notes due 2012 during the Class Period as set forth in the

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certification attached hereto and sustained damages as a result of the violations of law alleged

herein.

25. Named Plaintiff The San Antonio Fire and Police Pension Fund purchased units

of Tronox’s 9 ½ percent Senior Notes due 2012 and received Class B common stock as part of

the Spin-Off during the Class Period as set forth in the certification attached hereto and sustained

damages as a result of the violations of law alleged herein.

26. Lead Plaintiff and the Named Plaintiffs are sometimes collectively referred to

herein as “Plaintiffs.”

B. Unnamed Defendant

27. Unnamed defendant Tronox Incorporated (“Tronox”) is a Delaware corporation

which was formed on May 17, 2005 as a wholly-owned indirect subsidiary of defendant Kerr-

McGee Corporation, with its principal place of business at One Leadership Square, Suite 300,

211 N. Robinson Avenue, Oklahoma City, Oklahoma. Tronox has operations and facilities in

the United States, the Asia Pacific region, and Europe. Tronox was formed for the purpose of

and in preparation for the contribution and transfer by Kerr-McGee of certain entities to Tronox,

including those comprising substantially all of Kerr-McGee’s chemical business. Tronox went

public on November 21, 2005. On January 12, 2009, Tronox and 14 of its affiliated companies

filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the

Southern District of New York, In re Tronox Incorporated, et al., No. 09-10156 (Bankr.

S.D.N.Y.) and is operating as a debtor in possession. As a result of the Tronox bankruptcy and

the automatic stay provisions of 11 U.S.C. §362(a), Tronox is not named as a defendant in this

action.

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C. Corporate Defendants

28. Defendant Kerr-McGee Corporation was an oil and gas exploration and

production company, which was acquired by Anadarko during the Class Period. Kerr-McGee

controlled Tronox at relevant times herein. Kerr-McGee was the publicly-held parent of Tronox

from the time of Tronox’s incorporation in May 2005 until the Tronox IPO in November 2005.

The net proceeds of Tronox’s IPO of approximately $224.7 million were distributed to Kerr-

McGee. In addition, concurrent with the IPO, Tronox, through wholly-owned subsidiaries,

issued $350 million in aggregate principal amount of 9.5% senior unsecured bonds due 2012 and

borrowed $200 million under a six year secured credit facility. The net proceeds of these

borrowings of approximately $537.1 million were also distributed to Kerr-McGee

contemporaneous with the closing of these transactions in November 2005. Immediately after

the IPO, Kerr-McGee held 56.7% of Tronox’s outstanding common stock. Kerr-McGee

exercised control over Tronox and the Tronox IPO in light of its 56.7% holding in Tronox

(which represented 88.7% of the voting power of all classes of Tronox common stock). On

March 31, 2006, Kerr-McGee completed the Spin-Off by distributing its Tronox shares to its

stockholders.

29. Defendant Anadarko Petroleum Corporation is a Delaware corporation with its

principal place of business at 1201 Lake Robbins Drive, The Woodlands, Texas. On June 22,

2006, Anadarko made an offer to acquire Kerr-McGee for $18 billion, of which $16.4 billion

was in cash. On August 10, 2006, Kerr-McGee shareholders voted to approve the offer and

Kerr-McGee was absorbed by Anadarko. As a result, Anadarko is the successor-in-interest to

Kerr-McGee.

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D. Accounting Defendant

30. Defendant Ernst & Young LLP (“E&Y”) was at all times relevant to the

allegations raised herein the purported outside “independent” accountant and auditor for both

Kerr-McGee and Tronox. Through its Oklahoma City, Oklahoma office, E&Y falsely

represented that it audited Tronox’s financial statements for the fiscal years ended December 31,

2005, 2006, and 2007 in accordance with the standards promulgated by the Public Company

Accounting Oversight Board and it issued materially false and misleading unqualified audit

opinions as to those financial statements, falsely claiming that they were prepared in accordance

with GAAP. In addition, E&Y consented to the use of its unqualified opinion letters for

Tronox’s financial statements contained in Tronox’s Form 10-Ks for the fiscal years 2005, 2006,

and 2007.

E. Individual Defendants

31. Defendant Thomas W. Adams (“Adams”) was the Chief Executive Officer

(“CEO”) of Tronox from September 2005 until September 5, 2008. Adams also served as a

Director of Tronox during the Class Period. During the Class Period, Adams signed the

following Tronox SEC filings: (i) Registration Statement for Tronox’s IPO, dated November 21,

2005; (ii) Tronox’s Form 10-K for the year ended December 31, 2005, filed March 19, 2006; (iii)

Tronox’s Form 10-Q for the first quarter of fiscal year 2006, filed May 15, 2006; (iv) Tronox’s

Form 10-Q for the second quarter of fiscal year 2006, filed August 14, 2006; (v) Tronox’s Form

10-Q for the third quarter of fiscal year 2006, filed November 14, 2006; (vi) Tronox’s Form 10-

K for the year ended December 31, 2006, filed March 16, 2007; (vii) Tronox’s Form 10-Q for

the first quarter of fiscal year 2006, filed May 8, 2007; (viii) Tronox’s Form 10-Q for the second

quarter of fiscal year 2006, filed August 7, 2007; (ix) Tronox’s Form 10-Q for the third quarter

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of fiscal year 2007, filed November 7, 2007; (x) Tronox’s Form 10-K for the year ended

December 31, 2007, filed March 14, 2008; (xi) Tronox’s Form 10-Q for the first quarter of fiscal

year 2008, filed May 7, 2008; and (xii) Tronox’s Form 10-Q for the second quarter of fiscal year

2008, filed August 11, 2008. Adams also signed certifications pursuant to Sections 302 and 906

of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1350, contained in the foregoing quarterly

reports and Form 10-Ks issued by Tronox during the Class Period, which attested to the

adequacy of the Company’s internal controls and accounting systems. Adams had previously

served in various executive positions for Old Kerr-McGee, including President of Tronox LLC

since September 2004, Vice President and General Manager of the Pigment Division from May

2004 to September 2040, Vice President of Strategic Planning and Business Development of

Kerr-McGee Shared Services from 2003-2004, Vice President of Acquisitions from March 2003

to September 2003, and Vice President of Information Management and Technology from 2002

to 2003. Adams was a control person of Tronox during the Class Period.

32. Defendant Marty J. Rowland (“Rowland”) was the Chief Operating Officer of

Tronox and a Director during the Class Period. During the Class Period, Rowland signed the

following Tronox SEC filings: (i) Registration Statement for Tronox’s IPO, dated November 21,

2005; and (ii) Tronox’s Form 10-K for the year ended December 31, 2005, filed March 19, 2006.

Rowland had previously served in various executive positions for Old Kerr-McGee, including as

Vice President, Global Pigment Operations, for Tronox LLC, a division of Old Kerr-McGee,

from August 2004 to September 2005, and Director of North American Operations from May

2004. Rowland was a control person of Tronox during the Class Period.

33. Defendant Mary Mikkelson (“Mikkelson”) was the Senior Vice President and

Chief Financial Officer (“CFO”) of Tronox during the Class Period. Mikkelson was terminated

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by Tronox as of May 31, 2009. During the Class Period, Mikkelson signed the following Tronox

SEC filings: (i) Registration Statement for Tronox’s IPO, dated November 21, 2005; (ii)

Tronox’s Form 10-Q for the year ended December 31, 2005, filed March 19, 2006; (iii) Tronox’s

Form 10-Q for the first quarter of fiscal year 2006, filed May 15, 2006; (iv) Tronox’s Form 10-Q

for the second quarter of fiscal year 2006, filed August 14, 2006; (v) Tronox’s Form 10-Q for the

third quarter of fiscal year 2006, filed November 14, 2006; (vi) Tronox’s Form 10-K for the year

ended December 31, 2006, filed March 16, 2007; (vii) Tronox’s Form 10-Q for the first quarter

of fiscal year 2006, filed May 8, 2007; (viii) Tronox’s Form 10-Q for the second quarter of fiscal

year 2006, filed August 7, 2007; (ix) Tronox’s Form 10-Q for the third quarter of fiscal year

2007, filed November 7, 2007; (x) Tronox’s Form 10-K for the year ended December 31, 2007,

filed March 14, 2008; (xi) Tronox’s Form 10-Q for the first quarter of fiscal year 2008, filed

May 7, 2008; (xii) Tronox’s Form 10-Q for the second quarter of fiscal year 2008, filed August

11, 2008; and (xiii) Tronox’s Form 10-Q for the third quarter of fiscal year 2008, filed November

7, 2008. Mikkelson also signed certifications pursuant to Sections 302 and 906 of the Sarbanes-

Oxley Act of 2002, 18 U.S.C. §1350, contained in the foregoing quarterly reports and Form 10-

Ks issued by Tronox during the Class Period, which attested to the adequacy of the Company’s

internal controls and accounting systems. Mikkelson was responsible during the Class Period for

the oversight of Tronox’s financial reporting and management. Mikkelson had previously served

as Vice President and Controller of Tronox LLC, a division of Old Kerr-McGee, from December

2004 and Assistant Corporate Controller of Kerr-McGee Shared Services from February 2004 to

December 2004. Mikkelson had 20 years of experience as a certified public accountant.

Mikkelson was a control person of Tronox during the Class Period.

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34. Defendant Robert M. Wohleber (“Wohleber”) served as Chairman of the Board

and a Director of Tronox during the Class Period through March 31, 2006. Wohleber served on

the Audit Committee, the Corporate Governance Committee and the Executive Compensation

Committee of the Tronox Board. During the Class Period, Wohleber signed the following

Tronox SEC filings: (i) Registration Statement and Prospectus for Tronox’s IPO, dated

November 21, 2005; and (ii) Tronox’s Form 10-K for the year ended December 31, 2005, filed

March 19, 2006. Wohleber also was a member of the Audit Committee of the Tronox Board

during the Class Period. Wohleber served as Senior Vice President and Chief Financial Officer

(“CFO”) of Kerr-McGee since December 1999 and was instrumental in planning and

effectuating the transfer of the Legacy Liabilities to Tronox, the Tronox IPO, and the Spin-Off of

all remaining Tronox shares held by Kerr-McGee. Wohleber was a control person of Tronox and

Kerr-McGee during the Class Period.

35. Defendant J. Michael Rauh (“Rauh”) served as a Director of Tronox during the

Class Period through March 31, 2006. Rauh served on the Audit Committee, the Corporate

Governance Committee and the Executive Compensation Committee of the Tronox Board.

During the Class Period, Rauh signed the following Tronox SEC filings: (i) Registration

Statement and Prospectus for Tronox’s IPO, dated November 21, 2005; and (ii) Tronox’s Form

10-K for the year ended December 31, 2006, filed March 29, 2006. Rauh had previously served

in various positions for Old Kerr-McGee, including Vice President from 1987, Controller from

1987 to 1996 and from January 2002 to the present, and Treasurer from 1996 to 2002. Rauh was

a control person of Tronox and Kerr-McGee during the Class Period.

36. Defendants Adams, Rowland, Mikkelson, Wohleber, and Rauh are sometimes

collectively referred to herein as the “Tronox Individual Defendants.”

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37. Defendant Luke R. Corbett (“Corbett”) was the Chairman and CEO of Kerr-

McGee at all relevant times. Corbett was a control person of Tronox based on his involvement

in developing the plan to create Tronox, dumping the Legacy Liabilities on Tronox, entering into

the Master Separation Agreement, and planning the Tronox IPO and subsequent Spin-Off.

Corbett was also a control person of Kerr-McGee at relevant times.

38. Defendant Gregory F. Pilcher (“Pilcher”) was the Senior Vice President,

Secretary, and General Counsel of Kerr-McGee at all relevant times. Pilcher was a control

person of Tronox based on his involvement in developing the plan to create Tronox, dumping the

Legacy Liabilities on Tronox, entering into the Master Separation Agreement, and planning the

Tronox IPO and subsequent Spin-Off. Pilcher was also a control person of Kerr-McGee at

relevant times.

39. Because of the individually named defendants’ positions with Tronox and Kerr-

McGee, they had access to the material adverse undisclosed information about the true extent of

the Legacy Liabilities and the material deficiency in reserves recorded by Tronox. These

defendants had access to internal Tronox and Kerr-McGee corporate documents, including drafts

and final copies of Tronox’s press releases and its Forms 10-K and Forms 10-Q, as well as the

operating plans, budgets, forecasts and reports of operations prepared by Defendants, and had

conversations and connections with other corporate officers and employees, attended

management and/or Board of Directors meetings of Tronox and/or Kerr-McGee and committees

thereof, and had reports and other information provided to them in connection with their duties at

both Tronox and Kerr-McGee.

40. It is appropriate to treat the Tronox Individual Defendants as a group for pleading

purposes and to presume that the false, misleading and incomplete information conveyed in

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Tronox’s public filings, press releases and other publications as alleged herein during the

respective periods these individuals served on the Tronox Board are the collective actions of the

Tronox Individual Defendants.

41. The Tronox Individual Defendants participated in the drafting, preparation, and/or

approved of the various public, shareholder and investor reports and other communications

complained of herein, and were aware of, or recklessly disregarded, the misstatements contained

therein and omissions therefrom, and were aware of and/or recklessly disregarded their

materially false and misleading nature. Because of their Board membership and/or executive and

managerial positions with Tronox and Kerr-McGee, each of the Tronox Individual Defendants

had access to the adverse undisclosed information about the true extent of the Legacy Liabilities

as particularized herein, and knew or recklessly disregarded that these adverse facts rendered the

representations made by or about Tronox and its financial condition, and specifically the Legacy

Liabilities and the Company’s reserves for these liabilities, materially false and misleading

throughout the Class Period.

42. As officers and/or directors and controlling persons of a publicly held company

whose common stock was registered with the SEC pursuant to the Exchange Act, traded on the

New York Stock Exchange under the symbols TRX and TRX.B, and governed by the provisions

of the federal securities laws, the Tronox Individual Defendants each had a duty to promptly

disseminate accurate and truthful information with respect to the Company’s financial condition

and to correct any previously issued statements that had become materially misleading or untrue,

so that the market price of the Company’s common stock would be based upon truthful and

accurate information. The Tronox Individual Defendants’ misrepresentations and omissions

during the Class Period violated these requirements and obligations.

#121627 22

43. The Tronox Individual Defendants, because of their positions of control and

authority as officers and/or directors of the Company, were able to and did control the content of

the various SEC filings, press releases and other public statements pertaining to the Company

during the Class Period. Each Tronox Individual Defendant was provided with copies of the

documents alleged herein to be misleading prior to or shortly after their issuance, and/or had the

ability and/or opportunity to prevent their issuance or cause them to be corrected. Accordingly,

each of the Tronox Individual Defendants is responsible for the accuracy of the Company’s

financial reports and releases detailed herein and is therefore primarily liable for the

representations contained therein.

44. Each of the individually named Defendants, both individually and collectively, is

liable as a participant in a fraudulent scheme and course of business, which deceived purchasers

of the common stock and Bonds of Tronox through the distribution of materially false and

misleading information and concealment of the true financial condition of Tronox based on the

undisclosed obligations represented by the Legacy Liabilities, the recording of insufficient

reserves for these liabilities, and the implementation of an improper reserving methodology

which had the effect of understating reserves. The fraudulent conduct: (i) deceived the investing

public regarding the extent of Tronox’s environmental and tort liabilities and their effect on the

company’s publicly reported financial condition; (ii) deceived the investing public regarding

Tronox’s business, management, operations, the value of Tronox securities, and its ability to

continue as a going concern; (iii) enabled Kerr-McGee to receive at least $575 million from the

investing public based on the fraudulent acts alleged herein; (iv) enabled Kerr-McGee to free

itself from hundreds of millions of dollars of environmental remediation and related tort

liabilities and thus permit Kerr-McGee to be sold to Anadarko for $18 billion; and (v) caused

#121627 23

Plaintiffs and Class members to purchase the securities of Tronox at artificially inflated prices

and to thereafter sustain damages following the full disclosure of the fraud herein complained of

upon Tronox’s bankruptcy.

KERR-McGEE DOMINATES AND CONTROLS TRONOX

45. From the beginning of the Class Period, Tronox was dominated and controlled by

Defendant Kerr-McGee. Key Tronox personnel as of the date of the IPO, CEO Adams, and

Chairman of the Board Wohleber, were or had been high ranking executives within Kerr-McGee.

Adams had been CEO of Tronox LLC up to the time of the IPO, and Wohleber was the CFO of

Kerr-McGee at the time of the IPO and continuing into the Class Period.

46. The Registration Statement and Prospectus for the IPO acknowledged the

complete control exercised by Kerr-McGee over Tronox, as follows:

As long as Kerr-McGee owns shares of our common stock representing a majority of the voting power of our common stock, it will control us and the influence of our other stockholders over significant corporate actions will be limited.

Upon the closing of this offering, Kerr-McGee will own all of our Class B common stock, which will represent a majority of the combined voting power of all outstanding classes of our common stock. As a result, Kerr-McGee will be entitled to nominate a majority of our board of directors and will have the ability to control the vote in any election of directors. Kerr-McGee will also have control over our decisions to enter into significant corporate transactions and, in its capacity as our majority stockholder, will have the ability to prevent any transactions that it does not believe are in Kerr-McGee’s best interest. As a result, Kerr-McGee will be able to control, directly or indirectly and subject to applicable law, all matters affecting us, including the following:

• any determination with respect to our business direction

and policies, including the appointment and removal of officers;

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• any determinations with respect to mergers, business combinations or dispositions of assets;

• our capital structure;

• compensation, option programs and other human resources policy decisions;

• changes to other agreements that may adversely affect us; and

• the payment of dividends on our common stock.

47. Tronox described itself as a “controlled company” within the meaning of the New

York Stock Exchange corporate governance standards. Based on the foregoing, Tronox and

Kerr-McGee have admitted that Kerr-McGee was a controlling person of Tronox within the

meaning of Section 20(a) of the Exchange Act, 15 U.S.C. §78t(a).

CLASS ACTION ALLEGATIONS

48. Plaintiffs bring this action as a class action pursuant to Federal Rules of Civil

Procedure 23(a) and 23(b)(3) on their own behalf and on behalf of a Class consisting of all

persons and entities who purchased or otherwise acquired Tronox common stock and Bonds

between November 21, 2005 and January 12, 2009, inclusive (the “Class Period”), and who were

damaged thereby.

49. Excluded from the Class are the Defendants, officers and directors of Tronox,

Kerr-McGee, and Anadarko at all relevant times, members of their immediate families and their

legal representatives, heirs, successors or assigns, and any entity in which an excluded person

has or had a controlling interest.

50. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period up to September 30, 2008, Tronox common stock

was actively traded on the NYSE, an efficient market, under the symbols “TRX” and “TRX.B.”

#121627 25

Thereafter, Tronox common stock traded on the Over The Counter Bulletin Board, also an

efficient market. While the exact number of Class members is unknown to Lead Plaintiffs at this

time and can only be ascertained through appropriate discovery, Lead Plaintiffs believe that there

are thousands of members in the proposed Class who are geographically dispersed. Members of

the Class can be identified from records maintained by Tronox or its transfer agent and can be

notified of the pendency of this action by mail and through the Internet, using a form of notice

similar to that customarily used in securities class action lawsuits. As of December 31, 2008,

Tronox had 19,107,367 outstanding shares of class A common stock and 22,889,431 outstanding

shares of class B common stock.

51. Plaintiffs’ claims are typical of the claims of the Class as all members of the Class

are similarly affected by Defendants’ wrongful conduct in violation of federal securities laws as

alleged herein. Lead Plaintiffs, the Named Plaintiffs, and all members of the Class have

purchased and/or acquired common stock or Bonds of Tronox during the Class Period and have

sustained damages arising out of Defendants’ wrongful conduct as alleged herein upon the full

disclosure of the wrongdoing.

52. Plaintiffs will zealously prosecute the claims and will fairly and adequately

protect the interests of the members of the Class and have retained counsel competent and

experienced in securities litigation and class actions. Lead Plaintiffs and the Named Plaintiffs do

not have any interests antagonistic to or in conflict with the other members of the Class.

53. Common questions of law and fact exist as to all members of the Class and

predominate over any questions affecting only individual Class members. Among the questions

of law and fact common to the Class are the following:

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a. Whether the Defendants violated the federal securities laws through their

acts and/or omissions as alleged herein;

b. Whether Defendants directly or indirectly participated in and pursued the

fraudulent plan and scheme and common course of conduct as alleged herein;

c. Whether the filings, reports, documents, statements, and attestations made

by Defendants during the Class Period omitted or misrepresented material facts about the

business, operations, performance, and/or financial condition of Tronox;

d. Whether the public statements issued by Tronox and the Tronox

Individual Defendants, including Tronox’s financial statements and filings with the SEC,

contained material misrepresentations and/or omitted to state material facts;

e. Whether the Defendants acted knowingly or with reckless disregard for

the truth in misrepresenting and omitting material facts in committing the wrongful acts

complained of herein;

f. Whether the market price of Tronox common stock and the Bonds during

the Class Period was manipulated or artificially inflated due to the misrepresentations and/or

omissions complained of herein; and

g. Whether Plaintiffs and other members of the Class have sustained

damages and, if so, the proper measure of such damages.

54. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all Class members is impracticable.

Furthermore, as the damages suffered by individual Class members may be relatively small, the

expense and burden of individual litigation make it impossible for members of the Class to

#121627 27

individually redress the wrongs complained of herein. There will be no difficulty in the

management of this action as a class action.

HOW THE FRAUD WAS ACCOMPLISHED

A. Old Kerr-McGee Creates The Legacy Liabilities

55. Old Kerr-McGee was founded in 1929 as Anderson & Kerr Drilling Company

near Oklahoma City, Oklahoma. As the company grew its oil and gas exploration activities and

drilling operations, it moved into downstream operations with the purchase of its first refinery in

1945.

56. Old Kerr-McGee continued to expand in the 1950s into various other energy-

related businesses. In 1952, Old Kerr-McGee entered the uranium industry when it acquired

mining properties in Arizona. Shortly thereafter, it constructed the country’s largest uranium-

processing mill. Also in the 1950s, Old Kerr-McGee expanded its retail operations into owning

and operating gasoline service stations, and further expanded its refining operations.

57. In the early 1960s, Old Kerr-McGee entered the forestry business through a series

of asset purchases, and acquired several fertilizer-marketing companies.

58. In 1967, Old Kerr-McGee completed a merger with American Potash and

Chemical Corporation, and began to manufacture and market a variety of ammonium perchlorate

chemicals (such as fertilizers, potash, and sodium chlorate), boron, titanium dioxide, and

manganese. That same year, Old Kerr-McGee started construction of its first coal mine shaft in

Stigler, Oklahoma.

59. In the 1970s, Old Kerr-McGee became involved in various aspects of the nuclear

industry, including exploration, mining, milling, and conversion of uranium oxide into uranium

hexafluoride, palletizing of these materials, and fabrication of fuel elements.

#121627 28

60. By 2000, Old Kerr-McGee had exited most of these historic business operations

(collectively, the “Legacy Businesses”) and was left with two core operating businesses: (a) oil

and gas exploration and production; and (b) chemicals. Although it had discontinued the Legacy

Businesses, Old Kerr-McGee remained legally responsible for the Legacy Liabilities associated

with these businesses. The overwhelming majority of the Legacy Liabilities – including some

that are the direct result of oil and gas operations – are unrelated to the titanium dioxide and

other operations that were Tronox’s primary businesses during the Class Period.

B. Old Kerr-McGee Formulates A Plan To Free Itself From The Legacy Liabilities

61. In the late 1990s, consolidation in the oil and gas industry increased valuations of

exploration and production companies like Old Kerr-McGee. Old Kerr-McGee, however, was

unable to take advantage of this situation because potential merger and acquisition partners were

unwilling to take on the Legacy Liabilities. Old Kerr-McGee’s executives persisted in trying to

find a way to benefit from the increasing concentration in the oil and gas business.

62. By 1998, Old Kerr-McGee began considering various transactions through which

it could eliminate its Legacy Liabilities – its primary obstacle to a deal. This goal was

heightened in importance when, on July 6, 1999, EPA sent a letter to Old Kerr-McGee stating

that “EPA has documented the release and threatened release of hazardous substances into the

environment” at Manville, New Jersey, that the site “is currently the location of a residential

community of single-family homes, and is bordered by various commercial and residential

areas,” and that “hazardous substances have been detected at the Site in homes, soils and

groundwater.” The letter also stated that EPA has “reason to believe that, for purposes of

Section 107(a) of CERCLA, 42 U.S.C. §9607(a), Kerr-McGee is a potentially responsible party

#121627 29

(“PRP”) with respect to the Site.”4

63. On October 18, 1999, EPA sent another letter to Old Kerr-McGee stating that it

had selected a remedy for Manville that included permanent relocation of residents, excavation

of source material, and off-site thermal treatment and disposal. EPA estimated the cost of the

remedy at $59,100,000. EPA also warned that because the site “consists of residential housing

and is directly affecting this community, it is particularly important that this remedial action be

conducted on an expedited basis.” EPA requested that Old Kerr-McGee determine whether it

would voluntarily finance or perform the proposed remediation.

64. The July and October 1999 EPA letters caused significant concern within Old

Kerr-McGee, including among its Board of Directors. As a result of the EPA letters, Old Kerr-

McGee launched an investigation into the Manville site, including determining the nature and

extent of Old Kerr-McGee’s potential exposure. Old Kerr-McGee also met with EPA, among

other things, to try to determine the scope of the remediation project and whether a final remedy

had been selected for the site. Old Kerr-McGee management frequently updated the Company’s

Board of Directors regarding its investigation and communications with EPA. These interactions

indicated that there was a probability that Old Kerr-McGee would be responsible in significant

amounts for the Manville clean-up.

65. According to a cost recovery lawsuit that EPA and the State of New Jersey have

since filed against Tronox as Old Kerr-McGee’s successor-in-interest,5 these governmental

entities have spent approximately $280 million in clean-up costs at Manville, which is referred to

as a “Federal Creosote Superfund Site.”

4 “CERCLA” refers to the Comprehensive Environmental Response, Compensation, and Liability Act enacted in 1980 to facilitate the remediation of abandoned waste sites. 5 United States of America v. Tronox, LLC, No. 08-cv-4368 (FLW) (D.N.J. Aug. 29, 2008).

#121627 30

66. Notably, Manville was only one of numerous problem wood treatment and

agricultural chemical sites that posed the threat of debilitating environmental and tort liabilities

to Old Kerr-McGee. Given the scope of the potential liabilities at Manville and other similar

wood treatment sites as well as its numerous other legacy environmental sites – many of which

were not disclosed to the investing public – Old Kerr-McGee decided that it would not agree to

any transaction that required it to provide a guarantee or an indemnification equal to the likely

costs of the Legacy Liabilities.

C. Kerr-McGee And Its Officers Devise The Tronox Fraud

67. To avoid potentially massive liabilities from its Legacy Businesses, including

those associated with Manville, and allow a sale to a larger oil and gas concern to come to

fruition, Defendants Corbett, Wohleber, Pilcher, Adams, Mikkelson, Rowland, and Rauh

developed and/or assisted in effectuating a plan to use the public securities markets as a vehicle

to accomplish their goal to immunize Kerr-McGee from the Legacy Liabilities without making

disclosure of the true scope of these obligations.

68. The fraud involved isolating the Legacy Liabilities in a subsidiary that included

the Chemical Business (to become Tronox) in order to free up the valuable oil and gas assets

from any connection with the Legacy Liabilities.

69. In 2001, Old Kerr-McGee launched “Project Focus,” the effort to create a

corporate structure to isolate and separate the Legacy Liabilities from Kerr-McGee’s oil and gas

operations.

70. On May 13, 2001, the Old Kerr-McGee Board of Directors approved creation of a

new “clean” holding company – New Kerr-McGee – and a new “clean” subsidiary – the Oil and

Gas Business. Old Kerr-McGee became a wholly owned subsidiary of New Kerr-McGee.

