BP Claims Deepwater Horizon Spill Compensation Scheme Is Abused By Claimants
In a New Orleans court this week, the petroleum giant BP argued that fraudulent and improper claims have tarnished the agreement that led the company to pay millions of dollars to victims of the 2010 Deepwater Horizon oil spill.
A fund of $20 billion was set aside to settle claims and costs from the disaster, which killed 11 and spilled more than 4 million barrels of oil into the Gulf of Mexico — causing severe damage to wildlife, the environment and surrounding businesses.
The London-based company has filed a contentious appeal to go back on the terms of an agreement they drafted themselves last March.
BP bought advertising space in major U.S. newspapers to get out its statement that the settlement has brought “payments to business that did not suffer losses from the spill.”
Louis Freeh, a former FBI director, is investigating allegations of misconduct by parties that BP believes are not geographically or financially related to the spill.
“Trial lawyers and some politicians are attempting to capitalize on this misinterpretation by encouraging the submission of thousands of claims for inflated losses, or losses that do not even exist,” according to the BP ad.
If the appeal is successful, the oil company would have the right to reclaim money that has already been paid to some businesses and their lawyers, according to The Guardian.
A misinterpreted formula
The payments for claims are based on a numerical formula that compares revenues and expenses before and after the spill and primarily depends on distance from the event.
But businesses that claim losses are not required to prove a direct impact or link to the spill and are allowed to submit claims for losses based on their own accounting, according to Bloomberg.
BP initially estimated the overall settlement at $7.8 billion, but the total is uncapped and is dependent on decisions made by Patrick Juneau, the court-appointed claimants administrator and Louisiana lawyer.
Within the last six weeks, the number of claims has increased by 18 percent, reaching nearly 10,000, with only $1.7 billion remaining in the pot. The money could run out by September, and funds would then come from BP’s finances.
The company filed a lawsuit against Juneau, whose office has offered more than $2.2 billion in settlement payments to more than 8,600 businesses as of June 23, for misinterpreting the settlement formula and handing payouts to fictitious claims.
But after U.S. District Judge Carl Barbier ruled that Juneau was interpreting the contract properly, BP filed its appeal for stricter standards on evaluating claims.
One example cited by BP as an erroneous claim concerned Wall’s Gator Farm, a seller of alligator skins located 40 miles from the coast. Although the company suffered during the recession in 2008 and 2009, it made a $1.565 million profit in 2010, yet was compensated $1.2 million through the BP settlement.
Wall’s Gator Farm’s lawyers said they were rightfully compensated and that the payment was not enough to make up for losses that occurred after alligator breeding grounds were flooded by local authorities attempting to hold back encroaching oil.
The company also argues the compensation committee paid $9.7 million to a construction company that is based 200 miles from the coast in Alabama and didn’t even do business on the Gulf. BP also cited a $21 million payment to a rice mill in Louisiana that earned more revenue in 2010 than it had in the past three years.
A slippery slope
Independent advocacy network BP Claims posted a statement titled, “We The People Of The Gulf,” expressing outrage at BP’s court appeal.
“We, The People of The Gulf, have grown tired of you. You Lie. You tell us you want to make it right, but instead will try to exclude claimant categories tomorrow… Fair warning, keep it up and you will feel our wrath at your gas pumps, and beyond,” the post said.
The Environmental Defense Fund also feels BP should take responsibility for negligence. EDF President Fred Krupp said, “The American people deserve to see BP held fully accountable for its recklessness. The Gulf of Mexico is an ecological treasure that sustains a large part of the national economy.”
BP is still legally bound to pay all claims, but at the end of its ad, the company says although it is appealing the interpretation of the agreement, it is committed to the Gulf and will “keep paying legitimate claims for real losses — for as long as it takes.”
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