Court: BP’s Fraud Allegations Are ‘Uncorroborated’

Oil

BP once again failed to convince District Court Judge Carl Barbier that it was necessary to halt compensation payments resulting from a settlement the company inked with individuals and institutions affected by the 2010 Gulf of Mexico oil spill. His decision to reject the request for an injunction that would suspend payouts is hardly surprising, as the district judged stymied the company’s previous attempt to freeze the payment, as well.

As for the company’s next move, in a court document seen by the Financial Times, BP said it was “reviewing its options” and would continue to point out “any evidence of fraud or improprieties that surfaced and could potentially taint the settlement process or lead to the payment of undeserving claimants.”

Up until approximately six months ago, BP attempted to cooperate with the mountain of oil spill-related litigation that government agencies, private individuals, and businesses dumped on its docket. But in February, that changed: The company stopped pursuing a settlement for the federal government’s civil charges and the trial began in a New Orleans district court.

Several months later, when the restitution payments started to overshoot the original estimate by billions, BP began to contest the manner in which restitution payments were awarded, arguing that court-appointed fund administrator Patrick Juneau had compensated “fictitious and inflated losses.”

But BP’s claims have not gained much traction with any other of the parties involved in the settlement. A consortium of plaintiffs’ lawyers answered the company’s allegations with this one-liner: “Buyer’s remorse does not alter the deal that was struck.” As for Barbier, the judge who approved the settlement in 2012, he has refused to issue the injunction and even told one of the company’s lead outside litigators that the company’s perspective on the case “doesn’t make sense to most people down here,” according to Bloomberg.

This is Louisiana, after all,” Danny Abel, a longtime New Orleans plaintiffs’ lawyer not involved in the case, told Bloomberg, “A big foreign company with deep pockets and you’re surprised there’s a feeding frenzy? Come on, man.”

Even the discovery of evidence suggesting that fraud had been involved in the manner in which claims were compensated has not swayed Barbier. In June, the oil company asked the court to investigate an allegation that a lawyer working for the court-appointed administrator referred claims to a New Orleans law firm in exchange for a share of subsequent settlement payments.

Former FBI Director Louis Freeh was charged with examining the payout program, and BP asked that the U.S. District Court in New Orleans suspend the payouts until Freeh concluded his investigation, but to no avail.

Then, in a filing submitted to the court in early August, BP said it discovered that two lawyers reviewing appeals of disputed claims were partners at law firms that represented claimants before the Court Supervised Settlement Program. The information was acquired by simply cross-indexing lawyer partnerships and operating a fraud hotline, according to BP.

Through that tip line, the company learned that a worker at a Mobile, Alabama, claims center helped individuals submit fraudulent claims in return for a share of the restitution payment. But the court “concluded that the allegations were uncorroborated and that there was no evidence of internal fraud with respect to any of those claims,” Juneau said in a court filing, seen by the Financial Times.

However, as time goes by, the issue of compensation becomes all the more pressing. By the end of June, the costs of compensation had hit $9.6 billion. Since then, restitution costs have continued to climb. In its second-quarter results, the oil producer revealed that restitution-related costs skyrocketed, leaving just $300 million in the $20 billion fund set up to compensate oil spill victims.

BP said any future restitution payments will be deducted straight from earnings, and the deadline for claims is not until April or possibly later. Despite these setbacks, CEO Robert Dudley said in a statement that BP is “digging in” and will “play it long” for the sake of shareholders.

Follow Meghan on Twitter @MFoley_WSCS

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