#121627 31

71. Project Focus continued in December 2002 with numerous internal transactions

that effectively isolated the Legacy Liabilities in the Chemical Business. On December 31,

2002, Old Kerr McGee’s Board (which included New Kerr-McGee Chairman and CEO Luke

Corbett) approved by unanimous written consent numerous transactions that lacked any

independent economic substance or legitimate business purpose, but instead were simply a

means to strip the oil and gas assets from Old Kerr-McGee and isolate in the Chemical Business

the Legacy Liabilities that Old Kerr-McGee created during its more than 70-year history.

72. As stated in a Supplemental Bond Indenture dated December 31, 2002, New Kerr-

McGee caused “substantially all” of the valuable oil and gas assets to be distributed to the Oil

and Gas Business. The Legacy Liabilities, including many that were directly related to the oil

and gas assets that had been transferred, were left in the Chemical Business, which ultimately

was spun-off as Tronox.

73. As Project Focus continued throughout 2003 and 2004, New Kerr-McGee

continued to remove assets from the Chemical Business. In late November 2004, New Kerr-

McGee began drafting an Assignment and Assumption Agreement that would identify which

assets had been kept by New Kerr-McGee and also list the environmental remediation and tort

liability for which New Kerr-McGee was responsible. All environmental remediation and tort

liabilities which were not on this truncated list would ultimately become the responsibility of

Tronox. By drafting the Assignment and Assumption Agreement (which was an exhibit to

Tronox’s Registration Statement) in this manner, New Kerr-McGee was able to hide from public

investors the full extent of the liabilities to be assumed by Tronox. The agreement was signed in

2005 but made effective as of December 31, 2002.

#121627 32

D. Prospective Purchasers Of Kerr-McGee’s Chemical Business Spurn Taking On The Legacy Liabilities

74. On February 23, 2005 New Kerr-McGee announced that it had hired Lehman

Brothers to consider alternatives for separating the Chemical Business and that the Board of

Directors would formally consider the issue at its meeting on March 8, 2005.

75. On March 8, 2005, the New Kerr-McGee Board of Directors authorized New

Kerr-McGee to separate the Chemical Business through either a sale or spin-off. In a March 8

press release, New Kerr-McGee Chairman and CEO Luke Corbett stated: “For some time, the

Board has been considering the separation of chemical (sic), current market conditions for this

industry now make it an ideal time to unlock this value for our stockholders.” Corbett similarly

explained in a letter to employees that “[i]t’s clear to us that, with the inorganic chemical and

energy markets being as strong as they are today, the timing now is ideal to consider this

separation.”

76. On April 15, 2005, while the Chemical Business executives were touting the

business to potential third party purchasers, New Kerr-McGee received a demand from the EPA

for $178,800,000 in clean-up costs that EPA had incurred at Manville through 2004 plus interest.

77. Even before the EPA demand, potential purchasers were expressing concerns

about the Legacy Liabilities and questioning why the Chemical Business had been saddled with

all of them – even those created by oil and gas operations or otherwise not related to the

operations of the Chemical Business. For example, one potential purchaser said the magnitude

of the Legacy Liabilities was “criminal.” The EPA demand only added to these concerns among

potential purchasers.

78. By late April-early May 2005, at least four (4) potential purchasers had informed

New Kerr-McGee or Lehman that they were not interested in acquiring the Chemical Business as

#121627 33

long as the Legacy Liabilities were a part of the transaction. These were Apollo, Bain Capital,

J.P. Morgan Partners, and Madison Dearborn Partners. One prospective purchaser conveyed a

$1.2 billion bid if the Legacy Liabilities were not included, but otherwise only a $300 million bid

if they were. From these offers, Kerr-McGee was put on notice of the true extent of its Legacy

Liabilities and that its reserves for these obligations were materially deficient. These events also

made clear to New Kerr-McGee that the Legacy Liabilities precluded an arm’s-length sale of the

Chemical Business to a third party. Kerr-McGee failed to ever disclose these facts to the market.

Indeed, it was not until the filing of the Adversary Complaint in the bankruptcy proceeding that

these facts became known to the market.

79. In early April 2005, in-house counsel for New Kerr-McGee circulated a draft of

the Assignment and Assumption Agreement that was designed to “finish off” Project Focus. The

April 10 draft of the Assignment and Assumption Agreement did not include an indemnity

provision.

80. When it received the $179 million EPA demand for Manville on April 15, 2005,

however, New Kerr-McGee realized that it had not completely isolated its Legacy Liabilities in

the Chemical Business. Even following a sale or spin-off, the Chemical Business potentially

could seek contribution from New Kerr-McGee for the Legacy Liabilities. To eliminate that

risk, New Kerr-McGee put in place an indemnity in the form of the Assignment, Assumption and

Indemnity Agreement, made retroactive to December 31, 2002 (when certain of the Project

Focus transactions were purportedly consummated) to ensure that the $179 million Manville

demand would be included within its scope.

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E. New Kerr-McGee Offers A $400 Million Indemnity To Apollo To Take The Environmental Liabilities

81. While the existence of the Legacy Liabilities precluded numerous potential

purchase transactions, New Kerr-McGee had extensive negotiations with Apollo Investment

Corporation (“Apollo”) regarding the purchase of the Chemical Business throughout the summer

of 2005. Apollo’s initial bid of $1.6 billion for the Chemical Business excluded all liabilities

related to wood treatment facilities, including Manville. In other words, Apollo did not want the

Legacy Liabilities which, as has been revealed in the Adversary Complaint, they determined

were a $400 to $900 million dollar problem facing the Company. To complete the transaction

with Apollo, New Kerr-McGee had considered offering Apollo a $400 million indemnity to

purchase the Legacy Liabilities, including the wood treatment facilities. Ultimately, New Kerr-

McGee decided against the sale to Apollo because of the cost of the indemnity obligation.

Instead, New Kerr-McGee pursued the Tronox IPO and subsequent Spin-Off, which would

enable New Kerr-McGee to avoid the Legacy Liabilities without any significant indemnity

obligation.

F. New Kerr-McGee And Its Officers Who Became Tronox Board Members Engineer The IPO Fraud

82. On July 8, 2005, Lehman made a presentation to New Kerr-McGee comparing the

Apollo bid to a potential spin-off. Based on Lehman’s analysis, the Apollo bid would provide

more than $500 million in additional after-tax cash proceeds to New Kerr-McGee as compared to

a spin-off. But the Apollo deal did not allow New Kerr-McGee to offload the Legacy Liabilities,

including what Lehman termed “Unidentified Liabilities” that no knowledgeable, arm’s-length

purchaser would accept without, at a minimum, hundreds of millions of dollars in indemnities.

In effect, by choosing to proceed with the Spin-Off, New Kerr-McGee was foregoing $500

#121627 35

million in cash so long as the Legacy Liabilities were eliminated as a Kerr-McGee obligation. It

did so while at the same time it was only reserving approximately $200 million for these same

obligations.

83. In fact, as has only been recently revealed in connection with the Adversary

Complaint in the bankruptcy proceeding, the due diligence performed by Apollo in connection

with its offer to purchase the Chemical Business had uncovered that the Legacy Liabilities were,

at a minimum, at least a $400 million to $900 million problem. New Kerr-McGee, including its

senior officers, knew the scope and extent of the Legacy Liabilities. They also knew that the

Chemical Business did not have sufficient assets as a stand-alone entity to support the ongoing

maintenance of those Legacy Liabilities. Indeed, New Kerr-McGee and its financial advisor,

Lehman Brothers, warned that one of the risks of the proposed transaction was that the

“[s]eparation from legacy liabilities” would be “[c]omplicated under [a] bankruptcy scenario.”

84. Nevertheless, New Kerr-McGee then determined that a spin-off of the Chemical

Business would be effectuated to protect itself from the Legacy Liabilities. This transaction

allowed New Kerr-McGee to accomplish the following goals: 1) dump the Chemical Business

together with the Legacy Liabilities; 2) avoid disclosure of the magnitude of Legacy Liabilities

that would result from third-party due diligence; 3) avoid making significant representations and

warranties regarding the Chemical Business’ assets, liabilities, business, and operations – in

particular, the Legacy Liabilities; 4) avoid expensive indemnities for the environmental and tort

liabilities that Apollo or any other arm’s-length buyer would demand; and 5) remove all

remaining impediments to a subsequent transaction that would allow New Kerr-McGee senior

executives to obtain massive windfall profits.

85. On September 12, 2005, New Kerr-McGee incorporated the entity that would be

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used for the Spin-Off –Tronox – by filing an Amended and Restated Certificate of Incorporation

with the Delaware Secretary of State.

86. On October 6, 2005, the New Kerr-McGee Board of Directors, including

Defendants Corbett and Wohleber, approved the separation of the Chemical Business through a

two-part transaction. First, New Kerr-McGee would sell a minority stake in the Chemical

Business through an IPO of the Class A common stock of Tronox. Following the IPO, New

Kerr-McGee would maintain a controlling interest in Tronox through ownership of Tronox’s

Class B common stock, which New Kerr-McGee then would distribute to its stockholders in

spring 2006.

87. As part of the transaction, New Kerr-McGee determined that it would provide

Tronox with an indemnity for only up to $100 million for environmental Legacy Liabilities.

Even then, New Kerr-McGee would indemnify Tronox for only 50 percent of certain

environmental costs actually paid above the amount reserved for specified sites for a seven-year

period following the Spin-Off. New Kerr-McGee knew that the Chemical Business would not

have sufficient cash flow to spend the reserved amounts and thus qualify for indemnification.

88. In another unilateral decision, New Kerr-McGee determined that it would require

Tronox to assume $550 million in debt with the IPO – the proceeds of which would go

exclusively to New Kerr-McGee – that would saddle Tronox with more than $30 million per

year in interest expense.

89. New Kerr-McGee also decided to strip out all cash from the Chemical Business in

excess of $40 million, leaving Tronox with less cash than the amount Tronox would be required

to spend in the first year following the IPO just to service the Legacy Liabilities and debt it was

forced to assume. New Kerr-McGee knew this amount was insufficient as in each year from

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2000 to 2004, New Kerr-McGee had spent between $35 million and $126 million (net of

recovery) just on legacy environmental liabilities.

90. The terms imposed on Tronox provided New Kerr-McGee with total control over

Tronox. Projects, plans, activities and negotiations that had been approved by New Kerr-McGee

for the Chemicals Business and commenced as of the date of the IPO needed to be re-approved

following its completion. As alleged in the Adversary Complaint, based on the terms of the

overall transaction, one Tronox senior manager believed that he could not change the method by

which Tronox would take environmental reserves – which was the practice used by Kerr-McGee

and approved by E&Y – or the company risked losing whatever indemnity it had. These

constraints were designed to prevent Tronox from ever being able to collect on the $100 million

paper indemnity. At the same time, New Kerr-McGee had purported to impose on Tronox an

indemnification obligation for any misleading statements in the IPO, even though this was

effectively a Kerr-McGee transaction.

G. Materially Misleading Information Regarding Tronox Was Disseminated To The Market

91. In November 2005, the future Tronox management team (which included senior

Kerr-McGee personnel, Defendants Wohleber, Adams, and Mikkelson), made a series of road

show presentations to potential investors in connection with the IPO. These presentations were

prepared with the involvement of New Kerr-McGee and its investment banker, Lehman

Brothers.

92. According to the Adversary Complaint, on several occasions while preparing for

these presentations, a Lehman Brothers banker (who was responsible for marketing the IPO to

the public) drew a picture of a potted flower on a white board. He said that the flower

represented Tronox. He then drew a weed growing from the flower pot, which he said

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represented the Legacy Liabilities. The Lehman Brothers banker indicated that the weed would

choke the flower.

93. New Kerr-McGee, including its officers who would serve on the Tronox Board

(Defendants Wohleber, Adams, Mikkelson, and Rauh), knew that following extensive due

diligence, Apollo had asserted that Tronox should not go public because it could not survive as a

stand-alone company in the face of the Legacy Liabilities. Apollo’s due diligence teams had

concluded that New Kerr-McGee was attempting to offload hundreds of millions of dollars of

legacy environmental and tort claims through the sale process. This information was not

disclosed to the investing public. New Kerr-McGee needed to make sure that other potential

investors did not reach the same conclusion.

94. New Kerr-McGee also materially understated in the IPO Registration Statement

and Prospectus the reserves required for the Legacy Liabilities that it dumped on Tronox. Its

methodology for setting environmental and tort reserves was known to be inconsistent with

GAAP and industry practice. New Kerr-McGee ignored known information in setting reserves

and applied a threshold for taking a reserve that was materially higher than what was appropriate

under GAAP. As a result, the environmental and tort reserves set forth in the Registration

Statement for Tronox’s IPO were materially understated.

95. In addition, as later revealed through the bankruptcy proceedings, the Registration

Statement failed to disclose numerous wood treatment sites where a Kerr-McGee entity may

have been responsible for substantial clean-up costs similar to Manville even though New Kerr-

McGee was aware of these sites at the time of the IPO. Old Kerr-McGee and New Kerr-McGee

referred to these sites internally as the “Secret Sites.” In 2002, Old Kerr-McGee undertook a

“confidential” investigation of these sites by examining corporate records, published historical

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information about the wood treatment industry, and public property ownership records. Old

Kerr-McGee employees also made visits to the Secret Sites and were told they should not

disclose the purpose of their visit. Through this investigation, Old Kerr-McGee identified

approximately eleven additional wood treatment sites where it potentially could have liability

akin to that asserted by EPA at Manville. Based on these visits and information circulated to

them regarding the Secret Sites, New Kerr-McGee and the officers who would serve as Tronox

Board members knew or recklessly disregarded at the time of the IPO that several of these sites

were under investigation for potential remediation, and represented obligations of enormous

magnitude. These Secret Sites were never disclosed.

96. As was later revealed through the bankruptcy proceedings, New Kerr-McGee

considered doing a similar investigation shortly before the IPO regarding approximately 260

undisclosed agricultural chemical sites,6 five undisclosed former chemical manufacturing sites,

two undisclosed former fertilizer manufacturing sites, and several other undisclosed sites. That

investigation intentionally never occurred and these sites were never disclosed in the Registration

Statement. An August 2005 New Kerr-McGee memorandum listing these sites was

subsequently created. By virtue of their positions in both Old Kerr-McGee and Tronox, the

Kerr-McGee representatives on the Tronox Board, defendants Wohleber, Adams, Mikkelson,

and Rauh, were dutibound to be fully informed regarding these sites and knew of their, or were

reckless in not knowing.

97. New Kerr-McGee went to great lengths to ensure that the true magnitude of the

Legacy Liabilities was never properly disclosed. At one point, two senior members of the New

Kerr-McGee environmental group raised concerns regarding the sufficiency of the environmental

6 These sites are identified on Appendix A.

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reserves for the Legacy Liabilities. Instead of being rewarded for their diligence, they were both

disciplined.

98. New Kerr-McGee controlled the content of the Registration Statement for the

IPO. Counsel for New Kerr-McGee’s underwriters for the IPO, Akin Gump Strauss Hauer &

Feld LLP, raised concerns regarding the sufficiency of disclosures of risk factors in the

Registration Statement. Akin Gump proposed certain changes to the disclosures yet encountered

a refusal to do so.

99. The disclosures in the Registration Statement and throughout the Class Period

regarding tort liabilities were materially misleading. The following disclosure was made in the

Registration Statement regarding lawsuits related to former wood treatment sites, identified in

the public filings as “Forest Products Litigation:”

Between 1999 and 2001, KM Chemical was named in 22 lawsuits in three states (Mississippi, Louisiana and Pennsylvania) in connection with former forest products operations located in those states (in Columbus, Mississippi; Bossier City, Louisiana; and Avoca, Pennsylvania). The lawsuits sought recovery under a variety of common law and statutory legal theories for personal injuries and property damages allegedly caused by exposure to and/or release of creosote and other substances used in the wood-treatment process. KM Chemical has executed settlement agreements that are expected to resolve substantially all of the Louisiana, Pennsylvania and Mississippi lawsuits described above. Resolution of the remaining cases is not expected to have a material adverse effect on the company.

100. Defendants omitted to disclose at this time and throughout the Class Period that it

had settled these wood treatment claims for approximately $70 million prior to the IPO. This

omission was particularly significant in light of the nearly 11,000 additional claims related to

wood treatment sites that had been filed as of the time of the IPO. Although disclosing that these

claims were similar to the ones that had been resolved, there was no disclosure as to their

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potential size and no reference to the $70 million paid before the IPO to settle similar claims.

The Registration Statement for the IPO misleadingly stated: “The company has not provided a

reserve for these lawsuits because at this time it cannot reasonably determine the probability of a

loss, and the amount of loss, if any, cannot be reasonably estimated. The company believes that

the ultimate resolution of the forest products litigation will not have a material adverse effect on

the company’s financial condition or results of operations.” Tronox began reserving for these

claims in the fourth quarter of 2005 but the reserve never rose above $11 million during the

Class Period, a materially deficient amount given the claims history.

101. Based on the information provided to it during its due diligence process, Apollo’s

due diligence team from the law firm of Morgan Lewis & Bockius had concluded that New Kerr-

McGee “may be significantly under-reserved for these cases” and the “total potential exposure

could be well over $500 million.” Similarly, according to the Adversary Complaint, E&Y also

questioned the sufficiency of the tort disclosures in the Registration Statement. Specifically,

during a meeting in the first week of January 2006, E&Y challenged a New Kerr-McGee

executive regarding the accuracy of the Registration Statement in light of tort settlements in mid-

December 2005.

102. The Kerr-McGee representatives on the Tronox Board knew or were reckless in

not knowing that had there been full and truthful disclosure of the material exposures for

environmental remediation and tort claims based on the Legacy Liabilities, the IPO would not

have succeeded and Tronox Could not survive as an independent company.

103. On November 21, 2005, Tronox completed the IPO of its Class A Common

Stock. New Kerr-McGee, however, continued to exert control over Tronox through its majority

ownership of Tronox and the New Kerr-McGee officers who served on Tronox’s Board of

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Directors, including defendant Wohleber as Chairman of the Board. The Spin-Off was

completed on March 31, 2006 when New Kerr-McGee distributed its shares of Class B Common

Stock to New Kerr-McGee shareholders. On April 1, 2006, Tronox became an independent

company.

H. New Kerr-McGee Is Bought For $18 Billion

104. Less than three months after New Kerr-McGee completed the Spin-Off, on June

22, 2006, Anadarko offered to acquire New Kerr-McGee for $16.4 billion in cash and agreed to

assume $1.6 billion of New Kerr-McGee’s debt. The purchase price represented a 40% premium

to New Kerr-McGee’s stock price.

105. The shareholders of New Kerr-McGee voted to approve the offer on August 10,

2006, and New Kerr-McGee Corporation was integrated into Anadarko.

106. New Kerr-McGee senior executives, including its Chairman and Chief Executive

Officer Defendant Luke R. Corbett (a primary architect of the fraud herein alleged), its CFO,

Defendant Robert M. Wohleber (who also served as Chairman of the Board of Tronox until the

completion of the Spin-Off and was an architect of the fraud), and General Counsel Defendant

Gregory F. Pilcher (another architect of the fraud herein alleged) personally pocketed over $270

million between them upon the sale to Anadarko.

107. Anadarko purported to immunize New Kerr-McGee’s officers and directors from

liability for their roles in these transactions. Specifically, as part of its acquisition of New Kerr-

McGee, Anadarko agreed to indemnify New Kerr-McGee’s officers and directors for acts and

omissions occurring before the acquisition date.

108. Since acquiring New Kerr-McGee, Anadarko has admitted its potential

responsibility for the Legacy Liabilities in the event Tronox should fail. In both its 2006 and

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2007 Annual Reports, Anadarko stated: “Kerr-McGee could be subject to joint and several

liability for certain costs of cleaning up hazardous substance contamination attributable to the

facilities and operations conveyed to Tronox if Tronox becomes insolvent or otherwise unable to

pay for certain remediation costs. As a result of the merger, we will be responsible to provide

reimbursements to Tronox pursuant to the [Master Separation Agreement], and we may be

subject to potential joint and several liability, as the successor to Kerr-McGee, if Tronox is

unable to perform certain remediation obligations.”

109. In its 2008 Annual Report, Anadarko similarly stated:

We may incur substantial environmental and other costs arising from Kerr-McGee’s former chemical business. Prior to its acquisition by the Company, Kerr-McGee through an initial public offering, spun off its chemical manufacturing business to a newly created and separate company, Tronox Incorporated (Tronox). Under the terms of a Master Separation Agreement (MSA), Kerr-McGee agreed to reimburse Tronox for certain qualifying environmental remediation costs, subject to certain limitations and conditions and up to a maximum aggregate reimbursement of $100 million. However, Kerr-McGee could be subject to liability for certain costs of cleaning up hazardous substance contamination attributable to the facilities and operations conveyed to Tronox if Tronox becomes insolvent or otherwise unable to pay for certain remediation costs. As a result of the acquisition of Kerr-McGee, we will be responsible to provide reimbursements to Tronox pursuant to the MSA, and we may be subject to potential liability, as the successor-in-interest to Kerr-McGee, if Tronox is unable to perform certain remediation obligations. On January 12, 2009, Tronox and certain of its subsidiaries filed voluntary petitions to restructure under Chapter 11 of the United States Bankruptcy Code. As a result of this filing, third parties may seek to impose liability upon Kerr-McGee that is otherwise attributable to Tronox due to Kerr-McGee’s status as the former parent of Kerr-McGee Chemical Worldwide LLC, a predecessor-in-interest to Tronox. In addition, based on the information contained in the Tronox bankruptcy filings, it is also possible that third parties may pursue other claims against Kerr-McGee

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associated with the separation of Kerr-McGee’s former chemical business and the initial public offering of Tronox. Currently, we are unable to estimate the amount of these potential liabilities.

I. Tronox Goes Bankrupt

110. Tronox was overwhelmed by the financial burdens associated with the Legacy

Liabilities and debt obligations which negatively impacted the cost and terms on which Tronox

was able to raise capital. The Legacy Liabilities also prevented Tronox from taking advantage of

favorable market conditions by participating in mergers or acquisitions in the chemical sector. In

sum, the Legacy Liabilities made it impossible for Tronox to survive.

111. On January 12, 2009, Tronox, and certain related entities filed voluntary petitions

for relief under Chapter 11, Title 11 of the United States Code, 11 U.S.C. §1101 et seq. Tronox

continues to operate as a debtor in possession pursuant to Sections 1107(a) and 1108 of the

Bankruptcy Code.

TRONOX ADMITS MULTIPLE MATERIAL ACCOUNTING MISSTATEMENTS THROUGHOUT THE CLASS PERIOD

112. Tronox reported artificially inflated financial results during the Class Period by

knowingly or recklessly filing inaccurate financial statements with the SEC which failed to

properly reserve for environmental remediation and tort liabilities. The recording of a reserve is

a liability expense and represents a charge to income. The higher the reserve the lower the

reported income. By failing to record the appropriate liability expenses for the Company’s

environmental remediation and tort liabilities, Tronox both understated its liabilities and

overstated its reported income.

113. The Tronox Individual Defendants were motivated to understate Tronox’s

reserves throughout the Class Period. Any material deviation from the environmental reserve

balance that had been reported in connection with the IPO would have caused an immediate and

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devastating adverse market reaction, severely harmed Tronox’s ability to continue its normal

business activities, and generated significant litigation. Yet, New Kerr-McGee’s and Tronox’s

reserves were materially understated throughout the Class Period and a knowing violation of

GAAP, as alleged herein, because the Defendants ignored known information in setting reserves

and applied a threshold for taking reserves that was materially higher than what is permitted

under GAAP. In the Registration Statement, Tronox misleadingly stated that, in accordance with

applicable accounting rules, “when it is probable that a liability has been incurred and reasonable

estimates of the liability can be made” it established a reserve. The Tronox Individual

Defendants who signed the Registration Statement knew or recklessly disregarded the fact that

Kerr-McGee had not taken reserves in accordance with this policy. The Registration Statement

incorporated the financial results of the chemicals segment of Kerr-McGee for the years ended

December 31, 2001, 2002, 2003, and 2004 and reflected reserve balances as follows:

Kerr-McGee Chemicals Segment Environmental Remediation Reserve Balances

(in millions)

Date Reserve December 31, 2001 162.3 December 31, 2002 229.3 December 31, 2003 219.6 December 31, 2004

215.8

114. These recorded reserve balances remained essentially consistent in years 2002-

2004. This pattern was repeated during the Class Period when Tronox recorded remarkably

similar environmental remediation reserve balances as indicated on the following chart:

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Tronox Incorporated Environmental Remediation Reserve Balances

(in millions)

Date Reserve December 31, 2004 215.8 November 2005 239.4 December 31, 2005 223.7 March 31, 2006 216.5 June 30, 2006 221.0 September 30, 2006 242.2 December 31, 2006 223.9 March 31, 2007 221.1 June 30, 2007 214.3 September 30, 2007 203.6 December 31, 2007 188.8 March 31, 2008 181.8 June 30, 2008 183.8 September 30, 2008 170.7

Throughout the years 2002-2008, the same improper reserving methodology was employed by

Kerr-McGee and then Tronox. The terms of the Master Separation Agreement effectively

precluded Tronox from changing reserving methodologies by placing at risk Kerr-McGee’s

indemnity if it did so.

115. The recorded reserve balances throughout the Class Period were known or

recklessly disregarded to be materially deficient for several reasons. As of the time of the IPO

Tronox ascribed a zero reserve to the Manville, New Jersey wood-treatment site, even though the

Defendants knew that a significant and material demand had been made upon Tronox, LLC for

environmental remediation and reimbursement of in excess of $100 million by the EPA.

Beginning in the third quarter of 2006, Tronox began recording a reserve for the Manville site in

the amount of $35 million and did so throughout the remainder of the Class Period, but knew or

recklessly disregarded that this reserve was materially deficient in light of the EPA demand.

Accordingly, Defendants knew that the probable and reasonably estimable reserve for Manville

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was materially larger than what was recorded.

116. The Defendants also knew of or recklessly disregarded in determining the

foregoing reserve balances the existence of the Secret Sites, which were wood-treatment sites

similar to Manville, as well as the related Forest Products Litigation. Appropriate reserves for

these obligations would have been material in amount.

117. Even where no reserve was recorded as with the Manville site through the third

quarter of 2006, and the Secret Sites, Tronox was nonetheless required by GAAP to provide

meaningful disclosure to users of its financial statements as to the potential range of a reserve

balance that may become necessary for these potential obligations. The results set forth in the

financial statements issued throughout the Class Period failed to provide adequate disclosures as

to such potential liabilities. Tronox essentially had continued the flawed and improper reserving

methodology that had been employed pre-Class Period by the Kerr-McGee chemicals businesses

and approved by Defendant E&Y which had the effect of deliberately understating the reserve.

These improper reserving policies were simply carried over to Tronox and used throughout the

Class Period to distort Tronox’s financial results and deliberately misinform users of its financial

statements.

118. On May 5, 2009, Tronox announced that its previously issued financial statements

for the years ended December 31, 2005, 2006, and 2007, and the first three quarters of 2008, the

Selected Consolidated Financial Data for 2003 and 2004 (included in the Registration Statement)

were materially misstated should no longer be relied upon because the Company failed to set

aside adequate environmental remediation and other liability reserves.

119. The falsely reported financial results of Tronox for fiscal years 2005 through 2007

and the first three quarters of 2008 were included in the 10-Qs, 10-Ks and press releases

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disseminated by defendants to the public during the Class Period. Defendants knew or recklessly

disregarded that the Company had pervasive and material errors in the calculation of its

environmental remediation and tort liability reserves which caused its financial results to be

materially misstated.

ADDITIONAL SCIENTER ALLEGATIONS AS TO THE INDIVIDUALLY NAMED DEFENDANTS WHO SERVED ON TRONOX’S BOARD OF DIRECTORS

120. Each Tronox Individual Defendant knew or recklessly disregarded the extent of

the financial obligation which the Legacy Liabilities represented and that Tronox had recorded

inadequate reserves for these exposures. Each such defendant was motivated to conceal and/or

understate these liabilities, in order to allow Tronox to maintain the illusion of a company with a

successful business not unduly burdened by the liabilities imposed upon it by Kerr-McGee.

