BP to Feds: Stop Fraudulent Deepwater Horizon Claims
BP (NYSE:BP) has said all along that fraud would be rampant following their compensation settlement for Deepwater Horizon oil spill victims. Fund administrators countered that the oil giant was more likely to underestimate its debt to the Gulf Coast area where the 2010 spill took place. As cases of fraud begin to pile up in federal courts, BP lawyers are taking their grievance before a New Orleans judge today in hopes of changing the fund’s process of awarding claims.
The Deepwater Horizon was an unequivocal disaster for BP, though scientists who gathered in the Gulf in January reported that the results were not as bad as originally believed. Nonetheless, the largest U.S. oil spill to date sent BP’s stock plummeting from $60 to $27 in a six-week stretch of 2010. Though cleanup efforts and a massive campaign to reverse the negative public image helped pushed the stock above $40 (as of 1 PM Friday, BP held at $41.35), BP stock has never made it back to the 50-dollar mark.
The cases made against fraudulent claims have merit, as more than 125 charges have been filed by the Justice Department, according to the WSJ. In fact, guilty pleas are becoming common as fund administrators struggle to maintain their image as competent claim arbiters. Veteran administrator Ken Feinberg — who worked on September 11th and Agent Orange case from Vietnam before Deepwater Horizon — said that cases of fraud were common, especially when settlements reached into the billions (BP says it’s spent more than $24 billion)…
In the midst of this controversy, BP has remained relatively steady in 2013 after losing a few percentage points since early 2012. The company’s investment in Rosneft brought in a major influx of cash ($12.5 billion) as well as a 20 percent stake in the Russian oil company. Similarly, the sale of a Texas City refinery could net BP over $1 billion. Smart moves of this caliber are helping the company move forward following the disastrous spill.
It’s unclear whether BP’s court fight over Deepwater Horizon fraud will be a good move publicity-wise or not. Appearing like the victim after causing such an enormous environmental disaster is a tricky proposition. Even if hundreds more cases of fraud are prosecuted successfully, the fight to expose the injustices are unlikely to help BP grow. More savvy investing, on the other hand, would be the way to go.
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