In an emergency request filed in New Orleans federal court on Tuesday, BP (NYSE:BP) asked a United States judge to temporarily halt payments to oil spill victims from a court-supervised settlement fund, claiming that a “brief pause” was needed to ensure that the claims process would not be compromised.
Meanwhile, former Federal Bureau of Investigation director Louis Freeh investigated alleged wrongdoing by fund lawyers. “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.”
But Judge Carl Barbier, who appointed Freeh to look into BP’s accusation, denied the company’s request for a freeze on Friday, The Wall Street Journal reported.
BP claimed that two lawyers working for the fund responsible for distributing restitution payments — which were agreed upon to settle damage claims brought by numerous individuals and businesses hurt by the 2010 Deepwater Horizon oil spill — referred claims to a New Orleans law firm, in exchange for a share of the subsequent payments. Because the lawyers in question made decisions regarding the payments, BP lawyers said in court that they could have manipulated the claims process to “the detriment of the company,” reported the publication.
“We see the freeze as a necessary complement of Judge Freeh’s investigation,” said Jeff Clark, a lawyer for BP, which has paid billions of dollars in damages.
Barbier said the fund payments could not be frozen until the investigation is completed. While acknowledging that the probe has so far appeared to show lawyers did receive improper kickbacks, the system involved in reviewing the claims makes it difficult for one person to influence the payments, he said. “We would have to imagine some grand conspiracy over there involving dozens of people,” Judge Barbier said, according to the Journal.
In redacted reports BP filed with the court, fund lawyer Lionel Sutton was said to have emailed law firms that filed claims with the fund on more than one occasion to discuss payments he was owed. Sutton told the Journal that he did not take kickbacks for his work, and informed the administrator of the fund of all his activities. He resigned his position in late June, while his wife, Christine Reitano — also a fund lawyer — was fired when she refused to resign after the investigation began, he added.
BP is currently awaiting the ruling of Judge Barbier, who has been charged with deciding fault for the incident, and whether BP or its contractors acted with gross negligence.
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