121. As alleged herein, Defendants acted with scienter in that they knew and/or

recklessly disregarded that the public documents and statements issued or disseminated in the

name of the Company were materially false and misleading; knew or recklessly disregarded that

such statements or documents would be issued or disseminated to the investing public; and

knowingly and substantially participated or acquiesced in the issuance or dissemination of such

statements or documents as primary violations of the federal securities laws. As set forth

elsewhere herein in detail, Defendants, by virtue of their receipt of information reflecting the true

facts regarding Tronox, their control over, and/or receipt and/or modification of Tronox’s

allegedly materially misleading misstatements and/or their associations with the Company which

made them privy to confidential proprietary information concerning Tronox, made materially

misleading statements and/or failed to disclose material information required to render their

statements not misleading.

122. Defendants knew and/or recklessly disregarded the falsity and misleading nature

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of the financial information which they caused to be disseminated to the investing public. The

ongoing fraudulent acts described in this Complaint could not have been perpetrated over a

substantial period of time, as has occurred, without the knowledge and complicity of the

personnel at the highest level of the Company, including the Tronox Individual Defendants

123. The Tronox Individual Defendants had the opportunity to perpetrate the fraud

described herein because they included the most senior officers and, in all instances, were

directors of Tronox, and at various times they issued statements on behalf of Tronox.

124. In addition to the facts showing their intentional and/or reckless application of a

reserving policy which materially understated the required environmental remediation and tort

liability reserve in violation of the Company’s own stated reserving policy and GAAP, several

confidential witnesses (“CW”) have confirmed that the Tronox Individual Defendants acted

knowingly and/or recklessly with regard to the fraud herein alleged.

A. Reasons For The IPO Fraud

125. The Tronox Individual Defendants knew or recklessly disregarded that with the

burden of the Legacy Liabilities, Tronox would ultimately not be able to survive. CW1, a

Technical Specialist II in Electron Microscopy and Analytical Chemistry at Kerr-McGee and

Tronox from February 2001 through October 2008, stated that Kerr-McGee’s senior

management, including defendant Corbett, would not permit Tronox “to IPO unless we took on

all those liabilities. Specifically, she stated that it was in Defendant Corbett’s and the other “big

wigs” interests “to get their millions of benefit and leave Tronox, the red headed step child, with

[the] chemical liabilities.” CW1 recounted a meeting at the Tech Center in Oklahoma City that

she attended right before the IPO where senior management, including David Marshall, the

director of Research & Development and Defendant Thomas Adams stated that “is the only way

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we will get [to] IPO.” CW1 stated that during this meeting concern was raised that, “We don’t

know how we’re going to make it (after the IPO) but we’ll give it a shot.” Concern was also

raised that Tronox could not survive paying its bills. CW1 further stated that right after Tronox

was spun off from Kerr-McGee, it was discussed throughout the Company that the Legacy

Liabilities “would probably be the death of Tronox.” CW1 further confirmed that “spinning off

Tronox was the only way that Anadarko would buy Kerr-McGee because they would not take

Kerr-McGee’s chemical division. She reiterated, “the only way Anadarko would buy the Oil and

Gas business was if they got rid of the chemical business.” CW1 said that the reason why the

chemical business could not be sold was that no one wanted to take on all the liabilities they had

because it was “too much for one tiny company” and that “Kerr-McGee purposely gave those

liabilities to Tronox.”

126. CW2, an Environmental Manager and Business Manager for the Health, Safety,

and Environmental Group at both Kerr-McGee and Tronox between 1984 and 2008 confirmed

that there was “definitely a deliberate effort to dump Kerr-McGee’s legacy liabilities onto

Tronox.” He explained, “that’s how they cleaned up Kerr-McGee Oil and Gas, was to put the

liabilities into Kerr-McGee Chemical and that made shareholder value for Kerr-McGee stock.”

CW2 also confirmed that “Luke [Corbett] and Wohleber were very heavily involved” in that

decision.

127. CW7, a Vice-President, Treasurer and Manager at Kerr-McGee and Tronox from

the early 1980s through July 2008, who reported directly to Defendant Wohleber and was a

member of the “Project Focus” Team, explained that Apollo refused to purchase Kerr-McGee’s

chemical business because “it didn’t want to take enough liabilities to the price Kerr-McGee

wanted.”

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128. CW6 worked in the Research & Development Group at Tronox from 1996

through 2007. This witness reported that the legacy liability fraud was common knowledge

within the Company. He stated, “We and other employees always believed that the legacy

liabilities were understated. We could not prove it but it was assumed. We knew when the

offers to sell the chemical business unit prior to the IPO were unsuccessful – this confirmed our

belief about the legacy liabilities being the cause. We knew what price the Company wanted to

receive out of the sale because it was disclosed and talked about internally and when the private

sale did not occur the reason was clearly the size and scope of the legacy liabilities – no buyer

who knew the extent of the legacy liabilities wanted to take on the risk of these liabilities and

meet the company’s price – so no private sale was ever possible.” He further stated that, “the

Company did not fail because of business conditions or the economy, it failed because of the

extent of the legacy liabilities.”

129. CW9 explained that the Tronox spin off occurred “because of discussions

between Corbett and the CEO of Anadarko” and that these discussions took place “well before it

all went through.” This was confirmed by CW1 who confirmed that “spinning off Tronox was

the only way that Anadarko would buy Kerr-McGee because they would not take Kerr-McGee’s

chemical division.” She reiterated, “[t]he only way Anadarko would buy the Oil and Gas

business was if they got rid of the chemical business.”

B. Fraud In The Environmental Remediation Reserve

130. The Tronox Individual Defendants knew or recklessly disregarded the fact that

Tronox materially under-reserved for its environmental remediation obligations and reported

reserves in its financial statements that did not comply with applicable accounting rules. The

reported reserves were the product of a methodology that deliberately failed to recognize the

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probable and reasonably estimable costs to be incurred by Tronox. Implementation of this

improper reserving methodology allowed Tronox to report income in each of the quarters during

the Class Period that was materially greater than it would have been had proper reserves been

recorded. The Tronox Individual Defendants, as a result of their extensive history with Kerr-

McGee, were fully aware that the issue of environmental remediation liabilities and reserves was

a constant source of concern within Kerr-McGee given its lengthy history in the oil and gas and

chemicals business, especially in the face of increasing legislative efforts since the passage of

CERCLA to address the problem associated with environmental pollution. These officers of

Kerr-McGee’s chemicals subsidiaries and the company’s controller had repeatedly been required

to deal with this issue, respond to inquiries from Kerr-McGee’s auditor regarding this subject,

and provide information necessary to formulate the quarterly reserve number. Each of these

individuals understood that each dollar of recorded reserves represented less reportable income.

Thus, they were constantly motivated and encouraged to find means to “manage” the reserve in

such a way as to ensure that, in light of cash flow, the reserve would never create a dramatic

change in income. In their capacities as officers of chemical businesses within Kerr-McGee and

as controller, these defendants were aware of Project Focus and the efforts to sell the chemical

subsidiaries to third parties.

131. According to CW3, who served as Vice President for Human Resources for Kerr-

McGee Chemicals and Tronox, LLC in 2004 and 2005, and whose responsibilities included

scheduling meetings and facility visits, there were fourteen entities that expressed initial interest

in acquiring the chemicals businesses. In each instance, CW3 was aware that all complained

about the Legacy Liabilities being included in any transaction, including liabilities that

seemingly had no connection to the chemicals businesses, but related to gas stations, oil and gas

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drilling sites, and oil terminals. According to CW3, the policy of Kerr-McGee was to record a

reserve only upon receipt of a specific demand for payment by way of letter or lawsuit and that

the amount of the demand had to be specific before it was to be reserved for. CW3 confirmed

that Defendants Adams, Mikkelson, and Rowland met with prospective purchasers of the

chemicals businesses in 2005. These Defendants were also aware that no transaction was

consummated with any of these entities and that the deal breaker was the Legacy Liabilities.

132. CW4 served at Kerr-McGee’s chemicals business from February 2004 until

March 2006, and was an executive assistant to defendant Mikkelson. According to CW4,

Mikkelson “prepared financial documents which were earnings related and produced documents

that were intentionally done wrong. Things weren’t what they appeared to be. Mikkelson

changed financial documents and did it by herself.” CW4 stated that she believed this to be true

based on her own observations and comments made to her by other Tronox finance department

accountants. CW4 identified Joe Regan as an accountant who had conflicts with Mikkelson

about the accuracy of financial reporting done by Mikkelson, including with regard to

environmental reserves. At one point CW4 was instructed by Mikkelson not to give any

financial documents to Regan. CW4 stated that other Tronox accounting personnel also believed

that the Tronox accounting department was generating inaccurate financial information,

including an individual responsible for Sarbanes-Oxley compliance issues. At least four or five

financial department accountants commented to CW4 that the financial documents were wrong

and that changes made by Mikkelson were “illegal.” CW4 stated that she was aware in early

2005 of documents reflecting approximately 260 undisclosed sites where Tronox had

environmental liabilities. These sites were kept top secret, according to CW4, and the

documents referring to them were copied to Defendants Adams and Mikkelson. According to

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CW4, ‘I knew something was wrong when Tom Adams walked by and his assistant would cover

these documents up.”

133. CW9 was a Director of Financial Services at Kerr-McGee and Tronox from 1976

through October 2008 who reported directly to Defendant Mikkelson and was a member of the

Project Focus team. He stated that Tronox was “very under-reserved” as of September 2005. He

explained that the Company was under-reserving because “it was a new company trying to play

the quarterly earnings game with the ratings agencies” and that there was “a lot of pressure on

the officers to value the reserves at the minimum value.” CW9 also stated that a number of

people within the SEA group were “concerned and didn’t agree with the [reserve] values being

produced.”

134. CW10 was a Controller and Manager of Accounting at Tronox from June 2006

through May 2008. He explained that the debts and liabilities that Tronox had on its books were

“over a billion [dollars].” According to CW10, this amount included “environmental

contamination liabilities” from Kerr-McGee that “went as assets and liabilities,” and included

“plants in New York, Boston [and] all over the West.” CW10 stated that the Henderson, Nevada

site alone had liabilities of “$400-$500 million [of remediation costs to pay] over 30 years.”

This witness also stated that the Henderson liability “probably shouldn’t have gone to Tronox”

because it was not related to the chemical business.” CW10 stated that there “absolutely” was

concern over potential liabilities similar to those of the Manville, New Jersey site and that

Defendant Mikkelson and the Board of Directors “would have been aware of them.”

135. The threat represented by the environmental liabilities from the Manville site

raised significant concern about Tronox’s liabilities for similar wood treatment sites. CW2 who

had served as a corporate witness in numerous lawsuits brought against both Kerr-McGee and

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Tronox regarding environmental liabilities, stated that Kerr-McGee conducted a review of other

wood treatment sites after the Manville problem erupted in the late 1990s. The review was

ordered by the Vice President of the Environmental Group, George Christensen. CW5

confirmed that Manville “came on the radar” in 1999 or 2000 and that it “no doubt ... raised

concerns about cleanup costs at other similar sites as well.” CW10 stated that there “absolutely”

was concern over potential liabilities similar to those of the Manville site and that Defendant

Mikkelson and the Board of Directors “would have been aware of them.”

136. CW3, who also worked closely with the Company’s accounting department on the

costs for certain legacy liability projects that were under his control, made clear that the

Company was “not on the leading edge” in its application of relevant accounting principles for

environmental reserves. According to CW3 other companies in the chemical business were

“more forward process” than Kerr-McGee and Tronox. For example, CW3 explained that while

attending a conference for International Paper, he learned that as soon as Kerr-McGee’s

competitors “had a site identified, for example, a gas station, history would show that costs

associated with a gas station are typically $1 million. They would therefore already accrue for

$1 million once the site has been identified. Kerr-McGee’s view, on the other hand, would be a

more conservative view from a fiscal liability standpoint. That view is, ‘If I don’t know what it

is, I can’t estimate it.’ The thought [at the Company] would be, if we need to do a study we will

accrue for the dollars for the study because that much is known, but we are not going to account

for things we don’t know.” CW3 explained that Kerr-McGee and Tronox followed this practice

because “from a balance sheet standpoint it benefited them. You’d have a higher net worth if

you did it the way Kerr-McGee did it.”

137. CW5 was an analyst in the Safety and Environmental Affairs Group (“SEA”) at

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Kerr-McGee and Tronox who managed the analytical and hydrological data for over 40

environmental remediation projects, including refining, chemical, and nuclear sites, and

specifically, the Company’s legacy sites, from November 1997 through October 2008. She

stated that the legacy sites were a multi-million dollar expense for the company every year.

CW5 added that the annual budget for remediating those cites was $60 - $70 million per year

when the legacy liabilities were held by Kerr-McGee and then suddenly became $30-$35 million

when they were transferred to Tronox. CW5 explained that Tronox simply did not have the

necessary money to remediate the legacy sites. Accordingly, that is why the budget at Tronox

for remediation was approximately half of what it had been at Kerr-McGee, not that the amount

of money necessary for remediation per year was in reality any smaller.

138. CW5 also confirmed that Kerr-McGee officers were aware of the costs associated

with environmental projects at the legacy sites because “of the huge invoices” associated with

the site remediation. She explained that “it would not be uncommon, for example at the

Cushing, OK site, to get a monthly invoice from VFL [a consultant] for over a million dollars…

This would go on for months and all the project managers and program managers would all have

a signature limit on invoices.” According to CW5, those project and program managers would

need to get approval on such large invoices by the Company’s senior most executives. In fact,

CW5 stated that “she did not know how Corbett and all of the other executives could have

avoided awareness of these ‘mammoth invoices.’”

139. CW12 worked in the SEA Group on the environmental/technical side at both

Kerr-McGee and Tronox. He started in the hydrology group in SEA then held a staff position in

operations and at Tronox he had site monitoring and regulatory oversight responsibility and

managed closed locations. He stated that he left Tronox “because it looked like the company

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would not make it – it did not look to be viable. It is tough to start a new chemical company with

extensive liabilities – especially with all of the legacy liabilities such as gas stations, oil terminals

and the like that K-M dumped on Tronox – it was common knowledge in the company that the

legacy liabilities being dumped on Tronox were set up for K-M to merge with Anadarko.”

CW12 stated regarding undisclosed sites: “I had knowledge that there were wood treatment sites

referred to as ‘secret sites.’ I knew this from a hydrologist. I am certain that he went to one of

these sites specifically Jackson, MS because he told me so. We had worked together and he was

a friend. He told me about this on an airplane trip. There were ten or less members of the

hydrologist group that went out to these secret sites. By secret sites it was meant that they were

not listed or disclosed regularly on the company’s chain of sites. The investigations were

comprised basically of a Phase 1 environmental technical evaluation including a visible walk-

over, including tanks and the like and sampling. There was also research ongoing as to whether

these sites even belonged to us. Tom was going to these sites from 1999 to 2001. I was not

aware who specifically requested Tom to go or what he learned from his reconnaissance.”

Regarding undisclosed agricultural chemical sites, CW12 stated: “I was aware that there were

some ag-chemical sites that had been investigated but not disclosed. The sites that I was aware

of were in Indiana but not all of these sites were in Indiana. I had a wood treatment site in

Indianapolis which was closed in 2001. I knew about the undisclosed ag-chemical sites from a

fellow SEA employee who I had a conversation with about them.”

140. With regard to reserving, CW12 offered the following information: “One practice

that I was not comfortable with involved our budgeting process. I was given an annual budget

for costs and reserves. I was asked to sign-off monthly on a reserve number that I did not

allocate for my environmental locations. The reserve number that I was given would have fallen

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short of what costs were needed. I did not know how the reserve I was given was calculated. At

any one time my budget and its overview was comprised of 5-6 sites which I was responsible for.

Certain regulatory requirements stipulated a 30 year monitoring program. The company

approach to reserving was to make the environmental reserves as minimal as possible. The

general statement given by the company was that there was not a lot of money for the clean-up. I

was not comfortable with being asked to sign-off on sites which were to be monitored monthly

on a budget with the reserve number already provided and my knowing that the costs were going

to be much higher.”

C. Special Compensation Arrangements For Tronox Executives And Certain Employees

141. Several confidential witnesses noted that there were special compensation

arrangements in place for the Tronox officers to encourage them to serve the interests of Kerr-

McGee in completing the Tronox transaction. CW6 stated that “Tronox management were paid

higher and extra salary comparable to others in the chemical industry and especially for

executives living in Oklahoma City - they were issued stock and paid high bonuses. It was a

form of hush money coming from Kerr-McGee to stay the course and conform - employees of

the Company felt this way that the Company’s leadership at the VP level was being overly

compensated and manipulated by Kerr-McGee to look the other way.” CW6 elaborated that,

“the Company’s executives were of the kind that could be intimidated into doing what they knew

they should not be doing. The Company was losing money from the onset of its existence even

when things were going good yet high bonuses were always being paid. Stock awards, high

salaries, and high bonuses were the motivation for management to go along. Employees knew at

the very onset of the IPO that due to the legacy liabilities being loaded onto Tronox that the

company was doomed to fail and would go bankrupt.”

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142. In Tronox’s Proxy Statement pursuant to Section 14(A), filed April 10, 2006, the

Company disclosed individual compensation information for the fiscal years ended

December 31, 2005 and 2004, summarized in the following chart, with respect to Defendants

Adams, Rowland, and Mikkelson. This chart reflects massive increases in compensation for the

Tronox executives from 2004 through 2005, representing in effect a commercial bribe to induce

these individuals to assume senior management positions with Tronox in the face of their

knowledge of the massive burdens represented by the Legacy Liabilities.

SUMMARY COMPENSATION TABLE

Annual Compensation

Long-Term Compensation Awards

Name and Principal Position

Year Salary7 Bonus8 Restricted Stock Award(s)9, 10

No. of Securities Underlying Options11

All Other Compensation

2005 $365,519 $707,097 $1,324,350 116,650 $27,943 Thomas W. Adams, Chief Executive Officer

2004 285,600 169,513 81,625 5,155 23,780

2005 231,694 412,341 392,256 34,600 42,186 Marty J. Rowland, Chief Operating Officer

2004 189,137 74,127 21,799 1,357 55,185

2005 212,594 397,135 309,612 27,300 13,616 Mary Mikkelson, Senior Vice President

2004 131,592 85,648 --- --- 7,507

7 Salary for 2005 includes the following amounts paid on Tronox’s payroll: $56,634 for Mr. Adams; $231,694 for Mr. Rowland; and $28,034 for Ms. Mikkelson. The balance of the amounts for 2005 was paid by companies affiliated with Tronox. Ms. Mikkelson was hired by Kerr-McGee in February of 2004. 8 Includes bonuses paid under the Kerr-McGee 2005 Success Bonus Program in the amounts of $335,000 for Mr. Adams; $220,704 for Mr. Rowland; and $202,219 for Ms. Mikkelson. 9 Restricted stock grants are valued based on the closing price of common stock on the NYSE on the grant date. 10 For 2005, restricted stock includes grants of Tronox stock valued as follows: $1,139,880 for Mr. Adams; $329,820 for Mr. Rowland; and $241,500 for Ms. Mikkelson. 11 For 2005, stock option amounts include grants of Tronox stock options as follows: 102,200 for Mr. Adams; 29,600 for Mr. Rowland; and 21,700 for Ms. Mikkelson.

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143. CW6 further explained that financial statement manipulation was also related to

compensation issues. “I believe strongly that the company’s financial statements were also

manipulated in order that senior managers would make their bonuses. Their bonuses were tied to

the ‘SCORE’ numbers – SCORE was a compensation program whose metrics were tied to the

business for instance how the year finished performance-wise; and how the Company did against

competition and others. The motivation to manipulate the financials by management lay in the

magnitude of the differences in bonuses.”

144. CW7, who worked in IT server support, and had started at Kerr-McGee in 1989

and was released by Tronox on October 8, 2008, related information about special compensation

for the Tronox CEO: “I found it incredible to find out that [defendant] Tom Adams, our CEO,

was offered a bonus if he could keep the company alive for one year after the IPO. This was

common knowledge in our IT group which had 50-60 employees and was also known at the

Technical Center. This issue bothered a lot of people and it was talked about regularly. I first

heard about it from others in my department perhaps several months after the Company’s IPO in

November 2005.”

145. CW11 was a Contract Specialist in the SEA group who started at Kerr-McGee in

1987, transitioned to Tronox, and was laid off in October 2008. The reserve setting process

would begin with SEA. Her responsibilities included managing environmental work orders,

contracts with outside vendors for environmental assessment and remediation, and insurance.

She stated that “there were selective executives and employees who were rewarded and given

extra monies just after the IPO to joining Tronox. I was given 25% of my annual salary to join

Tronox. I was sworn to secrecy not to reveal this information and was asked to sign a document

to keep the bonus money confidential.

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D. Motive And Opportunity Of Defendants Corbett, Wohleber and Pilcher To Perpetrate The Fraudulent Scheme

146. Defendants Corbett, Wohleber and Pilcher also had both motive and opportunity

to perpetrate the fraudulent scheme herein alleged. As explained above, Kerr-McGee was able to

pass its environmental remediation and related tort liabilities onto Tronox and generate in excess

of $500 million in cash for itself from the IPO. Additionally, Kerr-McGee was thereafter able to

sell itself within just three months after the IPO to Anadarko for $18 billion and in the process

richly reward key architects of the fraud. Defendants Corbett, Wohleber and Pilcher each had a

huge financial stake in the sale of Kerr-McGee to Anadarko which, as alleged more fully above,

would not have occurred had Kerr-McGee retained the hundreds of millions of dollars in

environmental remediation liabilities, which the Legacy Liabilities represented.

147. Specifically, according to Kerr-McGee’s Form DEFM14A filed with the SEC on

July 12, 2006, under the heading “Interests of the Company Directors and Executive Officers in

the Merger,” Defendants Corbett, Wohleber and Pilcher reaped more than $270,019,216.40 as a

result of the sale of Kerr-McGee to Anadarko. As the following chart shows, Defendant Corbett

profited by more than $237,739,053.50, Defendant Wohleber profited by more than

$26,018,423.30 and Defendant Pilcher profited by more than $32,184,589.60. Accordingly,

these Defendants were highly motivated to perpetrate the fraudulent IPO and ensuing Spin-Off in

order to cleanse Kerr-McGee of the Legacy Liabilities prior to the sale to Anadarko.

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Corbett Wohleber Pilcher Unvested Stock Options

$19,352,822.00 (447,982 shares x $43.20 ($70.50-27.30)

$5,729,409.80 (122,738 shares x $46.68) ($70.50-23.82)

$3,424,653.60 (73,192 shares x $46.79 ($70.50-23.71)

Payout $8,984,500.00 $2,599,000.00 $1,486,800.00 Retirement Payout $5,595,055.00 n/a n/a Severance $9,623,253.00 $3,466,494.00 $3,020,889 Prorated Bonus $1,035,500.00 $323,775.00 $293,071.00 Lump Sum $3,313,178.00

(plus office space and $60 k secretary)

n/a n/a

Retirement Benefits

$43,745,842.00 $8,434,373.00 $6,169,418.00

Sale of Shares Beneficially Owned

$127,949,253.50 (2,404,709 shares - 447,982 shares = 1,956,727 shares x $70.50)

$452,821.50 (129,161 shares - 122,738 shares = 6,423 shares x $70.50)

$15,019,108 (286,229 shares - 73,192 shares = 213,037 shares x $70.50)

TOTAL $219,599,403.50 $21,005,873.30 $29,413,939.60

GAAP VIOLATIONS

148. The financial statements issued by Tronox during the Class Period were not

prepared in conformity with GAAP despite representations to the contrary, nor was the financial

information a fair presentation of the results of the Company’s operations due to the Company’s

improper accounting for environmental remediation liabilities and tort claim reserves.

149. The representations by Defendants that Tronox’s financial statements were

prepared in accordance with GAAP were materially false and misleading because the Defendants

engaged in fraudulent accounting practices which materially understated the environmental

remediation and related tort costs associated with the Legacy Liabilities. Tronox’s restatement

announcement has admitted that there were GAAP violations.

150. GAAP are those principles recognized by the accounting profession as the

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conventions, rules and procedures necessary to define accepted accounting practice at a

particular time. Regulation S-X (17 C.F.R. §210.4-01(a) (1)) states that financial statements

filed with the SEC which are not prepared in compliance with GAAP are presumed to be

misleading and inaccurate. Regulation S-X requires that interim financial statements must also

comply with GAAP, with the exception that interim financial statements need not include all

disclosure which would be duplicative of disclosures accompanying annual financial statements.

17 C.F.R. §210.10-01(a).

151. The responsibility for preparing financial statements that conform to GAAP rests

with corporate management as set forth in AU §110.03 of the Public Company Accounting

Oversight Board (“PCOAB”) Standards and Related Rules:

The financial statements are management's responsibility.... Management is responsible for adopting sound accounting policies and for establishing and maintaining internal controls that will, among other things, initiate, record, process, and report transactions (as well as events and conditions) consistent with management's assertions embodied in the financial statements. The entity's transactions and the related assets, liabilities, and equity are within the direct knowledge and control of management.... Thus, the fair presentation of financial statements in conformity with [GAAP] is an implicit and integral part of management's responsibility.

152. Tronox’s disclosure that its financial statements included in the Company’s

Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K filed with the SEC during

the Class Period should no longer be relied upon constitutes an admission that each of the

Company press releases and Forms 10-K and 10-Q issued during the Class Period were

materially false and misleading when issued. Pursuant to GAAP, as set forth in Statement of

Financial Standards (“SFAS”) No. 154, the type of restatement announced by Tronox was to

correct for material errors in its previously issued financial statements. See SFAS 154 ¶¶2(h),

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25-26. The restatement of past financial statements is a disfavored method of recognizing an

accounting change as it dilutes confidence by investors in the financial statements, it makes it

difficult to compare financial statements and it is often difficult, if not impossible, to generate the

numbers when restatement occurs. Thus, financial statements should only be restated in limited

circumstances. Additionally, under SFAS 16, Prior Period Adjustments, restatements are only

permitted – and are required – for material accounting errors or fraud. AU §316 of the PCAOB

Standards and Related Rules defines fraud as “an intentional act that results in a material

misstatement in financial statements that are the subject of an audit.”

153. Due to its accounting improprieties, the Company presented its financial results

and statements in a manner which violated GAAP, including the following fundamental

accounting principles:

a. the principle that interim financial reporting should be based upon the

same accounting principles and practices used to prepare annual financial statements was

violated (APB No. 28, ¶10);

b. the principle that financial reporting should provide information that is

useful to present and potential investors and creditors and other users in making rational

investment, credit and similar decisions was violated (FASB Statement of Concepts No. 1, ¶34);

c. the principle that financial reporting should provide information about the

economic resources of an enterprise, the claims to those resources, and effects of transactions,

events and circumstances that change resources and claims to those resources was violated

(FASB Statement of Concepts No. 1, ¶40);

d. the principle that financial reporting should provide information about

how management of an enterprise has discharged its stewardship responsibility to owners

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(stockholders) for the use of enterprise resources entrusted to it was violated. To the extent that

management offers securities of the enterprise to the public, it voluntarily accepts wider

responsibilities for accountability to prospective investors and to the public in general (FASB

Statement of Concepts No. 1, ¶50);

e. the principle that financial reporting should provide information about an

enterprise’s financial performance during a period was violated. Investors and creditors often

use information about the past to help in assessing the prospects of an enterprise. Thus, although

investment and credit decisions reflect investors’ expectations about future enterprise

performance, those expectations are commonly based at least partly on evaluations of past

enterprise performance (FASB Statement of Concepts No. 1, ¶42);

f. the principle that financial reporting should be reliable in that it represents

what it purports to represent was violated. That information should be reliable as well as

relevant is a notion that is central to accounting (FASB Statement of Concepts No. 2, ¶¶58-59);

g. the principle of completeness, which means that nothing material is left

out of the information that may be necessary to insure that it validly represents underlying events

and conditions was violated (FASB Statement of Concepts of No. 2, ¶79); and

h. the principle that conservatism be used as a prudent reaction to uncertainty

to try to ensure that uncertainties and risks inherent in business situations are adequately

considered was violated. The best way to avoid injury to investors is to try to ensure that what is

reported represents what it purports to represent (FASB Statement of Concepts No. 2, ¶¶95, 97).

