Judge Forces BP to Continue Settlement Payments, Fraud and All

Source: Thinkstock

Source: Thinkstock

British oil and gas supermajor BP (NYSE:BP) was once again denied its request to halt payments of its $9.2 billion settlement with victims of the 2010 Gulf of Mexico oil spill. BP requested the delay so that it could propose and implement new accounting safeguards aimed at reducing fraud at the court-supervised claims administration, but U.S. District Judge Carl Barbier denied the request without further explanation on Tuesday, according to Bloomberg. BP was previously denied a similar request on the grounds that the current accounting standards were ones that both the company and claimants had agreed to when they first settled.

According to Patrick Juneau, the court-appointed settlement fund administrator, BP has so far paid out about $3.81 billion of the $9.2 billion class-action settlement it reached with Gulf-area victims of the spill. These claimants mostly include businesses and individuals who suffered some sort of harm as a result of the spill. However, BP argues that the settlement office has paid out hundreds of millions of dollars in fraudulent claims because accounting controls are sub par.

To address the issue, BP wanted to pause payments and implement software that would cross-check claims, as well as institute controls that would require additional identification from individual claimants seeking a payment. These controls were recommended by a court-appointed special master who reported that there were instances of fraud in the current system.

For better or worse, BP kind of dug its own grave on this issue. Early on in the legal proceedings, BP attempted to cooperate with the mountain of litigation that government agencies, private individuals, and businesses dumped on its docket. But after taking an initially conciliatory approach toward the court on the matter of victim compensation, BP changed tactics last year in an effort to take control of its spill bill.

Now, BP claims that the company’s efforts to compromise were met with overreaching and outright fraud by the plaintiff’s lawyers. But even if BP’s accusations are true, the district judges in New Orleans appear eager to expedite the settlement and get it over with, fraud or not.

To date, BP has sold about $40 billion worth of assets to cover cleanup and legal expenses, to settle civil and criminal litigation with the government, and to compensate victims of the spill. Total spill-related expenses could be as high as $37.2 billion before all is said and done.

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