BP Still Seeking to Halt Restitution Payments


Since the beginning, BP (NYSE:BP) has argued that in a rush to punish the oil producer for the worst offshore oil spill in U.S. history, the American government miscalculated the number of barrels of crude that flowed into the Atlantic, estimates that were made by a team of scientists from across the country.

The oil producer also claimed that Patrick Juneau, the Louisiana lawyer responsible for deciding which people and companies should be compensated — and by how much — has made payment awards much more generous than the settlement with oil spill victims had intended.

While the company is awaiting the ruling of District Court Judge Carl Barbier, who has been charged with deciding fault for the incident and whether BP or its contractors acted with gross negligence, BP’s allegation that some claims for restitution payments have made fraudulently have taken on a legal life of its own.

In an emergency request filed in New Orleans federal court on Tuesday, BP asked a United States judge to temporarily halt payments from a court-supervised settlement fund, saying a “brief pause” is needed to ensure the claims process is not compromised while former FBI director Louis Freeh investigates possible misconduct. “There is a material risk that payments going out the door have been and continue to be tainted by possibly fraudulent or corrupt activity,” BP spokesman Geoff Morrell said in a statement. “No company would agree to bear the risk of improper payments in these circumstances.”

Since late June, BP has asked the court to investigation its claims that a lawyer working for the administrator of the settlement payments had referred claims to a New Orleans law firm in exchange for a share of the subsequent restitutions. The Court Supervised Settlement Program, or CSSP, has launched an internal investigation of its own, according to court filings, and two CSSP attorneys have resigned in the weeks since the probe began, BP said in its own filing. The CSSP is currently handing out $73 million in claims payments per week, the company added.

Freeh was appointed on July 2 to conduct an independent investigation into BP’s accusations. Previously, he led an internal investigation into the Penn State University sex abuse scandal.

Mandated by the terms of the settlement the company made to resolve the lawsuits brought by businesses and individuals hurt by the oil spill, BP agreed to make restitution payments. But the cost of this settlement has been much higher than the company expected. The number of new claims for compensation are continuing to come in at a rate of about 10,000 per month, making it likely that the payments will hit the company’s earnings before the end of the year unless it is successful in its legal challenge to the way payments are awarded. Lawyers for the plaintiffs say that BP is only trying to adjust the settlement terms because it miscalculated the cost of the deal.

But BP has argued that the judge who approved the deal and the court-appointed claims administrator misinterpreted the settlement terms, which allowed thousands of businesses to be awarded hundreds of millions of dollars in payments for inflated or fictional loss.

“The Deepwater Horizon settlement could serve as a positive landmark in American jurisprudence because of its ambitious size, its innovative nature, and the speed with which it was negotiated to compensate injured parties,” BP’s lawyers wrote. “Instead, it is poised to become an indelible black mark on the American justice system.”

Barbier has previously upheld Juneau’s application of the deal. BP aruged its case once more at a July 8 hearing, and the appeals court is expected to return its ruling within the next few months.

Follow Meghan on Twitter @MFoley_WSCS

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