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A. Specific GAAP Relating To Reserve Calculations Violated By Defendants

154. In preparing the financial statements which Tronox has now admitted were

materially misstated, defendants violated the following specific provisions of GAAP.

B. SFAS 5

155. GAAP provides that an estimated loss from a loss contingency such as

environmental remediation costs “shall be accrued by a charge to income” if: (i) information

available prior to issuance of the financial statements indicated that it is probable that an asset

had been impaired or a liability had been incurred at the date of the financial statements; and (ii)

the amount of the loss can be reasonably estimated. SFAS No. 5, at ¶8. SFAS No. 5, at ¶10 also

requires that financial statements disclose contingencies when it is at least reasonably possible

(i.e., more than remote) that a loss may have been incurred. The disclosure shall indicate the

nature of the contingency and shall give an estimate of the possible loss, a range of loss or state

that such an estimate cannot be made. The SEC considers the disclosure of loss contingencies to

be so important to an informed investment decision that it promulgated Regulation S-X, which

provides that disclosures in interim period financial statements may be abbreviated and need not

duplicate the disclosure contained in the most recent audited financial statements, except that,

“where material contingencies exist, disclosure of such matters shall be provided even though a

significant change since year end may not have occurred.” 17 C.F.R. §210.10-01.

C. FIN 14

156. Guidance for SFAS 5 is provided in FASB Interpretation No. 14 (“FIN 14”).

Contrary to the reserving methodology employed by Tronox, FIN 14 makes clear that accrual of

a loss is not to be delayed until only a single amount can be reasonably estimated.

157. Furthermore, FIN 14 indicates that disclosure is required of the nature of the

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contingencies that exist when the reasonable estimate of a loss is a range and that there should be

disclosure of the nature of the contingency and the additional exposure to loss if there is at least a

reasonable possibility of loss in excess of the amount accrued. In numerous instances Tronox

failed to disclose such additional exposure to loss in circumstances where there was a reasonable

possibility of loss in excess of the accrual.

D. SOP 96-1

158. Further guidance as to reserving requirements for environmental conditions is set

forth in Statement of Position 96-1 (“SOP 96-1”):

Statement of Position 96-1, Environmental Remediation Liabilities, Recognition of

Environmental Remediation Liabilities

Overall Approach .105 FASB Statement No. 5, Accounting for Contingencies, requires the accrual of a liability if (a) information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and (b) the amount of the loss can be reasonably estimated.

* * * .114 . . . [T]he components of the liability that can be reasonably estimated should be viewed as a surrogate for the minimum in the range of the overall liability. . . . This lack of ability to quantify the total costs of the remediation effort, however, should not preclude recognition of the estimated cost of the RI/FS [remedial investigation and feasibility study]. In this circumstance, a liability for the best estimate (or, if no best estimate is available, the minimum amount in the range) of the cost of the RI/FS and for any other component remediation costs that can be reasonably estimated, should be recognized in the entity’s financial statements. (Emphasis added).

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E. SAB No. 92

159. SEC Staff Accounting Bulletin No. 92 (“SAB No. 92”), Accounting and

Disclosures Relating to Loss Contingencies, provides additional guidance regarding appropriate

disclosure for loss contingencies such as environmental remediation obligations. As relevant

here, SAB No. 92 provides as follows:

Question 5: What financial statement disclosures should be furnished with respect to recorded and unrecorded product or environmental liabilities? Interpretive Response: Paragraphs 9 and 10 of SFAS 5 identify disclosures regarding loss contingencies that generally are furnished in notes to financial statements. The staff believes that product and environmental liabilities typically are of such significance that detailed disclosures regarding the judgments and assumptions underlying the recognition and measurements of the liabilities are necessary to prevent the financial statements from being misleading and to inform readers fully regarding the range of reasonably possible outcomes that could have a material effect on the registrant’s financial condition, results of operations, or liquidity. (Emphasis added).

160. Defendants violated SAB No. 92 by failing to provide meaningful detailed

disclosure to investors as to the potential scope of the remediation and tort liabilities associated

with the Legacy Liabilities, and employing a methodology that had the effect of intentionally

and/or recklessly understating the liabilities. Each of the defendants who signed Tronox’s

disclosures reflecting the reserve for environmental remediation and tort liabilities knowingly

and/or recklessly violated the foregoing provisions of GAAP applicable to the recording of

reserves. These defendants materially understated Tronox’s environmental remediation and tort

obligations based on existing facts. For example, they failed to record any reserve for the

multitude of “Secret Sites” that had been investigated by Defendant Kerr-McGee and which

were known to or recklessly disregarded by the Tronox Individual Defendants. As to the

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Manville, New Jersey site, Tronox failed to record any reserve for this known obligation until the

third quarter of 2006 and even at that time, the reserve that was recorded was materially deficient

under applicable accounting standards because it understated the probable and reasonably

estimable exposure. Further, these Defendants deliberately understated the potential exposure to

tort liabilities based on the $70 million paid to settle just 11 claims and the fact that Tronox had

inherited the liability for literally thousands of similar claims.

161. Defendants often represented that they could not reasonably estimate all

environmental remediation liabilities that Tronox faced, yet the environmental remediation

reserve reported throughout the Class Period remained remarkably consistent and showed little

fluctuation even as circumstances changed and additional information was obtained. This

reflects that Defendants were simply “managing” the environmental remediation reserve to avoid

any negative responses in the market’s perception of the Company. Further, Tronox’s financial

statements indicated that cash spending for environmental remediation obligations had been

declining in years 2002-2006 and gave no indication that this decline was due to an inability to

pay rather than a decline in actual payment obligations. Defendants ignored the gradual

accumulation of data that led to Tronox’s collapse and that the bankruptcy was necessitated by

the fact that the appropriate reserve was more than double what had been recorded.

162. Tronox claimed that it could not establish a range of potential liabilities for

several sites for purposes of recording a reserve, and eschewed the obligation to retain an expert

in environmental remediation to assist in developing a range. The reserve policy implemented for

purposes of Tronox’s Class Period financial statements also resulted in an insufficient reserve

being recorded in light of the fact that Tronox was a potentially responsible party (“PRP”) for at

least twelve (12) Superfund sites, and that United States law imposes “joint and several liability”

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on all PRP’s under CERCLA. Tronox reserved only $224 million as of December 31, 2005, a

facially deficient amount given the defendants’ extensive history with this issue and their

knowledge of the potential size of the exposures Tronox faced. Even where Tronox indicated

that it could not reliably estimate a range of future additions to its reserve for any individual site

or all sites collectively, the accounting literature required that some reserve amount be recorded,

even if it was at the low end of a range, rather than failing to record any amount. SOP 96-1

requires that in the early stages of the remediation process, where certain components of the

liability can be estimated but others cannot, the known components and an estimate of the

obligation associated therewith must be disclosed. Further, SAB 92 requires that judgments and

assumptions used in establishing and/or failing to establish a reserve must be meaningfully

disclosed to prevent the financial statements from being misleading and to provide full

information to users of the financial statements. Defendants failed to include in Tronox’s Class

Period financial statements such meaningful disclosure to allow users of its financials to

understand the true scope of the Company’s existing and potential obligations for environmental

remediation reserves.

163. Further, the undisclosed adverse information regarding reserve obligations

concealed by Defendants during the Class Period is the type of information which, because of

SEC regulations, regulations of the national stock exchanges and customary business practice, is

expected by investors and securities analysts to be disclosed and is known by corporate officials

and their legal and financial advisors to be the type of information which is expected to be and

must be disclosed.

164. The magnitude, duration and pervasiveness of the misstatements regarding

Tronox’s environmental remediation and tort liability reserves, which were repeated over four

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(4) years and which violated GAAP, compels the conclusion that these methods were

implemented by Defendants intentionally, or that, at a minimum, Defendants recklessly

disregarded the overwhelming prevalence of these improper procedures and the resulting

material falsifications of Tronox’s financial statements issued during the Class Period.

DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS MADE DURING THE CLASS PERIOD

165. Throughout the Class Period, Defendants issued false financial statements and

made other false and misleading statements to investors which failed to fully disclose the extent

of the environmental remediation and tort claim liabilities faced by Tronox. In addition, the

Defendants failed to inform investors that they were improperly determining the amounts that

should have been reserved each quarter for those remediation and tort claims. In doing so, the

Defendants misled the market as to the true financial condition of Tronox and deprived investors

of material information that was necessary to understand the Company’s financial condition.

A. Registration Statement

166. On November 21, 2005, the Registration Statement for the Company’s IPO was

filed with the SEC and declared effective. The Registration Statement assured investors:

As of September 30, 2005, our financial reserves for all active and inactive sites totaled $239.4 million, $160.6 million of which are classified as noncurrent liabilities. We believe we have reserved adequately for the reasonably estimable costs of known environmental contingencies. However, additional reserves may be required in the future due to the previously noted uncertainties. (Emphasis added).

167. This statement was materially false and misleading at the time it was made. The

Defendants knew, or were reckless in not knowing, that the $239.4 million reserve was grossly

insufficient to cover the environmental remediation costs associated with the Legacy Liabilities.

Tronox has now admitted that this reserve was determined using a methodology that was not in

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accordance with GAAP. Defendants also knew that the recorded reserves did not account for the

Secret Sites that had been identified. In addition, as was later revealed in the bankruptcy

proceedings, the Defendants had discussions with third parties who conducted due diligence and

reviewed internal, non-public information regarding Tronox’s potential environmental liability.

From these discussions, the Defendants knew that exposure for the Legacy Liabilities was, at a

minimum, between $400 million and $900 million.

168. Regarding Tronox’s other sites with environmental remediation and restoration

exposure, the Registration Statement represented that:

There may be other sites where we have potential liability for environmental-related matters but for which we do not have sufficient information to determine that the liability is probable or reasonably estimable. We have not established reserves for such sites. One such site involves a former wood treatment plant in New Jersey.

This statement was materially misleading because it failed to reveal, as was ultimately disclosed

in the bankruptcy proceedings, that Kerr-McGee had confidentially investigated numerous wood

treatment sites similar to the one in Manville, New Jersey, at which Kerr-McGee faced liability

for substantial environmental clean-up costs. Kerr-McGee, and Kerr-McGee’s representatives

on the Tronox Board, knew that this investigation had identified at least eleven wood treatment

sites at which the Company faced exposures similar to those at the Manville, New Jersey site.

169. The Registration Statement also failed to disclose that, prior to the IPO, Kerr-

McGee had considered conducting a wide scale investigation of other sites where it faced

potential liability. These additional sites included approximately 260 agricultural chemical sites,

two former fertilizer plants, five former chemical manufacturing sites, and several other

locations. Despite the questions surrounding these sites, Kerr-McGee chose not to follow

through with the investigation. Instead, it chose to spin-off Tronox without disclosing its

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concerns regarding these sites or the reasons why Kerr-McGee initially believed an investigation

might be necessary. Kerr-McGee wanted to avoid creating documentary evidence that would

demonstrate the need for additional reserves.

170. The Registration Statement also made material misrepresentations regarding

Tronox’s tort liabilities. Regarding the former forest products sites, the Registration Statement

stated that:

Between 1999 and 2001, Tronox LLC was named in 22 lawsuits in three states (Mississippi, Louisiana and Pennsylvania) in connection with former forest products operations located in those states (in Columbus, Mississippi; Bossier City, Louisiana; and Avcoa, Pennsylvania) . . .

* * * Tronox LLC has executed settlement agreements that are expected to resolve substantially all of the Louisiana, Pennsylvania and Mississippi lawsuits described above. Resolution of the remaining cases is not expected to have a material adverse effect on us.

171. This representation was materially false and misleading because, as disclosed in

the bankruptcy proceedings, Kerr-McGee’s settlement of the earlier claims had cost

approximately $70 million, but this fact was omitted from the Registration Statement. The

omission was glaring because approximately 11,000 additional claims relating to wood treatment

sites had been filed prior to the IPO. Thus, representing that these additional claims were “not

expected to have a material adverse effect” was materially false and misleading because the prior

settlements indicated, according to Apollo’s due diligence team from the law firm of Morgan

Lewis & Bockius, potential exposure of up to $500 million for these claims.

172. The Registration Statement also stated the following regarding the Company’s

policy for recording reserves for environmental remediation:

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As sites of environmental concern are identified, the company assesses the existing conditions, claims, and assertions, and records an estimated undisclosed liability when environmental assessments and/or remedial efforts are probable and/or remedial efforts are probable and the associated costs can be reasonably estimated.

This statement was false and misleading because, as discussed in paragraphs 168-169, there were

numerous sites of environmental concern identified for which the Company knowingly did not

properly assess the existing conditions and did not record a reserve even though remedial efforts

were probable and the costs estimable.

173. In addition, the financial statements in the Registration Statement were false and

misleading because the environmental remediation reserve was materially deficient. The reserve

calculation was based on an admittedly incorrect methodology that was not in accordance with

GAAP or industry practice. It also violated Tronox’s own publicly stated accounting policies

regarding reserves.

174. The Registration Statement also created the materially misleading impression that

Tronox was in sound financial condition and prepared to be a competitive business. Tronox,

operating as an independent entity, was doomed to fail for several reasons. First, the Defendants

concealed the extent of the Legacy Liabilities with which Tronox was burdened. Second, Kerr-

McGee left Tronox with only $40 million in cash following the IPO, which was insufficient

given Tronox's undisclosed liabilities and debt. Third, Kerr-McGee had advised Tronox to raise

cash by selling assets, but knew this would raise insufficient funds. Fourth, Kerr-McGee rushed

the IPO to capitalize on the upswing of the chemicals business, knowing that Tronox could never

meet the projections presented to investors. Indeed, after conducting significant due diligence, a

third-party had informed Kerr-McGee that Tronox could not survive as an independent entity

due to its overwhelming liabilities.

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B. December 21, 2005 Investor Presentation

175. On December 21, 2005, Defendant Adams made a presentation to securities

analysts and investors. A slide titled “Legacy Sites” stated that the “Company actively manages

environmental issues related to legacy businesses” and offered the following assurance that these

issues were properly accounted for and under control:

• In 1994, a centralized Safety and Environmental Affairs (S&EA) unit was formed to manage environmental issues.

• Financial reserves for probable and estimable

environmental costs were reviewed and updated quarterly. As of September 30, 2005, reserves were $239.4 million.

• Kerr-McGee had agreed to a 7-year remediation cost

reimbursement program which “[r]eimburses Tronox for 50% of remediation cost in excess of the reserves up to $100 million.”

• “Additional mitigating items: insurance policies,

government reimbursements (W. Chicago/Kress Creek and Henderson, Nevada) and land asset sales.”

176. At the time this presentation was made, the Defendants knew, or were reckless in

not knowing, that the environmental remediation reserves were inadequate. They also knew, or

were reckless in disregarding, that these reserves were determined through an inappropriate

methodology that resulted in deficient reserves. Potential reimbursements from Kerr-McGee,

insurance policies, funds from the U.S. government and the stated reserves, could not

conceivably cover the known and probable obligations. The false and misleading slides from the

December 21, 2005 presentation were also attached to a Form 8-K that was filed with the SEC

that same day.

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C. Announcement Of Navy Settlement Related To Henderson, Nevada Site

177. On January 17, 2006, Tronox announced it would receive $20.5 million from the

U.S. government to settle litigation related to perchlorate remediation at the Company's

Henderson, Nevada site. Pursuant to the settlement, the U.S. government would also pay 21% of

the future remediation costs at a future date. However, Tronox failed to state that the payments

from the U.S. government, Kerr-McGee, and the Company’s insurance policies were insufficient

to cover the full amount of the liability. By omitting this critical information from the January

17, 2006 announcement, the Defendants misled investors regarding the true extent of future

liability for this site.

D. 2005 Year End Results And Related Press Release

178. On January 24, 2006, Tronox issued a press release announcing its financial

results for fourth quarter 2005 and the fiscal year-ended December 31, 2005. The Company

reported a “provision for environmental remediation and restoration” of $17.1 million for fiscal

year 2005, which materially understated the amount that Tronox should have reserved. By

understating this expense, the reported net income of $18.1 million and earnings per share of

$0.45 for fiscal year 2005 were therefore also materially false.

179. In the January 24, 2006 press release, Defendant Adams stated that “[w]e

completed our initial public offering in November and continue to focus on the execution of our

strategy to add value for shareholders through increased cash flow, profits, and returns.” The

press release further noted that “[d]iscontinued items in the 2005 fourth quarter include a

provision for litigation matters related to the company's historical creosote and refining

operations of $5.7 million, after tax.” This representation was materially false and misleading

because it failed to reveal Kerr-McGee’s settlement of similar claims had cost the Company

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approximately $70 million, and there remained approximately 11,000 additional similar claims

related to creosote and wood-treatment. This representation was also materially misleading

because it failed to mention the Legacy Liabilities and their effect on the financial condition of

the Company.

180. The Company also made false and misleading statements during the Company’s

Q4 2005 conference call held on January 24, 2006. The call was led by Defendants Adams and

Mikkelson. Defendant Mikkelson stated that Tronox’s “environmental remediation accruals at

the end of the year were $223 million.” When asked about the EPA letters to the Company

regarding Manville, Defendant Adams failed to disclose the substantial and costly liabilities the

Company faced. Instead, he stated that reimbursement to the Company “is still to be determined

in the future. Actually we are in a position now of starting to gather some more information

from them, but at this time there is really not any change in status from what we previously

discussed or announced in the S1 [Offering prospectus].” When asked about other suspected

liabilities at the Company, Defendant Adams claimed that Tronox’s liabilities were adequately

disclosed and accurate because the Company “review[s] every quarter, our reserves and we

follow standard SEC guidelines and we basically make provisions for anything that is

estimable and probable at this time.”

181. Each of the above statements from the Company’s fourth quarter 2005 conference

call were false and misleading. They misrepresented and omitted the true extent of the

environmental liabilities facing the Company as well as the size of the necessary environmental

provision. These statements failed to disclose the material impact the Company’s environmental

liabilities would have on its financial condition and the extent of the Company’s liability with

respect to Manville.

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E. February 22, 2006 Investor Presentation

182. On February 6, 2006, Defendant Adams made a presentation to investors and

securities analysts. A slide titled “Legacy Sites” represented that the “Company actively

manages environmental issues related to legacy businesses.” It also offered the following

assurance that these issues were properly accounted for and were under control, stating that:

• In 1994, a centralized Safety and Environmental Affairs (S&EA) unit was formed to manage environmental issues. The S&EA was staffed with 34 experts in environmental remediation.

• Financial reserves have been established for probable and

estimable environmental costs, which are reviewed and updated quarterly. As of December 31, 2005, gross reserves were $223.7 million.

• “U.S. Navy settlement of $20.5 million to Tronox in Q1, 2006, and will pay 21% of future perchlorate remediation after 2011.”

• “Insurance coverage covering majority of perchlorate until Dec 31,

2010.” • “Insurance coverage for five former forest product sites.” • “Department of Energy (DOE) reimburses Tronox for 55.2% of

money spent to clean up West Chicago and Kress Creek sites.”

183. The foregoing representations were materially misleading. At the time this

presentation was made, the Defendants knew, or were reckless in not knowing, that the financial

reserves were inadequate. They also knew, or were reckless in not knowing, that these reserves

were determined through an inappropriate accounting methodology that resulted in inadequate

reserves. Potential reimbursements from Kerr-McGee, insurance policies, and funds from the

U.S. government could not satisfy the known and probable obligations. The false and

misleading slides from the February 6, 2006 presentation were also attached to a Form 8-K and

filed with the SEC that same day.

184. On February 22, 2006, Defendant Adams made a presentation at the Morgan

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Stanley Basic Materials Conference in New York City. A slide titled “Legacy Sites” addressed

the Company’s management of environmental issues at legacy businesses. The slide indicated

that financial reserves were in place “for probable and estimable environmental costs.”

However, the representation that Tronox had recorded adequate reserves was false at the time it

was made, for the reasons detailed above, i.e., paragraphs 168-169. The same false and

misleading presentation slides were also submitted to the SEC attached to a Form 8-K filed on

February 21, 2006.

F. Annual Report On Form 10-K For Fiscal Year 2005

185. On March 29, 2006, Tronox filed its Annual Report on Form 10-K for the fiscal

year ended December 31, 2005 (“2005 Form 10-K”). It included financial statements for periods

prior to November 2005 that were “derived from the accounting records of Kerr-McGee,

principally representing the Chemical - Pigment and Chemical - Other segments of Kerr-McGee,

using the historical results of operations, and historical basis of assets and liabilities of the

subsidiaries that the company did not own but currently owns and the chemical business the

company operates.”

186. The 2005 Form 10-K, signed by Defendants Adams and Mikkelson, stated that

“Management believes the assumptions underlying the financial statements to be true.” Among

other things, the Company stated that it had reserves for costs of environmental remediation and

restoration in the amount of $223.7 million. The financial statements also included a “provision

for environmental remediation and restoration” of $17.1 million for fiscal year 2005, which

materially understated the amount that Tronox should have reserved. By understating this

expense, the reported net income of $18.8 million and earnings per share of $0.77 for fiscal year

2005 were also materially false.

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187. In addition, the 2005 Form 10-K stated that “there may be other sites where we

have potential liability for environmental-related matters but for which we do not have sufficient

information to determine that the liability is probable and/or reasonably estimable. We have not

established reserves for such sites.” Regarding sites that were not specifically identified, the

2005 Form 10-K represented that:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood-treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of December 31, 2005, the company had reserves of $32.5 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

In addition, the 2005 Form 10-K stated that: “No reserve for reimbursement of cleanup costs at

the [New Jersey Wood Treatment] site has been recorded because it is not possible to reliably

estimate the liability, if any, the company may have for the site because of the aforementioned

defenses and uncertainties.” The representations that remediation costs could not reasonably be

estimated were false and misleading at the time they were made. Liability at other sites was, in

fact, “probable and reasonably estimable” and the reserves failed to account for the “Secret

Sites,” as alleged above. The Defendants knew, or recklessly disregarded, undisclosed

information indicating that the remediation costs would be substantially higher than they publicly

announced.

188. Defendants Mikkelson and Adams signed the 2005 Form 10-K on their own

behalf and on behalf of Defendants Rowland, Wohleber, and Rauh. Defendants Adams,

Rowland, Wohleber, Rauh, and Mikkelson reviewed, approved, and caused the 2005 Form 10-K

to be filed with the SEC. Despite the foregoing false and misleading statements contained

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therein, these Defendants represented that they “believe the assumptions underlying our

consolidated and combined financial statements are reasonable.” In addition, they made the

untrue representation that:

We provide for costs related to environmental contingencies when a loss is probable and the amount is reasonably estimable.

* * * We believe that we have reserved adequately for the reasonably estimable costs of known contingencies.

189. The 2005 Form 10-K also included certifications signed by Defendants Adams

and Mikkelson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, verifying that:

1. I have reviewed this report on Form 10-K of Tronox Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others

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within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on our evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

190. In addition, the 2005 Form 10-K included certifications signed by Defendants

Adams and Mikkelson pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 in which they

further verified that:

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[I]n connection with the registrant’s report on Form 10-K for the period that ended December 31, 2005 as filed with the Securities and Exchange Commission (the “Report”) that: • the Report fully complies with the requirements of Section

13(a) of the Securities Exchange Act of 1934; and

• information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

191. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements were false and must be restated. Indeed, all of the foregoing statements in

the 2005 Form 10-K were false and misleading at the time they were made. The Defendants

knew, or were reckless in not knowing, that the reserves for environmental liabilities were

grossly understated. Furthermore, by not referring to the “Secret Sites,” the Defendants hid

material information that was necessary to understand the extent of Tronox’s exposure.

G. First Quarter 2006

192. On May 3, 2006, Tronox issued a press release with the Company’s preliminary

financial results for the first quarter of 2006, which ended March 31, 2006. The Company

reported a “provision for environmental remediation and restoration” of a $20.5 million for first

quarter 2006, which materially understated the amount Tronox should have reserved. By

understating this expense, the reported net income of $20.6 million and earnings per share of

$0.51 for first quarter 2006 were therefore also materially overstated.

193. In the May 3, 2006 press release, Defendant Adams made positive comments,

representing that the results were “solid.” The press release also noted that net income was

“$20.6 million in the 2006 first quarter, compared with $4.0 million in the 2005 first quarter” and

that the environmental remediation reserves were currently $216.5 million, which was “a $7.2

million decline from Dec. 31, 2005.”

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194. The Company held its first quarter 2006 conference call on May 3, 2006. The call

was led by Defendants Adams and Mikkelson. Defendant Adams stated that: “we continue to

see reductions in our environmental reserves. I am proud to say our physical separation

from Kerr-McGee is going well, and is actually ahead of schedule.” Defendant Mikkelson

stated that “financial reserves for environmental remediation at March 31, 2006 for all active and

inactive sites totaled $216.5 million, down 7.2 million from December 31, 2005. . . . We

continue to forecast a net cash spend of approximately $35 to $40 million for 2006.”

195. The above statements regarding the first quarter 2006 results were false and

misleading. They misrepresented and omitted the true extent of the environmental liabilities

facing the Company, as well as the size of the necessary environmental provision. The

Defendants failed to disclose the material impact the Company’s environmental liabilities would

have on its financial condition and misleadingly represented that the Company’s separation from

Kerr-McGee was handled appropriately.

196. On May 15, 2006, Tronox filed a Form 10-Q with the Company’s financial results

for the first quarter of 2006. The Form 10-Q, signed by Defendants Adams and Mikkelson,

stated that the financial statements included therein provided a “fair statement of the results of

the interim periods presented.” It also stated that “the company believes that the disclosures are

adequate to make the information presented not misleading.” Among other things, the financial

statements included a “provision for environmental remediation and restoration” of negative

$20.5 million, which materially understated the amount that Tronox should have reserved. By

understating this expense, the reported net income of $20.6 million and earnings per share of

$0.51 were therefore also materially overstated.

197. Nonetheless, the Form 10-Q assured investors that all probable and reasonable

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costs known to the Defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that the company is currently reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

198. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood-treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of March 31, 2006, the company had reserves of $33.7 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

199. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made. The

Defendants knew, or recklessly disregarded, undisclosed information indicating that the

remediation costs for the other sites would be substantially higher than they publicly announced.

For example, the Company did not a record a reserve for the known New Jersey wood treatment

site in this period.

200. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed May 15, 2006 contained several misstatements,

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Adams’s and Mikkelson’s certifications were materially false when made.

201. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-Q for first quarter 2006 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

202. On May 23, 2006, eight days after filing the Form 10-Q, Defendant Adams made

a presentation to investors and securities analysts. A slide titled “Legacy Environmental” stated

that environmental remediation reserves were currently $216.5 million, an amount known or

recklessly disregarded to be insufficient. Defendant Adams repeated other representations made

in the Form 10-Q for first quarter 2006 as well. The false and misleading presentation slides

were also attached to a Form 8-K which was filed with the SEC that same day.

H. Second Quarter 2006

203. On August 2, 2006, Tronox issued a press release with the Company’s

preliminary financial results for the second quarter of 2006, which ended June 30, 2006. Among

other things, the press release represented that no “provision for environmental remediation and

restoration” had been taken, which materially understated the amount that Tronox should have

reserved. By understating this expense, the reported net loss of $14.4 million and loss per share

of $0.36 for second quarter 2006 were therefore also materially false.

204. The Company made false and misleading statements during the Company’s

second quarter 2006 conference call held on August 2, 2006 as well. The call was led by

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Defendants Adams and Mikkelson. Defendant Mikkelson stated that:

Financial reserves for environmental remediation at June 30, 2006 for all active and inactive sites totaled $221 million. . . . We have lowered our 2006 forecast for net cash spend on environmental projects approximately $5 million, to be in the range of $30 million to $35 million, which is net of all reimbursements . . .

205. The above statements from the Company’s second quarter 2006 conference call

were false and misleading. They misrepresented and omitted the true extent of the

environmental remediation liabilities facing the Company, as well as the size of the necessary

environmental provision. The Defendants also failed to disclose the material impact the

Company’s environmental liabilities would have on its financial condition.

206. On August 14, 2006, Tronox filed a Form l0-Q for the second quarter of 2006.

The Form 10-Q, signed by Defendants Adams and Mikkelson, stated that the financial

statements contained therein provided a “fair statement of the results for the interim periods

presented.” It also stated that “the company believes that the disclosures are adequate to make

the information presented and misleading.” Among other things, the financial statements

included no “provision for environmental remediation and restoration,” which materially

understated the amount that Tronox should have reserved. By understating this expense, the

reported net loss of $14.4 million and loss per share of $0.36 were therefore also materially

understated.

207. Nonetheless, the Form 10-Q assured investors that all probable and reasonable

costs known to the Defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that the company is currently reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including

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liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

208. The Defendants also repeated their representations regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood-treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of June 30, 2006, the company had reserves of $30.7 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

209. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made. The

Defendants knew, or recklessly disregarded, undisclosed information indicating that remediation

costs for the other sites would be substantially higher than they publicly announced. For

example, the Company did not a record a reserve for the known New Jersey wood treatment site

in this period.

210. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed August 14, 2006 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

211. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-Q for second quarter 2006 were false and misleading at the

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time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was needed to understand the extent

of Tronox’s exposure.

212. On August 16, 2006, Defendant Adams made a presentation to investors and

securities analysts. Adams represented that substantial portions of the Company’s environmental

charges to Discontinued Operations were subject to future reimbursement from DOE and were

“[s]ubject to future reimbursement from Kerr-McGee for $0.50 on every dollar after DEO

reimbursement.” Defendant Adams repeated other representations made in the Form 10-Q for

second quarter 2006 as well. This statement was false and misleading because the

indemnification was illusory. Kerr-McGee would indemnify Tronox only for 50% of certain

environmental costs actually paid above the amount reserved for specific sites for a seven-year

period following the Spin-Off. Adams knew that Tronox did not have sufficient cash flow to

spend the reserved amounts and thus qualify for the indemnification. The false and misleading

presentation slides were also attached to a Form 8-K which was filed with the SEC that same

day.

I. Third Quarter 2006

213. On November 1, 2006, Tronox issued a press release with the Company’s

preliminary financial results for third quarter 2006, which ended September 30, 2006. Among

other things, the attached financial statements included a “provision for environmental

remediation and restoration” of $100,000, which materially understated the amount that Tronox

should have reserved. By understating this expense, the reported net loss of $14.0 million and

loss per share of $0.35 were therefore also materially false.

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214. In addition, the Company made false and misleading statements during the

Company’s third quarter 2006 conference call held on November 1, 2006. The call was led by

Defendants Adams and Mikkelson. Defendant Adams stated that the Company’s $11 million

reserve for the Manville site was appropriate and reasonable: “[t]he mediation process is

continuing and we still believe we have legitimate defenses. . . . If this meditation does not lead

to an acceptable solution, we intend to vigorously defendant against the EPA’s demand.”

Defendant Adams continued, “the current reserve that we have taken [for Manville] is . . . based

on a reasonable assessment . . .” Defendant Mikkelson also stated that Tronox’s “financial

reserves for environmental remediation at September 30, 2006, for all active and inactive sites

totaled $242 million . . . We have lowered our 2006 forecast for net cash spend on

environmental projects approximately $10 million to a range of $20 million to $25 million. . . .”

Defendant Adams added that, “[i]f you take out the reserve that we just took for the New Jersey

forest products side, we would have ended the quarter about $207 million, so down

significantly.”

215. The above statements from the Company’s third quarter 2006 conference call

were materially false and misleading. They misrepresented and omitted the true extent of the

environmental liabilities facing the Company, as well as the size of the necessary environmental

provision. The Defendants failed to disclose the material impact the Company’s environmental

liabilities would have on its financial condition, including the Company’s liability with respect to

Manville.

216. On November 14, 2006, Tronox filed a Form 10-Q with the Company’s financial

results for third quarter 2006. The Form 10-Q, signed by Defendants Adams and Mikkelson,

stated that the financial statements contained therein provided a “fair statement of the results for

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the periods presented.” It also stated that “the company believes that the disclosures are

adequate to make the information presented not misleading.” Among other things, the financial

statements included a “provision for environmental remediation and restoration” of $100,000,

which materially understated the amount that Tronox should have reserved. By understating this

expense, the reported net loss of $14.0 million and loss per share of $0.35 were therefore also

materially understated.

217. Nonetheless, the Form 10-Q assured investors that all probable and reasonable

costs known to the Defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that the company is currently reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

218. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood-treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of September 30, 2006, the company had reserves of $29.3 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

219. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made. The

Defendants knew, or recklessly disregarded, undisclosed information indicating that the

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remediation costs for the other sites would be substantially higher than they publicly announced.

220. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were almost identical to those quoted in full in Paragraphs 189-190

above. As Tronox’s Form 10-Q filed November 14, 2006 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

221. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-Q for third quarter 2006 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

J. 2006 Year End Results And Related Press Release

222. On February 22, 2007, Tronox issued a press release announcing its financial

results for fourth quarter 2006 and the fiscal year ended December 31, 2006. The Company

reported that no “provision for environmental remediation and restoration” had been taken in the

fourth quarter 2006, which materially understated the amount that Tronox should have reserved.

By understating this expense, the reported net income of $7.6 million and earnings per share of

$0.19 for fourth quarter 2006 were therefore also materially overstated. For fiscal year 2006, the

press release indicated that the “provision for environmental remediation and restoration” was

negative $20.4 million, which materially understated the amount that Tronox should have

reserved. By understating this expense, the reported net income of negative $200,000 and zero

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earnings per share for fiscal year 2006 were therefore also materially false.

223. In addition, the Company made false and misleading statements during the

Company’s fourth quarter 2006 conference call held on February 22, 2007. The call was led by

Defendants Adams and Mikkelson. Defendant Mikkelson stated that:

On environmental matters, our financial reserves for environmental remediation at December 31, 2006 for all active and inactive sites totaled $224 million, a decrease from the prior quarter due to payments made during the quarter. . . . During 2006, we spent $57 million against our environmental reserves and received reimbursements of $38 million for a net cash spend of $19 million. This was at the low end of the range we had previously provided for the year and was lower than originally anticipated . . . we are currently estimating a net cash spend on environmental projects of $40 million to $45 million for 2007.

224. The above statement from the Company’s fourth quarter 2006 conference call was

false and misleading. It misrepresented and omitted the true extent of the environmental

liabilities facing the Company, as well as the size of the necessary environmental provision. The

Defendants failed to disclose the material impact the Company’s environmental liabilities would

have on its financial condition.

K. Annual Report On Form 10-K For Fiscal Year 2006

225. On March 16, 2007, Tronox filed its Annual Report on Form 10-K for the fiscal

year ended December 31, 2006 (“2006 Form 10-K”). The 2006 Form 10-K, signed by

Defendants Adams and Mikkelson, stated that “Management believes the assumptions

underlying the financial statements are reasonable.” Among other things, the Company reported

reserves for costs of environmental remediation and restoration in the amount of $223.9 million.

The financial statements also included a “provision for environmental remediation and

restoration” of negative $20.4 million for fiscal year 2006, which materially understated the

amount that Tronox should have reserved. By understating this expense, the reported net loss of

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$200,000 and zero earnings per share for fiscal year 2006 were therefore also materially

misstated.

226. In addition, in the 2006 Form 10-K, the Defendants represented that:

We believe that we have reserved adequately for the reasonably estimable costs of known contingencies. However, additions to the reserves may be required as additional information is obtained that enables us to better estimate our liabilities, including any liabilities at sites now under review. We cannot reliably estimate the amount of future additions to the reserves at this time. Additionally, there may be other sites where we have potential liability for environmental-related matters for which we do not have sufficient information to determine that the liability is probable and/or reasonably estimable.

227. However, liability at other sites was, in fact, “probable and/or reasonably

estimable” and the reserves failed to account for the “Secret Sites,” as alleged above. The 2006

Form 10-K also failed to provide meaningful disclosure regarding the range of reserves that may

ultimately be necessary.

228. Regarding sites that were not specifically identified, the 2006 Form 10-K

represented that:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood-treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of December 31, 2006, the company had reserves of $40.0 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

229. This statement was false and misleading as the Defendants knew, or recklessly

disregarded, undisclosed information indicating that the remediation costs for the other sites

would be substantially higher than they publicly announced.

230. Defendants Adams and Mikkelson signed the 2006 Form 10-K. They also

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reviewed, approved, and caused the 2006 Form 10-K to be filed with the SEC. Despite the

foregoing false and misleading statements contained therein, these Defendants represented that

they “believe the assumptions underlying our consolidated and combined financial statements

are reasonable.” In addition, they made the untrue representations that:

As of December 31, 2006, we had reserves in the amount of $223.9 million for environmental remediation and restoration. We reserve for costs related to environmental remediation and restoration only when a loss is probable and the amount is reasonably estimable.

231. The Form 10-K included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s 2006 Form 10-K contained several misstatements, Adams’s and

Mikkelson’s certifications were materially false when made.

232. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-K for fiscal year 2006 were false and misleading at the time

they were made. The Defendants knew, or were reckless in not knowing, that the reserves for

environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

L. First Quarter 2007

233. On May 2, 2007, Tronox issued a press release with the Company’s preliminary

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financial results for first quarter 2007, which ended March 31, 2007. The Company reported a

“provision for environmental remediation and restoration” of $200,000, which materially

understated the amount that Tronox should have reserved. By understating this expense, the

reported net loss of $9.4 million and loss per share of $0.23 were materially false.

234. In addition, the Company made false and misleading statements during the

Company’s first quarter 2007 conference call held on May 2, 2007. The call was led by

Defendants Adams and Mikkelson. Defendant Mikkelson stated that, “[o]n environmental

matters, our financial reserves for environmental remediation at March 31, 2007 for all active

and inactive sites totaled $221 million . . . we continue to estimate a net cash spend of

environmental projects of $40 million to $45 million for 2007.”

235. This statement was false and misleading. It misrepresented and omitted the true

extent of the environmental liabilities and the size of the necessary environmental provision. It

also failed to disclose the material impact the Company’s environmental liabilities would have

on its financial condition.

236. On May 8, 2007, Tronox filed a Form 10-Q with the Company’s financial results

for first quarter 2007. The Form 10-Q, signed by Defendants Adams and Mikkelson, stated that

the financial statements included therein provided a “fair presentation” of the Company’s

financial condition. Among other things, the financial statements included a “provision for

environmental remediation and restoration” of $200,000, which materially understated the

amount that Tronox should have reserved. By understating this expense, the reported net loss of

$9.4 million and loss per share of $0.23 were therefore also materially understated.

237. Nonetheless, the Form 10-Q assured investors that all probable and reasonable

costs known to defendants had been properly accounted for:

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Management believes, after consultation with its internal legal counsel, that the company is currently reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

238. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of March 31, 2007, the company had reserves of $37.7 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

239. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made. The

Defendants knew, or recklessly disregarded, undisclosed information indicating that the

remediation costs for the other sites would be substantially higher than they publicly announced.

240. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed May 8, 2007 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

241. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

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foregoing statements in the Form 10-Q for first quarter 2007 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

M. Second Quarter 2007

242. On August 1, 2007, Tronox issued a press release with the Company’s

preliminary financial results for second quarter 2007, which ended June 30, 2007. The Company

reported a “provision for environmental remediation and restoration” of $1.5 million, which

materially understated the amount that Tronox should have reserved. By understating this

expense, the reported net loss of $21.2 million and loss per share of $0.52 were therefore also

materially false.

243. In addition, the Company made false and misleading statements during the

Company’s second quarter 2007 conference call held on August 1, 2007. The call was led by

Defendants Adams and Mikkelson. Investors were told that the Company’s $1.5 million

environmental provision “does not reflect the full amount of Kerr-McGee’s future

reimbursement obligation.” They were also told that the Company’s future net cash exposure

related to this new provision is “expected to be approximately $750,000 after estimating the 50%

future reimbursement obligation from Kerr-McGee.” It was emphasized that Tronox was “doing

the right thing long-term to position the Company for success by driving the fundamental

changes in our business. We continue to see positive results in baseline costs reductions and

working capital area.” With regard to the Company’s environmental liabilities, investors were

told that the Company was “continu[ing] to work to mitigate these matters through insurance,

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reimbursements from PRPs or obligated parties, efficient management of ongoing projects, and

by defending our legal positions” and that the Company’s financial reserves for environmental

remediation totaled $214 million, “a decrease from the prior quarter,” which “does not include

$39 million in anticipated future reimbursements to Tronox by the Department of Energy for

work yet to be completed at the West Chicago site. It is expected that the DOE will continue to

reimburse us 55% of our costs at this site.” It was also stated that its gross reserve of $35 million

would be adequate to cover Tronox’s liability for the New Jersey wood treatment site as a result

of the Company’s mitigation strategies:

[We] continue to actively pursue mitigation strategies to ensure obligated parties, insurance companies, and government agency reimbursements are received to offset our remediation costs. Regarding the former wood treatment site in New Jersey, nonbinding mediation with the EPA is ongoing and we remain confident about our defenses and position concerning this matter.

244. The above statements from the Company’s second quarter 2007 conference call

were false and misleading. They misrepresented and omitted the true extent of the

environmental liabilities facing the Company, as well as the size of the necessary environmental

provision. The Defendants failed to disclose the material impact the Company’s environmental

liabilities would have on its financial condition.

245. On August 7, 2007, Tronox filed a Form 10-Q with the Company’s financial

results for second quarter 2007. The Form 10-Q was signed by Defendants Adams and

Mikkelson and contained what was represented to be a “fair presentation” of Tronox's financial

position and standing. Among other things, the financial statements included a “provision for

environmental remediation and restoration” of $1.5 million, which materially understated the

amount that Tronox should have reserved. By understating this expense, the reported net loss of

$21.2 million and loss per share of $0.52 were therefore also materially false.

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246. The Form 10-Q again assured investors that all probable and reasonable costs

known to defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that currently the company is reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

247. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of June 30, 2007, the company had reserves of $35.5 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

248. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made. The

Defendants knew, or recklessly disregarded, undisclosed information indicating that the

remediation costs for the other sites would be substantially higher than they publicly announced.

249. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed August 7, 2007 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

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250. In its Form 8-K, filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-Q for second quarter 2007 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

N. Third Quarter 2007

251. On October 31, 2007, Tronox issued a press release with the Company’s

preliminary financial results for third quarter 2007, which ended September 30, 2007. The

Company reported a “provision for environmental remediation and restoration” of $1.3 million,

which materially understated the amount that Tronox should have reserved. By understating this

expense, the reported net loss of $19.1 million and loss per share of $0.47 were therefore also

materially false.

252. In addition, the Company made false and misleading statements during the

Company’s third quarter 2007 conference call held on October 31, 2007. The call was led by

Defendants Adams and Mikkelson. Defendant Mikkelson stated that:

On environmental matters, our financial reserves for environmental remediation at September 30, 2007 for all active and inactive sites totaled $203.6 million, a net decrease from the prior quarter . . . We estimate our net cash spend on environmental projects for 2007 will be at the lower end of our range of $35 million to $40 million. We continue to actively pursue mitigation strategies to ensure obligated parties, insurance companies and government agency reimbursements are received to offset our remediation costs.

253. Defendant Adams also stated that, “[c]oncerning our legacy environmental

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business, we continue to spend significant time pursuing our risk mitigation strategies associated

with our legacy environmental business. These include proactively negotiating with regulators

concerning obligations, pursuing other [PRTs] or responsible parties, insurance and Anadarko

reimbursements and evaluating the opportunities to sell land with environmental obligations

included.” Defendant Adams continued by stating that Tronox “currently ha[s] reserved what

is probable and estimable at this time and obviously we can’t predict what will happen in the

future, around future requirements or regulations but we continue to accrue as required by

standard SEC guidelines. But I would just refer you to looking back at our track record,

you can see that the reserve numbers if you look back over the last four or five years have

decreased significantly.” He explained that Tronox is “going to be probably in the lower end of

our range this year in the $35 million to $40 million, and we’ve talk about the cash spend really

coming down to kind of that $25 million range over the four to five year period.”

254. The foregoing statements from the Company’s third quarter 2007 conference call

were false and misleading. They misrepresented and omitted the true extent of the

environmental liabilities facing the Company, as well as the size of the necessary environmental

provision. The Defendants failed to disclose the material impact the Company’s environmental

liabilities would have on its financial condition.

255. On November 11, 2007, Tronox filed a Form 10-Q with the Company’s financial

results for third quarter 2007. The Form 10-Q, signed by Defendants Adams and Mikkelson,

stated that the financial statements included therein provided a “fair presentation” of the

Company’s financial condition. Among other things, the financial statements included a

“provision for environmental remediation and restoration” of $1.3 million, which materially

understated the amount that Tronox should have reserved. By understating this expense, the

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reported net loss of $19.1 million and loss per share of $0.47 were therefore also materially

overstated.

256. Nonetheless, the Form 10-Q assured investors that all probable and reasonable

costs known to defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that currently the company is reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

257. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. As of September 30, 2007, the company had reserves of $33.8 million for the environmental costs in connection with these other sites. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

258. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made. The

Defendants knew, or recklessly disregarded, undisclosed information indicating that the

remediation costs for the other sites would be substantially higher than they publicly announced.

259. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

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190 above. As Tronox’s Form 10-Q filed November 11, 2007 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

260. In its Form 8-K, filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-Q for third quarter 2007 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

O. 2007 Year End Results And Related Press Release

261. On February 13, 2008, Tronox issued a press release announcing its financial

results for the fourth quarter of 2007 and the fiscal year ended December 31, 2007. The

Company reported a “provision for environmental remediation and restoration” of negative

$600,000 for Q4 2007, which materially understated the amount that Tronox should have

reserved. By understating this expense, the reported net loss of $56.7 million and loss per share

of $1.39 for Q4 2007 were therefore also materially false. For fiscal year 2007, the financial

statements included a “provision for environmental remediation and restoration” of negative

$20.4 million, which materially understated the amount that Tronox should have reserved. By

understating this expense, the reported net loss of $106.5 million and earnings per share of

negative $2.61 for fiscal year 2007 were therefore also materially false.

262. In addition, the Company made false and misleading statements during the

Company’s fourth quarter 2007 conference call held on February 13, 2008. The call was led by

Defendants Adams and Mikkelson. Defendant Mikkelson stated that:

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On environmental matters, our financial reserves for environmental remediation at December 31, 2007 for all active and inactive sites totaled $188.8 million, a net decrease of $14.8 million from the prior quarter. . . . our receivables do not include approximately $30 million in anticipated future reimbursements due Tronox by the Department of Energy for work that’s yet to be completed at the West Chicago site. It is expected that the DOE will continue to reimburse us 55% of our cost at this site. . . .For the year Tronox’s gross cash spend on environmental remediation was $52 million . . . resulting in a net cash spend for 2007 of $33 million. Our current estimate for net cash spend on environmental projects in 2008 is in the range of $40 million to $45 million. . . . we continue to actively pursue mitigation strategies to ensure obligated parties, insurance companies and government agency reimbursements are received to offset our remediation costs.

263. Defendant Adams added that:

In the last few years our reserves for environmental remediation have decreased from $239 million in late 2005 to $189 million at the end of 2007. Considering the current and future receivables we expect to receive from government and insurance agencies we have a future net cash liability of approximately $91 million based on our current probable and estimateable reserves. We have done a lot of heavy lifting at a number of our sites including West Chicago and Henderson, Nevada. Our focus continues to be on execution of the remediation plans to properly clean up these sites as mandated by the government agencies and to work with state and federal government representatives to reduce our future liability for sites where we believe we have little or no liability. For instance, the Manville, New Jersey site was cleaned up . . . We feel the audit will support our position coupled with the fact that there are additional PRPs now identified for this project will lead to a reasonable settlement in the future. . . . We are also in the process of evaluating a number of ways to reduce or limit our legacy liability which I cannot provide in any detail. But I just want to emphasize that we are being diligent with regards to this critical issue. We are working each and every day to reduce our future liability wherever we can while also

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adhering to our core values which includes protecting the environment.

264. The above statements from the Company’s fourth quarter 2007 conference call

were false and misleading. They misrepresented and omitted the true extent of the

environmental liabilities facing the Company, as well as the size of the necessary environmental

provision. The Defendants failed to disclose the material impact the Company’s environmental

liabilities would have on its financial condition.

P. Annual Report On Form 10-K For Fiscal Year 2007

265. On March 14, 2008, Tronox filed its Annual Report on Form 10-K for fiscal year

2007 (“2007 Form 10-K”). The 2007 Form 10-K, signed by Defendants Adams and Mikkelson,

reported reserves for costs of environmental remediation and restoration in the amount of $188.8

million. The financial statements also included a “provision for environmental remediation and

restoration” of $2.4 million, which materially understated the amount that Tronox should have

reserved. By understating this expense, the reported net loss of $106.4 million and loss per share

of $2.61 were therefore also materially understated.

266. In addition, in the 2007 Form 10-K, the Defendants represented that:

We believe that we have reserved adequately for the probable and reasonably estimable costs of known contingencies. However, additions to the reserves may be required as additional information is obtained that enables us to better estimate our liabilities, including any liabilities at sites now under review. We cannot reliably estimate the amount of future additions to the reserves at this time. In certain situations reserves are probable but not presently estimable. Additionally, there may be other sites where we have potential liability for environmental-related matters for which we do not have sufficient information to determine that the liability is probable and/or reasonably estimable.

267. However, liability at other sites was, in fact, “probable and/or reasonably

estimable” and the reserves failed to account for the “Secret Sites,” as alleged above. The 2007

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Form 10-K also failed to provide meaningful disclosure regarding the range of reserves that may

ultimately be necessary. The Defendants also repeated other false statements regarding reserves

for other remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood-treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

268. Although they recorded a reserve of $24.6 million for these sites, Defendants

knew, or recklessly disregarded, undisclosed information indicating that the remediation costs

would be substantially higher than they publicly announced.

269. Defendants Adams and Mikkelson signed the 2007 Form 10-K. They reviewed,

approved, and caused the 2007 Form 10-K to be filed with the SEC. Despite the foregoing false

and misleading statements contained therein, these Defendants represented that they “believe the

assumptions underlying our consolidated and combined financial statements are reasonable.” In

addition, they made the untrue representation that:

As of December 31, 2007, we had reserves in the amount of $188.8 million for environmental remediation and restoration. We reserve for costs related to environmental remediation and restoration only when a loss is probable and the amount is reasonably estimable.

270. The Form 10-K included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s 2007 Form 10-K contained several misstatements, Adams’s and

Mikkelson’s certifications were materially false when made.

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271. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-K for fiscal year 2007 were false and misleading at the time

they were made. The Defendants knew, or were reckless in not knowing, that the reserves for

environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

Q. First Quarter 2008

272. On April 30, 2008, Tronox issued a press release with the Company’s preliminary

financial results for first quarter 2008, which ended March 31, 2008. The Company reported no

“provision for environmental remediation and restoration,” which materially understated the

amount that Tronox should have reserved. By understating this expense, the reported net loss of

$200,000 and zero earnings per share were therefore also materially false.

273. In addition, the Company also made false and misleading statements during the

Company’s first quarter 2008 conference call held on April 30, 2008. The call was led by

Defendants Adams and Mikkelson. Defendant Mikkelson stated that:

Our financial reserves for environmental remediation at March 31, 2008, for all active and inactive sites totaled $181.8 million, a net decrease of $7 million from the prior quarter . . . [which] do[es] not include approximately $28 million in anticipated future reimbursements due Tronox by the Department of Energy for work yet to be completed at the West Chicago site. It is expected that the DOE will continue to reimburse us 55% of our cost at this site. As we continue to manage our cash flows for 2008, we have reduced our forecasted spend. Our current estimate for net cash spend on environmental projects in 2008 is in the range of $30 million to $35 million, a $10 million reduction from our previous forecast.

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274. The above statements from the Company’s first quarter 2008 conference call were

false and misleading. They misrepresented and omitted the true extent of the environmental

liabilities facing the Company, as well as the size of the necessary environmental provision. The

Defendants failed to disclose the material impact the Company’s environmental liabilities would

have on its financial condition.

275. On May 7, 2008, Tronox filed a Form 10-Q with the Company’s financial results

for first quarter 2008. The Form 10-Q, signed by Defendants Adams and Mikkelson, stated that

the financial statements included therein provided a “fair presentation” of the Company’s

financial condition. Among other things, the financial statements included no “provision for

environmental remediation and restoration,” which materially understated the amount that

Tronox should have reserved. By understating this expense, the reported net loss of $200,000

was materially understated and the zero earnings per share was materially overstated.

276. Nonetheless, the Form 10-Q assured investors that all probable and reasonably

estimable costs known to defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that currently the company is reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

277. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing.

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Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

278. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made.

Although they recorded a reserve of $29.8 million for these other sites, the Defendants knew, or

recklessly disregarded, undisclosed information indicating that the remediation costs for the

other sites would be substantially higher than they publicly announced.

279. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed May 7, 2008 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

280. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements from in the Form 10-Q for first quarter 2008 were false and misleading at

the time they were made. The Defendants knew, or were reckless in not knowing, that the

reserves for environmental liabilities were grossly underestimated. Furthermore, by not referring

to the “Secret Sites,” the Defendants hid material information that was necessary to understand

the extent of Tronox’s exposure.

R. Second Quarter 2008

281. On July 30, 2008, Tronox issued a press release with the Company’s preliminary

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financial results for second quarter 2008, which ended June 30, 2008. The Company reported a

“provision for environmental remediation and restoration” of $500,000, which materially

understated the amount that Tronox should have reserved. By understating this expense, the

reported net loss of $34.4 million and loss per share of $0.84 were therefore also materially false.

282. In addition, the Company made false and misleading statements during the

Company’s second quarter 2008 conference call held on July 30, 2008. The call was led by

Defendants Adams and Mikkelson. Defendant Mikkelson stated that “our financial reserves for

environmental remediation at June 30, 2008 . . . totaled $183.8 million.” Defendant Mikkelson

also misleadingly stated that Tronox was entitled to environmental remediation reimbursement

from the Department of Energy, Kerr-McGee/Anadarko, and insurance providers which it would

use to offset its environmental costs. Defendant Mikkelson stated that Tronox “believe[s] that

the insurance policy we have for this site [Henderson, Nevada] will cover the majority of these

costs,” and to “[p]lease keep in mind that our receivables do not include approximately $27

million in anticipated future reimbursements due Tronox.” Defendant Mikkelson also

represented stated that Tronox projected its spending for environmental liabilities to be in the

range of $30 million to $35 million.”

283. The above statements from the Company’s second quarter 2008 conference call

were false and misleading. They misrepresented and omitted the true extent of the

environmental liabilities facing the Company, as well as the size of the necessary environmental

provision. The Defendants failed to disclose the material impact the Company’s environmental

liabilities would have on its financial condition.

284. On August 11, 2008, Tronox filed a Form 10-Q with the Company’s financial

results for second quarter 2008. The Form 10-Q was signed by Defendants Adams and

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Mikkelson and contained what was represented to be a “fair presentation” of Tronox's financial

position and standing. Among other things, the financial statements included a “provision for

environmental remediation and restoration” of $500,000, which materially understated the

amount that Tronox should have reserved. By understating this expense, the reported net loss of

$34.4 million and loss per share of $0.84 were therefore also materially false.

285. The Form 10-Q assured investors that all probable and reasonable costs known to

defendants had been properly accounted for:

Management believes, after consultation with its internal legal counsel, that currently the company is reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

286. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

287. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made.

Although they recorded a reserve of $27.3 million for these other sites, the Defendants knew, or

recklessly disregarded, undisclosed information indicating that the remediation costs for the

other sites would be substantially higher than they publicly announced.

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288. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed August 11, 2008 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

289. In its Form 8-K filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

foregoing statements in the Form 10-Q for second quarter 2008 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

S. Third Quarter 2008

290. On November 7, 2008, Tronox filed a Form 10-Q with the Company’s financial

results for third quarter 2008. The Form 10-Q, signed by Defendant Mikkelson, stated that the

financial results included therein provided a “fair presentation” of the Company’s financial

condition. Among other things, the financial statements included no “provision for

environmental remediation and restoration,” which materially understated the amount Tronox

should have reserved. By understating this expense, the reported net loss of $37.9 million and

loss per share of $0.92 were therefore also materially understated and reported liabilities were

materially understated.

291. Nonetheless, the Form 10-Q assured investors that all probable and reasonably

estimable costs known to defendants had been properly accounted for:

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Management believes, after consultation with its internal legal counsel, that currently the company is reserved adequately for the probable and reasonably estimable costs of known environmental matters and other contingencies. However, additions to the reserves may be required as additional information is obtained that enables the company to better estimate its liabilities, including liabilities at sites now under review. At this time, however, the company cannot reliably estimate a range of future additions to the reserves for any individual site or for all sites collectively.

292. The Defendants also repeated their false statements regarding reserves for other

remediation sites:

In addition to the sites described above, the company is responsible for environmental costs related to certain other sites. These sites relate primarily to wood treating, chemical production, landfills, mining, and oil and gas refining, distribution and marketing. Although actual costs may differ from current estimates, the amount of any revisions in remediation costs cannot be reasonably estimated at this time.

293. The representations that all probable and reasonably estimable remediation costs

had been properly accounted for were false and misleading at the time they were made.

Although they recorded a reserve of $25.7 million for these other sites, the Defendants knew, or

recklessly disregarded, undisclosed information indicating that the remediation costs for the

other sites would be substantially higher than they publicly announced.

294. The Form 10-Q included certifications signed by Defendants Adams and

Mikkelson pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-

Oxley Certifications”) that were substantially identical to those quoted in full in Paragraphs 189-

190 above. As Tronox’s Form 10-Q filed November 7, 2008 contained several misstatements,

Adams’s and Mikkelson’s certifications were materially false when made.

295. In its Form 8-K, filed with the SEC on May 5, 2009, Tronox admitted that its

financial statements for the entire Class Period were false and must be restated. Indeed, all of the

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foregoing statements in the Form 10-Q for third quarter 2008 were false and misleading at the

time they were made. The Defendants knew, or were reckless in not knowing, that the reserves

for environmental liabilities were grossly underestimated. Furthermore, by not referring to the

“Secret Sites,” the Defendants hid material information that was necessary to understand the

extent of Tronox’s exposure.

DEFENDANT E&Y VIOLATED THE FEDERAL SECURITIES LAWS

A. Background

296. Defendant E&Y is a worldwide firm of certified public accountants, auditors and

consultants. Through its Oklahoma City, Oklahoma office, E&Y served as both Kerr-McGee’s

and Tronox’s auditor and principal accounting firm prior to and throughout the Class Period.

E&Y was required to audit Tronox’s financial statements in accordance with the standards

established by the PCAOB, which incorporates substantially the provisions of Generally

Accepted Accounting Standards (“GAAS”), and report the audit results to Kerr-McGee and

Tronox, their boards of directors, their audit committees and the members of the investing

public, including Plaintiffs and the other members of the Class. With knowledge of Tronox’s

true financial condition, or in reckless disregard thereof, E&Y certified the materially false and

misleading financial statements of Tronox described below and provided unqualified

Independent Auditors’ Reports, dated March 29, 2006, March 15, 2007, and March 13, 2008,

which were included in Tronox’s SEC filings and publicly disseminated statements. Without

these materially false and misleading unqualified audit opinions and reports, the fraud alleged

herein could not have been perpetrated.

297. Prior to the Spin-Off, Tronox’s revenues, expenses, assets, and liabilities had been

consolidated into Kerr-McGee’s financial statements, also audited by E&Y beginning in fiscal

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year 2002. The same improper reserving methodologies for the businesses that became Tronox

after the IPO had been used to determine Kerr-McGee’s environmental remediation reserves.

Indeed, the information in the Tronox IPO Registration Statement and its Annual Report on

Form 10-K for the year ended December 31, 2005 contained the environmental remediation

reserve balances for the years ended December 31, 2002, 2003, 2004, and 2005 for the Kerr-

McGee chemical businesses, which had been audited and approved by E&Y.

298. E&Y’s professional services for Kerr-McGee and Tronox generated significant

aggregate fees for E&Y during each of the years 2002-2007, as follows:

E&Y Audit & Tax Fees Kerr-McGee and Tronox

(in millions)

Year Amount 2002 6.176 2003 5.657 2004 7.333 2005 10.143 2006 4.4 2007 4.6

Of the 2005 fees, $2,485,000 was attributable to services related to the IPO and the audit of

Tronox.

299. The income of the E&Y partners responsible for the Kerr-McGee and Tronox

accounts benefited, and E&Y’s professional status was enhanced by its relationship with Kerr-

McGee and Tronox. Kerr-McGee and Tronox combined was one of the largest clients of E&Y’s

Oklahoma City office, if not the largest. It was a high priority for E&Y to keep Kerr-McGee and

Tronox as clients so that E&Y could continue to benefit financially. Because the compensation

of the E&Y partners is related to the fees produced by the clients for whom they are responsible,

the E&Y partners on the Kerr-McGee and Tronox engagements had a direct financial motive to

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acquiesce in the accounting positions taken by their clients to ensure the retention of Kerr-

McGee and Tronox as E&Y clients and thereby ensure the continuation of millions of dollars in

annual fees.

B. E&Y Had Full And Complete Access To Kerr-McGee’s And Tronox’s Information

300. As a result of its relationship with Kerr-McGee and Tronox and the audit and tax

services it rendered to both companies, E&Y’s personnel were regularly present at Kerr-

McGee’s and Tronox’s corporate headquarters. E&Y had continual access to, and had

knowledge of Kerr-McGee’s and Tronox’s confidential corporate financial and business

information through conversations with employees of Kerr-McGee and Tronox and through

review of Kerr-McGee’s and Tronox’s non-public documents. The close relationship between

E&Y and Kerr-McGee dated back to 2002.

301. In addition, E&Y personnel had the opportunity to observe and were obligated

under GAAS to review Kerr-McGee’s and Tronox’s business and accounting practices, and test

Kerr-McGee’s and Tronox’s internal and publicly reported financial statements, as well as its

internal controls and structures.

C. E&Y’s Materially False And Misleading Audit Reports

302. PCAOB standards and related rules provide that an audit report must state

whether a company’s financial statements are presented in conformity with GAAP. Statement

on Auditing Standards (codified and referred to as AU §___), AU §110.01. The audit reports

issued and signed by defendant E&Y for fiscal years 2005, 2006, and 2007 falsely represented

that Tronox’s financial statements for the reported periods were presented in conformity with

GAAP when such financial statements violated GAAP with regard to the appropriate

environmental remediation reserve. Had these financial statements been prepared in accordance

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with GAAP, Tronox’s total assets and net income (among other financial statement items) would

have been substantially and materially reduced and its liabilities would have been materially

increased.

303. Specifically, E&Y’s report annexed to the Company’s 2005 Form 10-K falsely

stated, in relevant part:

We have audited the accompanying consolidated and combined balance sheets of Tronox Incorporated as of December 31, 2005 and 2004, and the related consolidated and combined statements of operations, comprehensive income (loss) and business/stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. . . . We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). . . . We believe that our audits provide a reasonable basis for our opinion.

* * * In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated and combined financial position of Tronox Incorporated at December 31, 2005 and 2004, and the consolidated and combined results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

304. Similarly, E&Y’s reports annexed to the Company’s 2006 Form 10-K falsely

stated, in relevant part:

We have audited the accompanying consolidated balance sheets of Tronox Incorporated as of December 31, 2006 and 2005, and the related consolidated and combined statements of operations, comprehensive income (loss) and business/stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. . . .

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We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). . . . We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tronox Incorporated at December 31, 2006 and 2005, and the consolidated and combined results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

* * * We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 15, 2007, expressed an unqualified opinion thereon.

In addition, regarding the Company’s internal control over financial reporting, E&Y represented

as follows:

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). . . . We believe that our audit provides a reasonable basis for our opinion. In our opinion, management’s assessment that Tronox Incorporated maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Tronox Incorporated maintained, in all material respects, effective internal

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control over financial reporting as of December 31, 2006, based on the COSO criteria.

305. E&Y’s reports annexed to the Company’s 2007 Form 10-K falsely stated, in

relevant part:

We have audited the accompanying consolidated balance sheets of Tronox Incorporated as of December 31, 2007 and 2006, and the related consolidated and combined statements of operations, comprehensive income (loss) and business/stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007.

* * * We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). . . . We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tronox Incorporated at December 31, 2007 and 2006, and the consolidated and combined results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statements schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

* * * We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Tronox Incorporated’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2008, expressed an unqualified opinion thereon.

In addition, regarding the Company’s internal control over financial reporting, E&Y represented

as follows:

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We have audited Tronox Incorporated’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control – Integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). . . . We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). . . . We believe that our audit provides a reasonable basis for our opinion.

* * * In our opinion, Tronox Incorporated maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Tronox Incorporated as of December 31, 2007 and 2006 and the related consolidated and combined statements of operations, comprehensive income (loss) and business/stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 and our report dated March 13, 2008, expressed an unqualified opinion thereof.

306. The foregoing audit reports issued by E&Y were materially false and misleading

because the financial statements referred to therein were not in conformity with GAAP and the

Company did not maintain, in all material respects, effective internal control over financial

reporting particularly with regard to the environmental remediation reserve. The audit reports

were also materially false and misleading because the audits referred to therein were not

conducted in accordance with GAAS.

D. E&Y’s Audits Were Not Conducted In Conformity With GAAS

307. The SEC has stressed the importance of meaningful audits being performed by

independent accountants:

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[T]he capital formation process depends in large part on the confidence of investors in financial reporting. An investor’s willingness to commit his capital to an impersonal market is dependent on the availability of accurate, material and timely information regarding the corporations in which he has invested or proposes to invest. The quality of information disseminated in the securities markets and the continuing conviction of individual investors that such information is reliable are thus key to the formation and effective allocation of capital. Accordingly, the audit function must be meaningfully performed and the accountants’ independence not compromised. (Emphasis added).

Relationship Between Registrants and Independent Accountants, SEC Accounting Series Release

No. 2961, 1981 SEC LEXIS 858 (Aug. 20, 1981).

308. GAAS, as approved and adopted by the American Institute of Certified Public

Accountants (“AICPA”), relate to the conduct of individual audit engagements. Statements on

Auditing Standards are recognized by the AICPA as the interpretation of GAAS. In conducting

the audits herein at issue, E&Y knowingly and/or recklessly violated GAAS.

E. E&Y Knew Or Recklessly Disregarded That Tronox’s Internal Accounting Controls Were Materially Deficient With Regard To Environmental Remediation Reserve Balances

309. E&Y issued unqualified audit opinions on Tronox’s financial statements for fiscal

years 2005, 2006, and 2007, turning a blind eye to, first, Kerr-McGee’s and, thereafter, Tronox’s

failure to properly record environmental remediation and tort liability reserves and the

implementation of an improper reserving methodology.

310. At all times relevant thereto, Tronox exhibited significant internal control

weaknesses, including the lack of appropriate policies and procedures to measure and record

environmental remediation reserves, which subjected the Company to significant risk of material

financial statement misstatements.

311. GAAS requires an auditor to determine three initial risk factors in order to obtain

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an understanding of internal controls sufficient to plan the audit. An auditor must evaluate (i)

“control risk,” or whether a misstatement will be prevented or detected on a timely basis by the

entity’s internal control; (ii) “inherent risk,” or the susceptibility of an assertion to a material

misstatement assuming there are no internal controls; and (iii) “detection risk,” the risk that the

auditor will not detect a material misstatement. AU §319.63.

312. GAAS also requires an auditor to assess risk factors relating to misstatements

arising from fraudulent financial reporting. AU §316.32-.33. The risk associated with an audit

determines the nature and extent of the evidentiary matter that must be obtained to assure the

auditor that the financial statements are free from material error.

313. GAAS and E&Y’s audit approach required E&Y to study Tronox’s internal

controls before issuing an opinion on its financial statements. With respect to internal controls,

GAAS requires the following:

AU §319, Consideration of Internal Control in a Financial Statement Audit In all audits, the auditor should obtain an understanding of each of the five components of internal control sufficient to plan the audit by performing procedures to understand the design of controls relevant to an audit of financial statements, and whether they have been placed in operation. In planning the audit, such knowledge should be used to – • Identify types of potential misstatement. • Consider factors that affect the risk of material

misstatement. • Design substantive tests. [AU §319.19] • Design tests of controls, when applicable [AU §319.25] The auditor should obtain sufficient knowledge of the control environment to understand management’s and the board of directors’ attitude, awareness, and actions concerning the control environment, considering both the substance of controls and their collective effect. The auditor should concentrate on the substance of controls rather than their form, because controls may be

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established but not acted upon. For example, management may establish a formal code of conduct but act in a manner that condones violations of that code. [AU §319.35] The auditor should obtain sufficient knowledge of the entity’s risk assessment process to understand how management considers risks relevant to financial reporting objectives and decides about actions to address those risks. This knowledge might include understanding how management identifies risks, estimates the significance of the risks, assesses the likelihood of their occurrence, and relates them to financial reporting. [AU §319.39]

[* * *] The auditor should obtain sufficient knowledge of the information systems relevant to financial reporting to understand – • The classes of transactions in the entity’s operations that are significant to the financial statements. • The accounting records, supporting information, and specific accounts in the financial statements involved in the initiating, recording, processing and reporting of transactions. • The financial reporting process used to prepare the entity’s financial statements, including significant accounting estimates and disclosures . . . [AU §319.49] In obtaining an understanding of controls that are relevant to audit planning, the auditor should perform procedures to provide sufficient knowledge of the design of the relevant controls pertaining to each of the five internal control components and determine whether they have been placed in operation. This knowledge is ordinarily obtained through previous experience with the entity and procedures such as inquiries of appropriate management, supervisory, and staff personnel; inspection of entity documents and records; and observation of entity activities and operations…. [AU §319.58]

314. E&Y knew or recklessly disregarded that Tronox’s internal controls with respect

to the development and quantification of environmental remediation reserves were deficient and,

as a result, Tronox’s financial statements were materially false and misleading during the Class

Period based on Tronox’s failure to record an adequate reserve for environmental remediation

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and related tort liabilities. In light of its role in auditing the environmental remediation reserve

for Kerr-McGee during the years 2002-2005, E&Y knew, or was reckless in not knowing, that

Kerr-McGee and Tronox relied primarily on significant subjective factors in determining the

environmental remediation reserve, greatly heightening the risk of misstatement and revealing an

absence of adequate internal controls relating to this material item. This risk factor was of

special importance during the Class Period as E&Y was aware of Kerr-McGee’s intention to

divest itself of its chemical businesses together with the Legacy Liabilities, creating a powerful

motivation to minimize the magnitude of the environmental remediation reserve. Moreover,

pursuant to Section 2.5(e) of the Master Separation Agreement entered into between Kerr-

McGee and Tronox in connection with the Tronox IPO, Tronox was required to use the

environmental remediation policies that had historically been applied by Kerr-McGee or risk

losing its indemnity rights under the agreement. E&Y knew or should have known of this

provision in the agreement.

F. E&Y Knew Of Or Recklessly Disregarded Significant Risk Factors In Conducting Its Audits

315. E&Y knew of or recklessly disregarded significant risk factors relating to possible

misstatements arising from fraudulent financial reporting at Tronox. AU §316 (see also AU

§316A) give examples of risk factors relevant to the audits of Tronox during the Class Period

including the use of unusually aggressive accounting policies with regard to estimates of

accruals, in this case amounts to be recorded as environmental remediation and tort liability

reserves.

316. E&Y was required under GAAS to devise an audit plan that would appropriately

address areas of audit risk. With regard to Tronox, the environmental remediation and tort

reserves were the single most significant area of risk. E&Y nonetheless continued to acquiesce

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in the application of the improper reserving methodologies used by Kerr-McGee, in part, because

the Master Separation Agreement precluded Tronox from changing those policies as a condition

of retaining indemnity rights form Kerr-McGee. Indeed, according to the Adversary Complaint,

E&Y questioned the sufficiency of the tort disclosures in the Tronox IPO Registration Statement.

Shortly after the IPO, Tronox settled certain wood treatment claims in mid-December 2005.

During a meeting in the first week of January 2006, E&Y challenged a New Kerr-McGee

executive regarding the accuracy of the Registration Statement in light of these tort settlements.

Despite recognizing the insufficiency of Tronox’s Registration Statement statements, E&Y failed

to either issue a qualified opinion on Tronox’s financial statements or resign as Tronox’s auditor.

317. Furthermore, given E&Y’s intimate knowledge of the magnitude of the Legacy

Liabilities, based on its years of audit work for Kerr-McGee, coupled with its knowledge that the

Legacy Liabilities were transferred to Tronox, E&Y knew, or was reckless in not knowing, that

these obligations would inevitably overwhelm Tronox. E&Y knew, or recklessly disregarded,

that Tronox lacked the cash resources and borrowing ability to deal with the monumental

financial burden which the Legacy Liabilities represented, and could not contemporaneously

adequately fund its ongoing business operations, including paying interest on the Bonds,

especially if it spent and reserved the amounts necessary to properly address its environmental

remediation obligations.

318. During the annual audits, E&Y also noted or deliberately turned a blind eye to the

existence of the following additional factors regarding the deficiency in Tronox’s reserving

methodology with regard to its environmental remediation reserves: (i) by virtue of its

longstanding relationship in providing audit, tax, and consulting services to Kerr-McGee, E&Y

had in depth knowledge as to the status of both the chemicals and oil and gas businesses, and

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was knowledgeable about Kerr-McGee’s effort to sell the chemicals business and the fact that

those efforts were unsuccessful due to potential purchasers’ refusal to take on the Legacy

Liabilities in light of their enormous magnitude; (ii) E&Y knew, or was reckless in not knowing,

that the Tronox IPO was occurring because no third party would take on the Legacy Liabilities

without an indemnity from Kerr-McGee in the hundreds of millions of dollars, while knowing

that the recorded reserve for Tronox was approximately $200 million and that Kerr-McGee had

structured the transaction so that the Legacy Liabilities became obligations of Tronox; (iii) E&Y

had signed off on the improper reserving policies that Kerr-McGee had employed for years and

that would be carried over to Tronox, and to secure the significant additional revenue that this

new engagement represented, E&Y was willing to turn a blind eye to the improper reserving

practices and defer to management with regard to recording of accruals and disclosure for

environmental remediation obligations; (iv) E&Y knew, or was reckless in not knowing, about

the impact on reserves of the dispute between the chemical subsidiaries of Kerr-McGee that

became Tronox as of the IPO, and the EPA with regard to the Manville, New Jersey wood

treatment site and that Tronox had received a demand for potentially up to $236 million to

remediate that location; nonetheless E&Y acquiesced in Tronox’s decision to not record a

reserve for that obligation until the third quarter of 2006 and, even at that date, the amount

recorded, $35 million, was far below the probable and reasonably estimable liability for the site;

(v) E&Y knew, or was reckless in not knowing, that $70 million had been paid by Kerr-McGee

to settle 11 wood treatment lawsuits and that there were thousands of analogous claims pending

which would require multi-millions of dollars to resolve, yet a materially inadequate reserve (of

no more than $11 million) was recorded during the Class Period for these obligations; (vi) where

Tronox stated that it was not possible to establish a range of potential liability for a particular

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environmental remediation site, and for which no liability was recorded, E&Y, in violation of

GAAS, failed to insist on development of an estimate of liabilities which could then have been

recorded consistent with SAB 92, or issue a qualified opinion; (vi) in an environment of

increasingly stringent application of environmental laws and regulations E&Y provided

unqualified opinions on the financial statements of Tronox for the years ended 2005, 2006, and

2007 even though it knew, or recklessly disregarded, that there were material uncertainties as to

the amount of the environmental remediation and tort liabilities Tronox faced; and (vii) E&Y

knew, or recklessly disregarded that Kerr-McGee’s total environmental remediation expenditures

through 2005 far exceeded the $224 million in reserves for all potential future liabilities which

Tronox recorded in 2005, a facially insufficient amount in light of the history of the Company

and the information known to E&Y regarding the Legacy Liabilities.

G. E&Y Failed To Obtain Sufficient Competent Evidential Matter Or Ignored The Audit Evidence It Did Gather In Violation Of GAAS

319. GAAS, as set forth in AU §326, Evidential Matter, requires auditors to obtain

sufficient, competent, evidential matter through inspection, observation, inquiries, and

confirmations to afford a reasonable basis for an opinion regarding the financial statements under

audit.

320. In violation of GAAS, and contrary to the representations in its reports on

Tronox’s financial statements, E&Y did not obtain sufficient, competent, evidential matter to

support Tronox’s assertions regarding its environmental remediation reserve for the periods

ending December 31, 2005, 2006, and 2007 and/or was reckless in ignoring audit evidence.

321. Based on its historical audit work for Kerr-McGee, E&Y was aware that the

Company’s estimate of this reserve was a material component of Kerr-McGee’s and Tronox’s

financial results and would be of critical importance to potential purchasers of the Company’s

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securities. AU §312 regarding “Audit Risk and Materiality in Conducting an Audit” specifically

identifies the following as a potential source of a misstatement: “Management’s judgments

concerning an accounting estimate or the selection or application of accounting policies that the

auditor may consider unreasonable or inappropriate.” AU §342 entitled “Auditing Accounting

Estimates” is also directly applicable here. This standard notes that because estimates are based

on subjective and objective factors, it may be difficult for management to establish controls over

them. Thus, “when planning and performing procedures to evaluate accounting estimates, the

auditor should consider, with an attitude of professional skepticism, both the subjective and

objective factors.” (Emphasis added). AU §342 is clear that it is the auditor’s obligation to

ensure that the accounting estimate (here the environmental remediation and tort liability

reserves) are reasonable in the circumstances and are presented in conformity with applicable

accounting principles and are properly disclosed. Based on the allegations set forth in

Paragraphs 316-318 hereof, E&Y’s audits of Tronox’s financial statements with regard to the

environmental remediation and tort liability reserves were, at a minimum, recklessly performed.

E&Y simply accepted management’s assumptions and estimates regarding the adequacy of the

reserve in the face of overwhelming competent evidential matter indicating that the recorded

reserves were materially deficient, and endorsed the Company’s use of a reserving methodology

that caused the recorded reserve to be materially understated.

322. To conduct its audits in accordance with GAAS, E&Y’s obligations included

visiting selected sites where significant mediation obligations either had been or may be

recorded, obtaining adequate documentation regarding Tronox’s potential liabilities arising from

demands made by governmental agencies and/or private businesses and individuals, confirming

the validity and likelihood of reimbursement sources for remediation obligations from potential

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responsible parties, insurance, other third parties, and litigation claims, and generally conducting

detailed investigations into remediation sites where Tronox faced potentially material liability.

For example, in the case of government demands, such as the ones issued by the EPA for the

Manville, New Jersey wood-treatment site, given the size of the claim against Tronox, E&Y was

required to become fully informed as to the specific demands made and the underlying basis for

the demand. In this regard, and based on the information available to it, E&Y knew and/or

recklessly disregarded that Tronox’s failure to record any reserve for this site until the second

quarter of 2006 materially understated its probable and reasonably estimable obligations, and

that the reserve that was recorded on and after the third quarter of 2006 was also materially

deficient under GAAP.

323. E&Y ignored the guidance in this professional literature, which required that

Tronox make adequate disclosure and proper accounting for the environmental remediation

reserve it recorded. Further, E&Y ignored the critical warning in PCAOB Release No. 2007-001

dated January 22, 2007 which stated among other things, “[f]raudulent financial reporting often

is accomplished through intentional misstatement of accounting estimates. Financial frauds have

been committed by management intentionally biasing assumptions and judgments used to

estimate account balances. In certain cases management also has used significant or unusual

accounting estimates to intentionally distort results of operations ...”

324. E&Y abandoned its role as independent auditor by turning a blind eye to each

indication of improper accounting. Despite its knowledge, E&Y did not insist upon adjustments

to Tronox’s audited financial statements. Pursuant to GAAS, E&Y should have issued qualified

or adverse reports, or it should have insisted that Tronox comply with GAAP.

325. E&Y’s failure to qualify, modify, or abstain from issuing its audit opinions on

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Tronox Class Period financial statements, when it knew or deliberately turned a blind eye to

numerous facts that showed that those financial statements were materially false and misleading

caused E&Y to violate at least the following provisions of GAAS:

(a) E&Y violated the second general standard (AU §§150, 220), which provides that “[i]n all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.”

(b) E&Y violated the third general standard (AU §§150, 230),

which provides that “[d]ue professional care is to be exercised in the performance of the audit and the preparation of the report.”

(c) E&Y violated the first standard of field work which

provides that, “[t]he work is to be adequately planned . . .” (d) E&Y violated the second standard of field work (AU

§150), which provides that “[a] sufficient understanding of internal control is to be obtained to plan the audit and to determine the nature, timing, and extent of tests to be performed.” This standard requires the auditor to make a proper study of existing internal controls, including accounting, financial and managerial controls, to determine whether reliance thereon was justified, and if such controls are not reliable, to expand the nature and scope of the auditing procedures to be applied. In the course of auditing, Tronox’s financial statements, E&Y either knew or recklessly disregarded facts that evidence that it failed to sufficiently understand Tronox’s internal control structure and/or it disregarded weaknesses and deficiencies in Tronox’s internal control structure, and failed to adequately plan its audit or expand its auditing procedures.

(e) E&Y violated the third standard of field work (AU §§150,

326), which provides that “[s]ufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit.”

(f) E&Y violated the third standard of reporting (AU §§150,

431), which provides that “[i]nformative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.”

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(g) E&Y violated the fourth standard of reporting, which

provides that “[t]he report shall either contain an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons therefore should be stated. In all cases where an auditor’s name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditor’s work, if any, and the degree of responsibility the auditor is taking.” This standard requires that when an opinion on the financial statements taken as a whole cannot be expressed, the reasons therefore must be stated. E&Y should have stated that no opinion could be issued by it on Tronox’s fiscal 1997, 198, and 1999 financial statements or issued an adverse opinion stating that those financial statements were not fairly presented. (AU §508)

(h) E&Y violated AU §316 (see also AU §316A), which

provides that an auditor must consider the following factors in assessing audit risk: (a) whether management compensation creates a motivation to engage in fraudulent financial reporting; (b) domination of management by a small group; (c) one’s actions which are not supported by proper documentation or are not appropriately authorized; (d) reporting records or files that should be, but are not, readily available and are not promptly produced when requested; and (e) lack of timely inappropriate documentation for transactions.

(i) E&Y violated AU §316 (see also AU §316A), which

provides that “[j]udgments about the risk of material misstatement due to fraud have an overall effect on how the audit is conducted in the following ways:

(i) Professional skepticism. Due professional care

requires the auditor to exercise professional skepticism – that is, an attitude that includes a questioning mind and critical assessment of audit evidence (see §§230.07 through .09). Some examples demonstrating the application of professional skepticism in response to the auditor’s assessment of the risk of material misstatement due to fraud include (a) increased sensitivity in the selection of the nature and extent of documentation

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to be examined in support of material transactions, and (b) increased recognition of the need to corroborate management explanations or representations concerning material matters – such as further analytical procedures, examination of documentation, or discussion with others within or outside the entity.

(ii) Accounting principles and policies. The auditor

may decide to consider further management’s selection and application of significant accounting principles, particularly those related to subjective measurements and complex transactions. In this respect, the auditor may have a greater concern about whether the accounting principles selected and policies adopted are being applied in an inappropriate manner to create a material misstatement of the financial statements.

(iii) Controls. When a risk of material misstatement due

to fraud relates to risk factors that have control implications, the auditor’s ability to assess control risk below the maximum may be reduced. However, this does not eliminate the need for the auditor to obtain an understanding of the components of the entity’s internal control sufficient to plan the audit (see §319). In fact, such an understanding may be of particular importance in further understanding and considering any controls (or lack thereof) the entity has in place to address the identified fraud risk factors. However, this consideration also would need to include an added sensitivity to management’s ability to override such controls.

(iv) E&Y violated AU §319.24, which provides that

“when the nature of management incentives increases the risk of material misstatement of financial statements, the effectiveness of control activities may be reduced.”

(v) E&Y violated AU§319.28, which provides that

“[t]he auditor’s understanding of internal control may sometimes raise doubts about the auditability of an entity’s financial statements.” Indeed, “[c]oncerns about the integrity of the entity’s

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management may be so serious as to cause the auditor to conclude that the risk of management misrepresentation in the financial statements is such that an audit cannot be conducted.” Moreover, “[c]oncerns about the nature and extent of an entity’s records may cause the auditor to conclude that it is unlikely that sufficient competent evidential matter will be available to support an opinion on the financial statements.”

(vi) E&Y violated AU §380.09, which states that “[t]he

auditor should inform the audit committee about adjustments arising from the audit that could, in his judgment, either individually or in the aggregate, have significant effect on the entity’s financial reporting process.” For purposes of this section, “an audit adjustment, whether or not recorded by the entity, is a proposed correction of the financial statements that, in the auditor’s judgment, may not have been detected except through the auditing procedures performed.” Indeed, “[m]atters underlying adjustments proposed by the auditor but not recorded by the entity could potentially cause future financial statements to be materially misstated, even though the auditor has concluded that the adjustments are not material to the current financial statements.”

LOSS CAUSATION

326. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiffs and the Class. Throughout the Class Period, the market

prices of Tronox securities were inflated by the material omissions and materially false and

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misleading statements made by the Defendants named herein, and, as a result, Plaintiffs and the

Class purchased Tronox securities at artificially inflated prices. When the truth about Tronox

was revealed to the market, the price of Tronox’s securities declined in response, as the artificial

inflation caused by Tronox and the Defendants’ material omissions and false and misleading

statements was removed from the price of Tronox’s securities, thereby causing substantial

damage to Plaintiffs and the Class.

327. During the Class Period, Tronox Class A common stock traded as high as $19 per

share, Class B common stock traded as high as $19.37 per share and Tronox bonds traded as

high as $107.75 per bond. In fact, just days before July 11, 2007, when the first partial

disclosures about Tronox’s true financial condition were made, Tronox Class A common stock

was trading at $14.73 per share, Tronox Class B common stock was trading at $14.47 per share

and Tronox bonds were trading at $104. Over the next 18 months, in response to additional

partial disclosures that revealed more about the Company’s true financial condition, the market

reacted, and Tronox’s securities declined in value. Throughout those 18 months, however,

Defendants mitigated the impact of those disclosures and prevented the full truth about Tronox

from being revealed by making contemporaneous false and misleading statements and omissions

that minimized and denied the facts being revealed to the market. By the time the market finally

gained a complete understanding of the magnitude of the environmental and other liabilities

facing Tronox and the implications for Tronox’s financial condition with the filing of Tronox’s

bankruptcy, the price of Tronox Class A and Class B common stock had plummeted to just $0.03

per share and the price of Tronox bonds had plummeted to $16 per bond. Accordingly, as a

result, at least in part, of the truth emerging about the Company’s true financial condition and the

extent of the environmental remediation and other liabilities facing the Company, the market

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price of Tronox Class A and Class B common stock fell a total of more than $14 per share, or

nearly 100%, and the market price of Tronox bonds fell more than $88 per bond, or more than

84%.

328. Specifically, on July 11, 2007, Tronox issued a press release titled “Tronox

Identifies Factors That Will Impact Second-Quarter Financial Results” which disclosed that one

of the factors that would impact the Company’s second quarter 2007 earnings was $2 million in

costs associated with “an ongoing environmental assessment at its Henderson, Nev. site.” In

response to this disclosure, numerous analysts reduced their earnings estimates for Tronox

specifically citing concerns over the Company’s ongoing remediation work at the Henderson,

Nevada site. For example, on July 13, 2007, JPMorgan issued an analyst report lowering its

2007 earnings per share estimate for Tronox from $0.10 to a loss of ($0.30), explaining that

“ongoing remediation work at the Henderson Nevada site required an increase in environmental

reserves of $2M ($0.03/share). Similarly, in a July 16, 2007 analyst report, BB&T Capital

Markets (“BB&T”) lowered its second quarter 2007 earnings per share estimate for Tronox

“from ($0.15) to ($0.25), reflecting . . . a noncash environmental charge of -$2M (pretax) which

will also impact Q2 earnings.”

329. The Company’s July 11, 2007 disclosures caused a statistically significant

decline, net of market and industry factors, in the price of Tronox’s Class A and Class B

common stock. Specifically, Tronox Class A common stock dropped from a closing price of

$14.48 per share on July 10, 2007, to a closing price of $13.85 per share on July 11, 2007 and

Tronox Class B common stock dropped from a closing price of $14.21 per share on July 10,

2007, to a closing price of $13.62 per share on July 11, 2007.

330. Defendants prevented an even steeper decline in Tronox securities, however, by

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falsely blaming the Company’s performance on “second-quarter softness in the United States

housing market in conjunction with rising input costs.” Defendants also mitigated the impact of

Tronox’s July 11, 2007 disclosures by misrepresenting and omitting the size of the necessary

environmental provision, the true extent of the environmental and other liabilities facing Tronox

and the effect these liabilities would have on the Company’s financial condition. Accordingly,

the Company’s July 11, 2007 disclosures were materially false and misleading, and only partially

disclosed the Company’s true condition.

331. Just two weeks later, on August 1, 2007, the Company issued a press release

announcing Tronox’s financial results for the second quarter of 2007. According to the press

release, Tronox’s second quarter 2007 losses of $0.49 per share were caused, in part, by “an

environmental provision of $1.5 million for costs associated with environmental assessment at

the Henderson, Nev. site.”

332. On a conference call later that day run by Defendants Adams and Mikkelson,

Defendants acknowledged that one of the items negatively impacting the quarter “was the pre-

tax non-cash environmental provision of $1.5 million for costs associated with environmental

assessment at our Henderson, Nevada site.” Defendants succeeded, however, in partially

mitigating the impact of this disclosure by misleadingly stating that the $1.5 million provision

“does not reflect the full amount of Kerr-McGee’s future reimbursement obligation.”

Defendants explained that, “the Company’s future net cash exposure related to this new

provision is expected to be approximately $750,000 after estimating the 50% future

reimbursement obligation from Kerr-McGee.” Indeed, Defendants misleadingly omitted the true

extent of the environmental remediation and other liabilities facing Tronox and the effect these

liabilities would have on the Company’s financial condition. Defendants also falsely

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emphasized that it was “doing the right things long-term to position the Company for success by

driving fundamental changes in our business. We continue to see positive results in baseline cost

reductions and working capital area.”

333. Specifically, with regard to the Company’s environmental remediation liabilities,

Defendants focused on the fact that they were “continu[ing] to work to mitigate these matters

through insurance, reimbursements from PRPs or obligated parties, efficient management of

ongoing projects, and by defending our legal positions” and that the Company’s financial

reserves for environmental remediation totaled $214 million, “a decrease from the prior quarter,”

which “does not include $39 million in anticipated future reimbursements to Tronox by the

Department of Energy for work yet to be completed at the West Chicago site. It is expected that

the DOE will continue to reimburse us 55% of our costs at this site.” Defendants also

misleadingly stated that its gross reserve of $35 million would be adequate to cover Tronox’s

liability for the Manville, New Jersey Wood-Treatment Site as a result of the Company’s

mitigation strategies:

[We] continue to actively pursue mitigation strategies to ensure obligated parties, insurance companies, and government agency reimbursements are received to offset our remediation costs. Regarding the former wood treatment site in New Jersey, nonbinding mediation with the EPA is ongoing and we remain confident about our defenses and position concerning this matter.

334. A presentation filed in a Form 8-K that same day and referenced on the related

conference call repeated those false statements and also misleadingly stated that the Company’s

2007 projected net cash spend on environmental liabilities was just “$35MM to $40MM.”

335. The Company’s announcement unnerved analysts who raised concerns over the

Company’s future financial prospects. For example, the same day, JPMorgan issued an analyst

report stating that Tronox’s earnings loss was due to a “$1.5M pre-tax provision ($0.02/share)

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related to environmental remediation costs and $1.2M after tax ($0.03/share) for environmental

remediation costs related to discontinued operations.” JPMorgan also noted that Tronox’s

GAAP earnings a year prior had already “included a $13.8M pre-tax provision ($0.22/share)

related to environmental remediation costs in discontinued operations.” As a result, JPMorgan

“include[d] provisions related to environmental remediation costs for continuing operations and

for discontinued operations” in its valuation of Tronox, “since these have been ongoing expenses

for the company.”

336. In response to these disclosures, the price of Tronox Class B common stock

declined in a statistically significant amount, net of market and industry factors, dropping from a

closing price of $12.30 per share on July 31, 2007, to a closing price of $11.62 per share on

August 1, 2007.

337. Notwithstanding the partial disclosure of the Company’s true condition, the

Company’s conference call statements were materially false and misleading because they

continued to conceal the true extent of the Company’s environmental remediation and other

liabilities. In fact, these liabilities and their impact on the Company’s financial condition were

far more significant than the Company disclosed at that point and, by not revealing the true

extent and scope of the Company’s liabilities, Defendants prevented a much steeper drop in the

price of the Company’s securities. Indeed, the Company was partially successful in assuaging

investors’ concerns and continuing to conceal the true extent of the Company’s environmental

remediation liabilities. For example, in an analyst report issued the following day, August 2,

2008, BB&T wrote that it “believe[s] that Tronox’s earnings are sloooowly making the transition

from red ink to black ink.” BB&T also noted that “Tronox is actively defending itself from the

liability for the EPA’s Federal Creosote Superfund Project [the New Jersey Wood-Treatment

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Site],” and that while the Environmental Protection Agency had identified Tronox as a

potentially responsible party (“PRP”), it “believe[s] that there are other PRPs” and that Tronox’s

reimbursement program with Kerr-McGee will require Kerr-McGee (now part of Anadarko

Petroleum) to reimburse TRX for 50% of environmental remediation costs, up to $100M.”

338. Then, on February 13, 2008, Tronox issued a press release and held a conference

call announcing the Company’s fourth quarter 2007 earnings, including that Tronox suffered a

loss of $57.4 million and that its net spend on environmental liabilities was $33 million in 2007.

During the conference call Tronox also stated that the Company’s net spend on environmental

remediation would increase by more than 20%, from $33 million in 2007 to between $40 and

$45 million in 2008.

339. Defendants Mikkelson and Adams, however, once again attempted to diminish

the impact of this revelation by stressing that the Company has “been very successful” in

mitigating its legacy environmental liabilities, decreasing its reserves “from $239 million in late

2005 to $189 million at the end of 2007.” As Defendant Adams explained:

Our focus continues to be on execution of the remediation plans to properly clean up these sites as mandated by the government agencies and to work with state and federal government representatives to reduce our future liability for sites where we believe we have little or no liability. For instance, the Manville, New Jersey site was cleaned up by the U.S. EPA and we believe they grossly overpaid for this clean up. I am very pleased to report that we have received political support and have been successful in getting a General Accounting Office audit of the EPA’s cleanup of the Manville site. We feel the audit will support our position coupled with the fact that there are additional PRPs now identified for this project will lead to a reasonable settlement in the future. This is just one example of what we are doing to contain our legacy liability. We are also in the process of evaluating a number of ways to reduce or limit our legacy liability which I cannot

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provide in any detail. But I just want to emphasize that we are being diligent with regards to this critical issue. We are working each and every day to reduce our future liability wherever we can while also adhering to our core values which includes protecting the environment.

340. Defendants’ misleading statements during the conference call were reinforced by

a slide show presentation accompanying the call. Specifically, the slides focused on the fact that

the Company’s environmental “reserves [were] down from $239MM at IPO to $189MM at end

of 2007” and that the Company’s environmental reserves were “$189MM” with receivables of

“$68MM . . . exclud[ing] anticipated future receivables of $39MM from DOE in West Chicago.”

These same slides also misleadingly reiterated that the Company’s 2008 projected net cash spend

on environmental liabilities was now “$40 - 45,” but that the Company still expected to mitigate

that spending through “government reimbursements” from the DOE and DOD, pursuing other

PRPs, insurance policies, land sales and the Kerr-McGee 7-year remediation cost reimbursement

program in which Kerr-McGee “reimburses Tronox for 50% of remediation costs[s] in excess of

reserves at IPO up to $100MM.”

341. Defendants’ false and misleading statements and omissions had their intended

effect on the market. For example, in a February 14, 2008 analyst report, BB&T reiterated its

opinion that Tronox would not be subject to substantial environmental liabilities associated with

the Federal Creosote Superfund Project (otherwise known as the New Jersey Wood-Treatment

Site). Specifically, BB&T stated that “Tronox is actively defending itself from the liability for

the EPA’s Federal Creosote Superfund Project . . . and obtained political support for a GAO

audit of the EPA’s cleanup and identified other PRPs (potentially responsible parties).” In

addition, BB&T noted its belief that Tronox’s reimbursement program with Kerr-McGee will

require Kerr-McGee (now part of Anadarko Petroleum) to reimburse TRX for 50% of

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environmental remediation costs, up to $100M.” Similarly, in a February 14, 2008 UBS

Securities analyst report, UBS Securities stated that Tronox’s “cash environmental legacy costs

should be in the range of $40mm to $45mm. However, the company is aggressively focused on

cost reduction and is targeting an additional $22mm in savings in 2008.” Nevertheless, UBS

noted that Tronox “should be cash flow challenged in the near term.”

342. Following the Company’s disclosures, the Company’s securities experienced

statistically significant decline, net of market and industry factors. Specifically, shares of Tronox

Class A common stock dropped from $7.55 per share on February 12, 2008 to $5.46 per share on

February 14, 2008, and shares of Tronox Class B common stock dropped from $7.48 per share

on February 12, 2008 to $5.43 on February 14, 2008. Furthermore, the Tronox bonds dropped

from $92.50 on February 12, 2008 to $86.75 per share on February 14, 2008.

343. Throughout the Spring of 2008, the Company’s securities continued to decline in

response to news that Tronox had been downgraded by a number of rating agencies and that

Tronox had suspended its quarterly dividend. However, the Defendants were able to thwart a

huge declines with false assurances that the Company’s environmental liabilities were properly

reserved for. For example, at a March 13, 2008, Lehman Brothers High Yield Bond and

Syndicated Loan Conference, Defendant Adams falsely assured the market that the Company’s

environmental liabilities were in control by touting that its environmental reserves were down by

$50 million, or more than 20%, from “$239MM at IPO to $189MM at end of 2007” with

receivables of approximately “$68MM.” Defendant Adams again stressed that Tronox would

mitigate its spending on environmental costs through reimbursements from the Department of

Energy and Department of Defense, pursing potentially responsible parties, insurance, land sales

and from reimbursements from Kerr-McGee/Anadarko.

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344. Then, in a Form 8-K filed with the SEC on April 30, 2008 announcing the

Company’s first-quarter 2008 earnings and signed by Defendants Adams and Mikkelson, Tronox

reported a smaller first quarter 2008 loss than expected and that its environmental reserves had

been reduced by more than 20%, from $239 million at the time of the IPO to $182 million in the

first quarter of 2008. In a conference call held the same day, Tronox repeated that its financial

reserves for environmental remediation had decreased and that its estimate for net cash spent on

environmental remediation in 2008 was in the range of $30 million to $35 million, “a $10

million reduction from its previous forecast.” As set forth above, these statements were false and

misleading.

345. Just two weeks later, however, on May 13, 2008, Fitch downgraded Tronox’s

Senior Unsecured Notes to B/RR4 from B+/RR3 to “reflect Fitch’s view that environmental

claims would reduce the recovery for senior unsecured creditors in a distressed scenario.” The

next day, Tronox was forced to suspend its $0.05/share quarterly dividend “as part of its ongoing

efforts to improve financial flexibility.”

346. On June 4, 2008, Moody’s downgraded Tronox’s corporate family rating to B3

from B2, Tronox’s secured revolver and term loan to Ba3 and Ba2 and its unsecured notes to

Caa1 from B3 with a negative rating outlook. In its downgrade report, Moody’s stated that it

“believes the ratings are constrained by the prospect of . . . large legacy environmental liabilities

(even as reserves on existing active sites have been reduced). Moody’s believes that these legacy

liabilities are unique in size and complexity, and constitute a key negative factor when

determining the rating.”

347. On July 30, 2008, the market gained a fuller understanding of the magnitude and

severity of the environmental liabilities facing Tronox. On this date, Tronox announced its

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second quarter of 2008 earnings, including a loss of $0.73 per share, and held a conference call

with analysts to discuss its results. On the conference call, Tronox disclosed that its

environmental expenses were continuing to mount:

Our financial reserves for environmental remediation at June 20, 2008, for active and inactive sites totaled $183.8 million, a net increase of $2 million from the prior quarter. This increase was due to an increase in our environmental reserves of $10.2 million . . . [and] included a $6.2 million reserve for our Henderson, Nevada facility for the estimated costs associated with the ongoing eco site investigation work where we are now required by NDEP to perform four times the number of samples to complete testing and analysis. . . . We also increased our reserve for the former Cleveland, Oklahoma refinery site by $3.8 million for recently completed engineering estimates to complete the necessary excavation and disposal of additional impacted soil from this site. (Emphasis added).

348. In an attempt to mitigate any further drops in the price of its securities, however,

Tronox continued to stress that it was entitled to environmental remediation reimbursements

from the Department of Energy, Kerr-McGee/Anadarko and insurance providers which it would

use to offset its costs. For example, Tronox told investors that it “believe[s] that the insurance

policy we have for [the Henderson, Nevada] site will cover the majority of these costs” and

to“[p]lease keep in mind that our receivables do not include approximately $27 million in

anticipated future reimbursements due to Tronox.” Tronox also continued to downplay its

anticipated spending for environmental liabilities, projecting the costs “to be in the range of $30

million to $35 million.”

349. Indeed, a slide distributed to investors in connection with the conference call,

misleadingly stated that the Company’s environmental reserves were down to “$183.8MM at end

of Q2 2008” with receivables of approximately $63MM and future receivables of “$27MM from

DOE for West Chicago.” The slide also stressed that Tronox would mitigate its spending on

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environmental costs through reimbursements from the Department of Energy and Department of

Defense, pursuing potentially responsible parties, insurance, land sales and reimbursements from

Kerr-McGee/Anadarko.

350. On July 31, 2008, JPMorgan issued an analyst report lowering its Tronox GAAP

earnings per share estimate from a loss of ($1.00) to a loss of ($1.40), due, in part, to the fact that

Tronox’s reported “$0/5Mn in additional environmental reserves” which had an impact of

“0.01/share” and that Tronox’s losses included $4.5 million in losses “related to increased

environmental provisions.” In this report, JPMorgan also noted that the Company’s

environmental reserves of $120.7 million net of receivables would offset the benefit of the $168

million in proceeds from possible land sales the Company was projecting over the next four

years.

351. Similarly, the same day, BB&T issued an analyst report entitled, “Not for the

Faint of Heart.” BB&T stated that “one must have a high risk tolerance to invest in this name,”

and noted that the Company’s “larger than-expected environmental remediation costs and

liabilities” were a risk. BB&T also noted the possibility of bankruptcy at the Company, stating

“[w]e believe fundamentals should improve and are hopeful that any changes made to the capital

structure are done outside of the Chapter 11 process.”

352. The next day, UBS Securities issued a report reiterating its “hold”

recommendation on Tronox, stating that it “urge[s] caution to investors on Tronox due to the

current risk associated with the company’s environmental dispute in New Jersey . . . The major

unknown in the credit is the environmental liability associated with the current dispute with the

New Jersey Department of Environmental Protection and Anadarko, which we expect should get

decided by the end of August. We would not recommend potentially adding exposure to the

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credit until this issue is resolved.”

353. In addition, on August 1, 2008, Moody’s downgraded Tronox to Caa2 from B3

citing as a “key negative factor in determining the rating,” its belief that the Company’s legacy

liability “are unique in size and complexity.”

354. These announcements led to statistically significant declines, net of market and

industry factors, of Tronox securities. Specifically, the market price of Tronox Class A common

stock dropped from its close of $1.51 per share on July 29, 2008 to $1.20 per share on August 1,

2008 and Tronox Class B common stock dropped from its close of $1.43 per share on July 29,

2008 to $1.06 per share on August 1, 2008.

355. Then, on August 18, 2008, BB&T issued an analyst report entitled “Error of

Olympic Proportions,” in which it lowered its rating of Tronox and expressed concern about a

potential bankruptcy. Specifically, BB&T stated that the surprise removal of Defendant Adams

as Tronox’s CEO “escalated the alarm that the Company might put itself into Chapter 11.”

However, BB&T cautioned that “[i]n and of itself, we do not believe that environmental

liabilities would be enough to trigger a Chapter 11 filing in the near and mid-term.”

356. These disclosures caused statistically significant declines, net of market and

industry factors, of Tronox securities. Specifically, the price of Tronox Class A common stock

dropped from $0.97 on August 15, 2008 (a Friday) to $0.70 on August 18, 2008 (a Monday) and

Class B common stock dropped from $0.78 on August 15, 2008 to $0.63 on August 18, 2008.

The bonds similarly dropped.

357. On August 21, 2008, Tronox announced after the close of market in a Form 8-K

that the NYSE had notified it on August 11, 2008 that Tronox was not in compliance with the

NYSE’s continued listing standards due to the fact that the Company’s market capitalization had

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fallen below a required minimum of $75 million during the 30-day period, ending August 8,

2008.

358. This news caused statistically significant declines, net of market and industry

factors, in Tronox securities. Specifically, the market price of Tronox Class A common stock

dropped from its close of $0.45 per share on August 21, 2008, to $0.33 per share on August 22,

2008, and the market price of Tronox Class B common stock dropped from its close of $0.28 per

share on August 21, 2008, to $0.18 per share on August 22, 2008. Tronox bonds similarly

dropped. Just a week later, on August 28, 2008, Tronox was notified by the NYSE that its Class

B common stock was also not in compliance with the NYSE’s listing standard.

359. On August 25, 2008, Moody’s downgraded Tronox again, from Caa2 to Caa3,

citing as a “key negative factor in determining the rating,” its belief that the Company’s legacy

liability “are unique in size and complexity.” In addition, Moody’s stated that its downgrade was

“in reaction to: 1) recent management changed replacing the former CEO; 2) the presence of

“going concern” language in the second quarter 10Q; 3) the discussion of possibility of filing

Chapter 11 appearing for the first time in the second quarter 10Q; and 4) the possibility of a

delisiting of Tronox’s equity on the NYSE due to the rapid decline of Tronox’s market capital.”

The Tronox bonds declined in a statistically significant amount in response to this news.

360. On September 12, 2008, Tronox disclosed to investors in a Form 8-K that the

federal government had filed a $280 million claim against the Company for the costs of cleaning

up a wood treatment plant in New Jersey.

361. Days later, on September 17, 2008, Standard & Poor’s lowered Tronox’s Credit

Rating to CCC- from CCC+, citing concerns that Tronox’s reserves were inadequate to cover the

Company’s environmental liabilities. Specifically, in its report, Standard & Poor’s stressed that:

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An additional, but potential longer-range concern, related to Tronox’s recent announcement that it received notice of a lawsuit for the recovery of $280 million incurred by the EPA in the cleanup of a New Jersey wood treatment site. . . . The amount Tronox provides for in its reserves is far lower than the $280 million claimed by the EPA in its lawsuit. Although the outcome of the lawsuit is unlikely to result in a cash outflow in the near term, the lawsuit raises the possibility of additional financial pressure on Tronox’s already weakened financial profile at a time when the improvement of operating performance remains uncertain and a breach of financial covenants is increasingly likely.

362. Tronox’s securities experienced statistically significantly declines, net of market

and industry factors, in response to this news. Specifically, Tronox Class A common stock price

dropped from a closing price of $0.35 per share on September 16, 2008, to a closing price of

$0.29 per share on September 17, 2008, Class B common stock price dropped from a closing

price of $0.19 per share on September 16, 2008, to a closing price of $0.13 per share on

September 17, 2008, and the market price of Tronox bonds dropped from its close of $41.50 on

September 16, 2008, to $37.00 on September 17, 2008.

363. On September 22, 2008, BB&T filed an analyst report reporting on Standard &

Poor’s downgrade of Tronox, the EPA’s lawsuit against Tronox to recoup cleanup costs and that

“TRX is also facing a $128M lawsuit in New Mexico, as well as state claims in Avoca, PA,

Columbus, MS, and Texarkana, TX.” Notably, BB&T also stated that “[w]ith unsecured notes

trading in the high 30s range, we believe the debt markets are seriously concerned about a

potential bankruptcy filing.”

364. On September 30, 2008, Tronox was formally delisted from the New York Stock

Exchange.

365. On November 10, 2008, Fitch Ratings downgraded Tronox’s Issuer Default

Rating to ‘CC’ from ‘CCC.’ This disclosure caused a statistically significant decline, net of

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market and industry factors, of the Tronox bonds. Specifically, Tronox bonds plummeted from a

close of $24 on November 7, 2008 (a Friday) to a close of $21.50 on November 10, 2008 (the

next trading day).

366. On January 12, 2009, Tronox filed for bankruptcy revealing that it spent more

than $118 million to satisfy the Legacy Liability obligations and still faced hundreds of

millions of dollars worth of additional claims. The bankruptcy petition also revealed hundreds

of Secret Sites that Defendants had known about, or recklessly disregarded, during the Class

Period. On news of the bankruptcy filing, Fitch Ratings downgraded Tronox Issuer Default

Rating to ‘D’ from ‘C’. On this news, Tronox’s Class A and Class common stock dropped in

statistically significant amounts. Specifically, Class A common stock dropped from $0.06 per

share on January 9, 2009 to $0.03 per share on January 12, 2009, and Class B common stock

dropped from $0.05 per share on January 9, 2009 to $0.03 per share on January 12, 2009.

367. Tronox’s bankruptcy filing was the direct consequence of the wrongdoing in

which Defendants had engaged. It was entirely foreseeable to Defendants that concealing the

true extent of the Company’s environmental liabilities in violation of GAAP would artificially

inflate the price of Tronox securities. It was similarly foreseeable to Defendants that the

revelation of that misconduct, by way of the Company’s worsening financial condition, would

cause the price of Tronox securities to drop significantly as the inflation caused by their

misstatements and omissions was corrected. Accordingly, the conduct of the Company, Kerr-

McGee and the individually named Defendants, as alleged herein, proximately caused

foreseeable damages to Plaintiffs and members of the Class.

368. Specifically, the misleading omissions and statements detailed above falsely

assured investors, among other things, that Tronox’s environmental liabilities were adequately

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“reserved for”; “successfully mitigated”; “offset”; “indemnified”; “reimbursable”; and

“contained.” Those statements were materially false and misleading due to the size and scope of

the Company’s undisclosed environmental remediation liabilities, the fatal impact the

environmental liabilities would have on the Company’s financial condition, the failure of Tronox

to report its financial statements in accordance with GAAP during the Class Period, and the

limitations of Kerr-McGee/Anadarko’s indemnification of Tronox’s environmental remediation

costs.

369. Defendants’ material omissions and materially false and misleading statements

caused the market to believe that the Company’s environmental liabilities were contained and

properly managed; caused the Company’s financial reporting to be in violation of GAAP; and

conveyed the impression that the Company was financially stronger and more profitable than it

actually was. The prices of Tronox’s securities during the Class Period were affected by those

omissions and false statements, and were artificially inflated as a result thereof. Thus, the

declines in the value of Tronox’s securities purchased by the Class were a direct, foreseeable and

proximate result of the disclosures which slowly revealed the magnitude of the Company’s

environmental liabilities and true financial condition.

NO SAFE HARBOR 370. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pled in this complaint. The

specific statements alleged herein to be false and misleading were not identified as “forward-

looking statements” when made. To the extent there were any forward-looking statements, there

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were no meaningful cautionary statements identifying important facts that could cause actual

results to differ materially from those in the purportedly forward-looking statements.

371. Alternatively, to the extent that the statutory safe harbor does apply to any

forward-looking statements pleaded herein, Defendants are liable for those false forward-looking

statements because at the time each of those forward-looking statements was made, the particular

speaker knew that the particular forward-looking statement was false, and/or the forward-looking

statement was authorized and/or approved by an executive officer of Tronox who knew that

those statements were false when made.

APPLICATION OF THE PRESUMPTION OF RELIANCE: FRAUD ON THE MARKET

372. As to the claims asserted by Plaintiffs on behalf of the Class under Section 10(b)

of the Exchange Act, Plaintiffs rely, in part, on the presumption of reliance established by the

fraud-on-the-market doctrine. The market for Tronox securities was, at all relevant times, an

efficient market during the Class Period for the following reasons, among others:

a. During a substantial portion of the Class Period, Tronox’s common stock

met the requirements for listing and was listed on the NYSE, a highly efficient market that

quickly reflects all publicly available information concerning a listed company. Tronox Bonds

actively traded on the PORTAL Market operated by NASDAQ with trade information available

through TRACE and was followed by fixed income analysts;

b. As a regulated issuer, Tronox is required to and has filed periodic public

reports with the SEC, including Forms 10-K for fiscal years 2005 through 2007 and other

financial statements and reports that contained material misrepresentations and/or omitted

material facts during the Class Period, as alleged herein, causing the price of Tronox securities to

trade at artificially inflated prices;

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c. Tronox’s senior management regularly met with and provided Company-

related information to stock market analysts, institutional investors, fund managers and other

market professionals;

d. Tronox was followed by several securities analysts employed by major

brokerage firms who wrote research reports, which were distributed to the sales force and

customers of their respective brokerage firms. Each of these reports was publicly available and

entered the public marketplace;

e. The brokerage firms following Tronox during the Class Period included JP

Morgan; Lehman Brothers; Oppenheimer and Thomson. Each of these companies relied upon

Tronox’s financial statements, as well as statements made by senior management during

conference calls and meetings with analysts, in compiling their reports and making their

recommendations. The analysts’ assessments of Tronox’s securities were based, in material part,

upon the honesty and accuracy of Tronox’s reported financial results;

f. The trading volume of Tronox’s common stock during the Class Period

shows that there was a liquid market for Tronox’s stock during the Class Period;

g. Tronox transmitted information on a market-wide basis through various

electronic media services, including issuing press releases through its own website, Business

Wire and Newswire;

h. The market for Tronox’s securities reacted efficiently to new information

entering the market;

i. Tronox securities, including its debts securities, were rated by Moody’s,

Standard & Poor’s, and Fitch Ratings;

j. During the majority of the Class Period, Tronox met the SEC’s

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requirements to register debt and equity securities filed on Form S-3.

373. The above facts demonstrate the existence of an efficient market for trading

Tronox securities during the Class Period and allow the application of the fraud-on-the-market

doctrine. Accordingly, Plaintiffs are entitled to a presumption of reliance established by the

fraud-on-the-market doctrine for, but not limited to:

(a) Defendants’ public misrepresentations and misleading statements during

the Class Period;

(b) Defendants’ omissions of fact from their public statements during the

Class Period;

(c) The misrepresentations, misleading statements and omissions of fact were

material;

(d) The misrepresentations, misleading statements and omitted facts would

induce a reasonable investor to purchase the artificially-inflated securities;

(e) Plaintiffs made the purchases between the time that the Defendants first

made material misrepresentations or omissions of material facts and the true facts were fully

disclosed.

COUNT I

For Violations Of Section 10(b) Of The Exchange Act And Rule 10b-5 (Against Defendants Kerr-McGee, Anadarko, Corbett, Wohleber, and Pilcher)

374. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth here.

375. Defendants Kerr-McGee, Anadarko (as successor-in-interest to Kerr-McGee),

Corbett, Wohleber, and Pilcher were instrumental in formulating and implementing the plan,

scheme, and artifice to defraud which involved the transfer of the Legacy Liabilities in at least

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the hundreds of millions of dollars to Tronox and effectuating the Tronox IPO without making

disclosure of the true magnitude of these liabilities and thereafter falsely reporting Tronox’s

financial results. During the Class Period, Kerr-McGee, Anadarko (as successor-in-interest to

Kerr-McGee), Corbett, Wohleber and Pilcher disseminated or approved of the dissemination of

the false statements and omissions set forth above and summarized below, which they knew or

recklessly disregarded were misleading in that they contained misrepresentations and failed to

disclose material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading.

376. These Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 in

that they: (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of

material facts or omitted to state material facts necessary in order to make the statements made,

in light of the circumstances under which they were made, not misleading; and/or (iii) engaged in

acts, practices, and a course of business that operated as a fraud or deceit upon Lead Plaintiffs

and members of the Class in connection with their purchases or acquisitions of Tronox common

stock and Bonds during the Class Period. As detailed herein, the misrepresentations contained

in, or the material facts omitted from, Defendants’ public statements included, but were not

limited to, false and misleading representations and omissions regarding the amount of the

environmental remediation and related tort obligations associated with the Legacy Liabilities

imposed upon Tronox, the true reasons for the Tronox IPO, and the false annual and quarterly

statements which misrepresented the environmental remediation reserve, and the ability of

Tronox to continue as a going concern.

377. These Defendants, individually and in concert, directly and indirectly, by the use

of means or instrumentalities of interstate commerce and/or of the mails, engaged and

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participated in a continuous course of conduct that operated as a fraud and deceit upon Lead

Plaintiffs and members of the Class; made various false and/or misleading statements of material

fact and omitted to state material facts necessary in order to make the statements made, in light

of the circumstances under which they were made, not misleading; either made the above

statements with knowledge or a reckless disregard for the truth; and/or employed devices,

schemes and artifices to defraud in connection with the purchase or sale of securities, which were

intended to, and did: (i) deceive the investing public, including Lead Plaintiffs and members of

the Class, regarding, among other things, (ii) the existence of the Legacy Liabilities and the

failure to properly record and disclose such liabilities in accordance with the requirements of the

federal securities laws and GAAP; (iii) artificially inflate and maintain the market price of

Tronox securities; and (iv) cause Lead Plaintiffs and members of the Class to purchase Tronox

common stock at artificially inflated prices.

378. As described above, these Defendants had a duty to disclose the full extent of

Tronox’s Legacy Liability obligations. These Defendants also had a duty to disclose the fact that

Kerr-McGee and Tronox applied an improper methodology to determine the proper

environmental remediation and tort liability reserve.

379. These Defendants also had a duty to disclose this information because they were

required to update and/or correct their prior misstatements and omissions. In the Registration

Statement for the IPO, these Defendants repeatedly misrepresented the true scope and extent of

the environmental remediation reserve associated with the Legacy Liabilities and the related

improper reserving methodology. Defendants remained under a duty to update and correct these

and their other misrepresentations. Further, by continuing to speak throughout the Class Period

regarding the financial condition of Tronox, Defendants were under a duty to correct and update

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prior misstatements and statements that had become misleading, and to speak completely and

truthfully about the true scope and magnitude of the Legacy Liabilities and the Company’s

inability to survive as a going concern in light of the Legacy Liabilities.

380. Defendants Kerr-McGee, Anadarko, as Kerr-McGee’s successor-in-interest,

Corbett, and Pilcher are liable for all materially false and misleading statements made during the

Class Period, as alleged above, including, without limitations, the false and misleading

statements and omissions set forth above which appeared in (i) the Registration Statement for the

Tronox IPO, and the Tronox Annual Report for the fiscal year ended December 31, 2005, and

each of the subsequently published financial statements issued by Tronox which contained the

materially false and misleading disclosures regarding the environmental remediation and tort

liability reserves. These statements were materially false and misleading because, among other

things, they misrepresented the size of the Legacy Liabilities which Tronox was responsible for,

materially understated Tronox’s environmental remediation and tort liability reserve, and that

Kerr-McGee and Tronox used a methodology known to understate the required reserve. They

also failed to correct and update prior misrepresentations or statements that had become

misleading by intervening events.

381. As described above, these Defendants acted with scienter in committing the

wrongful acts and omissions alleged herein in that they either had actual knowledge of the

misrepresentations and omissions of material facts set forth herein, or acted with reckless

disregard for the truth in that they failed to ascertain and disclose the true facts, even though such

facts were available to them. Specifically, these Defendants knew or were reckless in not

knowing, inter alia, the true scope of the Legacy Liabilities imposed on Tronox, that Tronox

could not survive as a going concern in light of these obligations, and that Kerr-McGee and

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Tronox had understated its environmental remediation and tort liability reserve and had applied

an improper methodology to determine the reserve.

382. These Defendants engaged in this scheme in order to maintain and/or inflate the

prices of Tronox securities and, in the case of defendants Corbett, Wohleber, and Pilcher, to

obtain windfall profits from the subsequent sale of Kerr-McGee to Anadarko, which would not

have been possible absent successful completion of the Tronox transaction including the

offloading of the Legacy Liabilities onto Tronox.

383. Lead Plaintiffs and members of the Class have suffered damages in that, in

reliance on the integrity of the market, they paid artificially inflated prices for Tronox common

stock and the Bonds. Lead Plaintiffs and the Class would not have purchased or otherwise

acquired Tronox common stock and/or the Bonds at the prices they paid, or at all, if they had

been aware that the market price had been artificially and falsely inflated by these Defendants’

effectuation of a fraudulent scheme and course of business and their materially false and

misleading statements and/or omissions of material facts.

384. As a direct and proximate result of these Defendants’ wrongful conduct, Lead

Plaintiffs and other members of the Class suffered damages in connection with their purchase or

acquisition of Tronox common stock and/or Bonds during the Class Period.

COUNT II

For Violations Of Section 10(b) Of The Exchange Act And Rule 10b-5 (Against Defendants Adams, Wohleber, Mikkelson, Rowland, and Rauh)

385. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein.

386. During the Class Period, Defendants Adams, Wohleber, Mikkelson, Rowland, and

Rauh, each of whom served as a director of Tronox, disseminated or approved the false

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statements specified herein, which they knew or recklessly disregarded were false and

misleading in that they contained misrepresentations and failed to disclose material facts

necessary in order to make the statements made, in light of the circumstances under which they

were made, not misleading.

387. These Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 in

that they: (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of

material facts or omitted to state material facts necessary in order to make the statements made,

in light of the circumstances under which they were made, not misleading; and/or (iii) engaged in

acts, practices, and a course of business that operated as a fraud or deceit upon Lead Plaintiffs

and members of the Class in connection with their purchases or acquisitions of Tronox common

stock and/or Bonds during the Class Period. As detailed herein, the misrepresentations contained

in, or the material facts omitted from, Defendants’ public statements included, but were not

limited to, false and misleading misrepresentations and omissions regarding the amount of the

Legacy Liabilities imposed upon Tronox, the true reasons for the Tronox IPO, and the false

annual and quarterly financial statements in violation of GAAP which misrepresented the

environmental remediation reserve, and the ability of Tronox to continue as a going concern.

388. These Defendants, individually and in concert, directly and indirectly, by the use

of means or instrumentalities of interstate commerce and/or of the mails, engaged and

participated in a continuous course of conduct that operated as a fraud and deceit upon Lead

Plaintiffs and members of the Class; made various false and/or misleading statements of material

false and omitted to state material facts necessary in order to make the statements made, in light

of the circumstances under which they were made, not misleading; either made the above

statements with knowledge or a reckless disregard for the truth; and/or employed devices,

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schemes and artifices to defraud in connection with the purchase or sale of securities, which were

intended to, and did: (i) deceive the investing public, including Lead Plaintiffs and members of

the Class, regarding, among other things, (ii) the existence of the Legacy Liabilities and the

failure to properly record and disclose such liabilities in accordance with the requirements of the

federal securities laws and GAAP; (iii) artificially inflate and maintain the market price of

Tronox common stock; and (iv) cause Lead Plaintiffs and members of the Class to purchase

Tronox common stock at artificially inflated prices.

389. As described above, these Defendants had a duty to disclose Tronox’s Legacy

Liability obligations. These Defendants also had a duty to disclose the fact that Kerr-McGee and

Tronox applied an improper methodology to determine the proper environmental remediation

liability and tort liability reserve.

390. These Defendants also had a duty to disclose this information because they were

required to update and/or correct their prior misstatements and omissions. In the Registration

Statement for the IPO, these Defendants repeatedly misrepresented the true scope and extent of

the Legacy Liabilities and the related improper reserving methodology. Defendants were under a

duty to correct and update prior misstatements and statements that had become misleading, and

to speak completely and truthfully about Tronox and its inability to survive as a going concern in

light of the Legacy Liabilities.

391. Each of these Defendants’ primary liability arises from the fact that (i) they were

high level executives and/or directors of Tronox during the Class Period and were members of

the Company’ management team and had control of Tronox; (ii) each of these Defendants, by

virtue of his or her responsibilities and activities as a senior officer and/or director of Tronox was

privy to and participated in the creation, development and reporting of Tronox’s financial results;

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(iii) each of these Defendants had significant personal contact and familiarity with the other

Defendants and was advised of and had access to other members of Tronox’s management team,

internal report and other data and information about Tronox’s finances, operations, and

information regarding the environmental remediation reserve and related tort liabilities; (iv) each

of these Defendants was aware of Tronox’s dissemination of information to the investing public

which they know or recklessly disregarded was materially false and misleading.

392. As described above, these Defendant acted with scienter in committing the

wrongful acts and omissions alleged herein in that they either had actual knowledge of the

misrepresentations and omissions of material facts set forth herein, or acted with reckless

disregard for the truth in that they failed to ascertain and disclose the true facts, even though such

facts were available to them. Specifically, these Defendants knew or were reckless in not

knowing, inter alia, the true scope of the Legacy Liabilities imposed on Tronox, that Tronox

could not survive as a going concern in light of these obligations, that Kerr-McGee and Tronox

had understated their environmental remediation reserve and had applied an improper

methodology to determine the reserve and that throughout the Class Period Tronox reported to

the investing public a materially understated environmental remediation reserve, in annual and

quarterly financial statements which were false and misleading and violated GAAP.

393. These Defendants engaged in this scheme in order to maintain and/or inflate the

prices of Tronox common stock and the Bonds.

394. Lead Plaintiffs and members of the Class have suffered damages in that, in

reliance on the integrity of the market, they paid artificially inflated prices for Tronox common

stock and the Bonds. Lead Plaintiffs and the Class would not have purchased or otherwise

acquired Tronox common stock and/or the Bonds at the prices they paid, or at all, if they had

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been aware that the market price had been artificially and falsely inflated by these Defendants’

effectuation of a fraudulent scheme and course of business and their materially false and

misleading statements and/or omissions of material facts.

395. As a direct and proximate result of these Defendants’ wrongful conduct, Lead

Plaintiffs and other members of the Class suffered damages in connection with their purchases or

acquisitions of Tronox common stock and/or Bonds during the Class Period.

COUNT III

For Violation of Section 10(b) of the Exchange Act and Rule 10b-5 (Against Ernst & Young)

396. Lead Plaintiffs repeat and reallege each and every allegation contained

above as if fully set forth.

397. This Count is asserted against Defendant Ernst & Young LLP for violations of

Section 10(b) of the Exchange Act, 15 U.S.C. §78j(b) and SEC Rule 10b-5, 17 C.F.R. §240.10b-

5 promulgated thereunder.

398. E&Y individually and in concert, directly and indirectly, by the use of means or

instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business,

business practices, reserves and reserving methodologies, performance, operations and future

prospects of Tronox, as specified herein.

399. E&Y: (a) employed devices, scheme, and artifices to defraud; (b) made untrue

statements of material fact and/or omitted to state material facts necessary to make the statements

not misleading; and (c) engaged in acts, practices, and a course of business which operated as a

fraud and deceit upon the purchasers of Tronox’s securities in an effort to maintain artificially

high market prices for Tronox securities in violation of Section 10(b) of the Exchange Act and

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Rule 120b-5 promulgated thereunder.

400. During the Class Period, E&Y: (a) deceived the investing public, including Lead

Plaintiffs and the members of the Class, as alleged herein; (b) artificially inflated and maintained

the market price of Tronox’s common stock and Bonds; and (c) caused members of the Class to

purchase Tronox’s common stock and Bonds at artificially inflated prices.

401. E&Y had actual knowledge of the misrepresentations and omissions of material

facts set forth herein, or acted with reckless disregard for the truth, in that it failed to ascertain

and disclose such facts, even though such facts were available to it. E&Y’s material

misrepresentations and/or omissions as reflected in its audit reports specified above were done

knowingly or recklessly and for the purpose and effect of concealing from the investing public

Tronox’s adverse financial condition based on its materially deficient environmental remediation

and tort liability reserves which had been set pursuant to an improper methodology, and thereby

supporting the artificially inflated price of Tronox securities. As demonstrated herein, E&Y had

actual knowledge of the misrepresentations and omissions alleged, or was reckless in failing to

obtain such knowledge, by deliberately refraining from taking those steps necessary to discover

whether those statements were false or misleading.

402. As a direct and proximate result of the fraudulent activities of E&Y described

above, the market price of Tronox’s securities were artificially inflated during the Class Period.

In ignorance of the fact that the market prices of Tronox common stock and Bonds were

artificially inflated, and relying on the false and misleading statements made by E&Y, or upon

the integrity of the market in which Tronox securities traded, and on the truth of the

misrepresentations made to the investing public, at the time when such statements were made,

and/or on the absence of material adverse information that was known or, with recklessness,

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disregarded by E&Y during the Class Period, Plaintiffs and the other members of the Class

acquired Tronox common stock and Bonds during the Class Period at artificially inflated prices

and were damaged thereby, as evidenced by, among others things, the stock price declines

identified herein that released the artificial inflation from Tronox securities.

403. At the time of said misrepresentations and omissions, Lead Plaintiffs and the

other members of the Class were unaware of their falsity, and believed the false statements to be

true. Had Lead Plaintiffs, the other members of the Class and the marketplace known the true

facts regarding Tronox’s environmental remediation and tort liabilities and their impact on the

Company’s ability to continue as a going concern, they would not have purchased or otherwise

acquired their Tronox securities during the Class Period, or they would not have done so at

artificially inflated prices which they paid.

404. As set forth above in Paragraphs 316-318, E&Y knowingly and/or recklessly

disregarded numerous facts that constituted red flags warning E&Y of material inaccuracies in

Tronox’s financial statements, including Tronox’s use of an improper methodology for recording

its environmental remediation and tort liability reserve and the concealment of the full scope and

magnitude of the Legacy Liabilities from the investing public. Tronox has admitted that all of its

Class Period financial statements audited and opined on by E&Y were materially false and

misleading.

405. As a direct and proximate result of E&Y’s wrongful conduct, Plaintiffs and the

other members of the Class suffered damages in connection with their purchases or acquisition of

Tronox common stock and/or Bonds during the Class Period.

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COUNT IV

For Violations of Section 20(a) of the Exchange Act (Against Defendants Adams, Wohleber, Mikkelson, Rowland, and Rauh)

406. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein.

407. This Count as asserted against Defendants Adams, Wohleber, Mikkelson,

Rowland, and Rauh, for violations of Section 20(a) of the Exchange Act, 15 U.S.C. §78t(a).

408. During their tenures as officers and/or directors of Tronox, each of these

Defendants was a controlling person of Tronox within the meaning of Section 20(a) of the

Exchange Act. By reason of their positions of control and authority as officers and/or directors

of Tronox, these Defendants had the power and authority to cause Tronox to engage in the

wrongful conduct complained of herein. These Defendants were able to and did control, directly

and indirectly, the content of the public statements made by Tronox during the Class Period,

thereby causing the dissemination of the false and misleading statements and omissions of

material facts as alleged herein.

409. The Defendants who were members of the Tronox Board of Directors participated

in Tronox Board meetings and conference calls and signed the various SEC filings alleged herein

to be materially false and misleading. In their capacities as senior corporate officers and/or

directors of Tronox, and as more fully described above, these Defendants knew of and/or

recklessly disregarded the material adverse information regarding the size and scope of the

Legacy Liabilities, the improper reserving methodology employed by Tronox, the fact that

Tronox could not survive as a going concern in light of the reserves required to be recorded as a

result of the Legacy Liabilities, and the issuance of materially false and misleading annual and

quarterly financial statements in violation of GAAP.

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410. As a result of the foregoing, the Defendants named in this Count, as a group and

individually, were control persons of Tronox within the meaning of Section 20(a) of the

Exchange Act.

411. As set forth above, Tronox violated Section 10(b) of the Exchange Act by its acts

and omissions alleged in this Complaint. By virtue of their positions as controlling persons of

Tronox and, as a result of their own aforementioned conduct, the Defendants named in this

Count are liable pursuant to Section 20(a) of the Exchange Act, jointly and severally with, and to

the same extent as, Tronox is liable under Section 10(b) of the Exchange Act and Rule 10b-5

promulgated thereunder, to Lead Plaintiffs and other members of the Class who purchased or

otherwise acquired Tronox common stock and/or Bonds. Moreover, as detailed above, during

the respective times these Defendants served as officers and/or directors of Tronox, each of these

Defendants is responsible for the material misstatements and omissions made by Tronox.

412. As a direct and proximate result of these Defendants’ conduct, Lead Plaintiffs and

other members of the Class suffered damages in connection with their purchase or acquisition of

Tronox common stock and/or Bonds.

COUNT V

For Violation of Section 20(a) of the Exchange Act (Against Defendants Kerr-McGee, Anadarko, Corbett, Wohleber, and Pilcher)

413. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth.

414. This Count is asserted against defendants Kerr-McGee, Anadarko (as successor-

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in-interest to Kerr-McGee), Corbett, Wohleber, and Pilcher for violations of Section 20(a) of the

Exchange Act, 15 U.S.C. §78t(a), on behalf of members of the Class.

415. During the Class Period, Defendants Kerr-McGee, Anadarko (as successor-in-

interest to Kerr-McGee), Corbett, Wohleber, and Pilcher were controlling persons of Tronox and

the officers of Tronox who had previously held positions within Kerr-McGee (Defendants

Adams, Rowland, Mikkelson, Rauh) within the meaning of Section 20(a) of the Exchange Act.

Defendants Kerr-McGee, Corbett, Wohleber and Pilcher devised and effectuated the fraudulent

scheme and course of conduct alleged herein. They created the plan to remove the Legacy

Liabilities from Kerr-McGee and place them into Tronox without making full and adequate

disclosure to the investing public as to the size and scope of the environmental remediation and

related tort liability obligations, while at the same time imposing these obligations on the public

shareholders of Tronox by completing the Tronox IPO. They also planned and effectuated Kerr-

McGee’s extrication from further association with Tronox except through a modest

indemnification obligation reflected in the Master Separation Agreement, by completing the

Spin-Off. The Defendants named in this Count unilaterally determined the content of all

material agreements between Kerr-McGee and Tronox and dictated the terms of the transactions

described hereinabove. The Master Separation Agreement was imposed on Tronox by the

Defendants named in this Count. That agreement required Tronox to indemnify Kerr-McGee for

any material misstatements in the Tronox IPO Registration Statement, a highly unusual provision

given that the businesses that were to become Tronox had been wholly owned and controlled

subsidiaries of Kerr-McGee and the offering was effectively a Kerr-McGee transaction. Further,

the Master Separation Agreement effectively required Tronox to continue using the reserving

methodology used by Kerr-McGee in connection with the environmental remediation and tort

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liability reserves as a condition to preserving whatever indemnity obligations Kerr-McGee had in

favor of Tronox with regard to environmental remediation costs. These obligations further

reflect the domination and control exercised by the Defendants named in this Count.

416. During his tenure as Chairman of the Board of Tronox, Defendant Wohleber was

a controlling person of Tronox within the meaning of Section 20(a) of the Exchange Act. By

reason of his position of control and authority as Tronox’s Chairman, Defendant Wohleber had

the power and authority to cause Tronox to engage in the wrongful conduct complained of

herein. Defendant Wohleber was able to and did control, directly and indirectly, the content of

the public statements made by Tronox, thereby causing the dissemination of the false and

misleading statements and omissions of material facts as alleged herein during that period.

Moreover, as detailed above, during the time that Wohleber served as Tronox’s Chairman, he

was responsible for the material misstatements and omissions made by Tronox.

417. In his capacity as Tronox’s Chairman, and contemporaneously as the Chief

Financial Officer of Kerr-McGee, and as more fully described above, Defendant Wohleber was

fully knowledgeable as to the scope of the Legacy Liabilities and the fact that both Kerr-McGee

and Tronox had failed to record adequate reserves for these environmental remediation and

related tort liabilities and had employed a reserving methodology that was known to improperly

understate these obligations. As a result of the foregoing, Wohleber was a controlling person of

Tronox within the meaning of Section 20(a) of the Exchange Act.

418. Anadarko is liable as a controlling person of Tronox pursuant to this Count to the

same extent as Kerr-McGee in light of Anadarko’s status as the successor-in-interest to Kerr-

McGee.

419. As set forth above, Tronox violated Section 10(b) of the Exchange Act by its acts

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and omissions as alleged in this Complaint. By virtue of their positions as controlling persons of

Tronox and, as a result of their own conduct, Defendants Kerr-McGee, Anadarko (as successor-

in-interest to Kerr-McGee), Corbett, Wohleber, and Pilcher are liable pursuant to Section 20(a)

of the Exchange Act, jointly and severally with, and to the same extent as, Tronox is liable under

Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, to Lead Plaintiffs

and other members of the Class who purchased or otherwise acquired Tronox common stock

and/or Bonds.

COUNT VI

For Violations of Section 20(a) of the Exchange Act (Against Corbett, Wohleber, and Pilcher)

420. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein.

421. This Count is asserted against Defendants Corbett, Wohleber, and Pilcher for

violations of Section 20(a) of the Exchange Act, 15 U.S.C. §78t(a), on behalf of members of the

Class.

422. During their tenures as officers and/or directors of Kerr-McGee, each of the

Defendants named in this Count was a controlling person of Kerr-McGee within the meaning of

Section 20(a) of the Exchange Act. By reason of their positions of control and authority as

officers and/or directors of Kerr-McGee, these Defendants had the power and authority to cause

Kerr-McGee to engage in the wrongful conduct complained of herein. These Defendants were

able to and did control, directly and indirectly, the activities of Kerr-McGee in implementing the

plan, scheme, and wrongful course of conduct whereby Kerr-McGee removed from its financial

statements and transferred to the public shareholders of Tronox substantially all of the liability

for the Legacy Liabilities by virtue of the Tronox IPO and subsequent Spin-Off of Kerr-McGee

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shares in Tronox as of March 31, 2006.

423. Defendant Corbett was the CEO of Kerr-McGee, Wohleber was the CFO of Kerr-

McGee, and Pilcher was a Vice President, Secretary and General Counsel of Kerr-McGee at the

times the plan was formulated and effectuated whereby Kerr-McGee rid itself of substantially all

of the Legacy Liabilities and foisted them on the public shareholders of Tronox. By virtue of

their positions, the Defendants named in this Count had knowledge of the full size and scope of

the Legacy Liabilities and related tort liabilities, and knew that Kerr-McGee and Tronox had

implemented an inappropriate reserving methodology for the purpose of hiding from the

investing public the true extent of such liabilities.

424. As set forth above, Kerr-McGee violated Section 10(b) of the Exchange Act by

virtue of its acts and omissions as alleged in this Complaint. By virtue of their positions as

controlling persons of Kerr-McGee and, as a result of the aforementioned conduct, Defendants

Corbett, Wohleber, and Pilcher are liable pursuant to Section 20(a) of the Exchange Act, jointly

and severally with, and to the same extent as, Kerr-McGee is liable under Section 10(b) of the

Exchange Act and Rule 10b-5 promulgated thereunder, to Lead Plaintiffs and other members of

the Class who purchased or otherwise acquired Tronox common stock and/or Bonds.