Four years after the Deepwater Horizon event, the worst oil spill in U.S. history, petroleum giant BP is fighting a barrage of what it calls fraudulent claims for compensation. Many of the claims, BP alleges, are based on events that occurred before the spill, and have nothing to do with Deepwater Horizon. Claims are likely to continue to be argued, however. The famous BP oil spill stands to generate barrels of cash for people who can get their claims past the board of inquiry.
Former FBI director Louis Freeh has been assisting in investigations against some attorneys who have been alleged to have acted improperly during the processing of claims against BP. Freeh states that conflicts of interest have arisen due to the tight knit nature of the legal community in New Orleans, and that there have been breaches of confidentiality by private attorneys in the situation.
These attorneys, Freeh says, have used relationships with members of Patrick Juneau’s staff to expedite claims. Patrick Juneau is the court appointed claims administrator; he is the person who investigates all the claims that come in against BP and decides whether they were caused by the spill. Freeh, who oversees this process in order to catch any claims that might be fraudulent, says that the court should disallow the claim in question and should impose sanctions on the lawyers involved. He further recommends that the court restructure the claims process to better control which claims are paid out so that no more impropriety ensues.
The British oil giant, concerned about the alleged improprieties and about possible fraudulent claims, has asked that Freeh turn over documents related to his probe of the proceedings so that they can investigate the claims in turn. Freeh has stated that doing so will violate agreements between the parties involved, and says his reports should give BP all the information it needs to go forward.
Despite legal fees, BP has posted a profit of $23.5 billion in the last year. Some claimants have complained that the once-contrite BP seems to be quibbling over damages and fees costing them $1.4 billion more than they had estimated.
The massive oil spill has certainly generated barrels of cash for plaintiffs against the oil giant. BP had originally set aside $42.5 billion to cover any claims and legal fees related to Deepwater Horizon, though they had estimated a payout of $3.5 billion. The maximum allowable payout, however, can total $18 billion. By April of 2012, 256,478 claims were filed against BP, causing them to revise their estimates to $7.8 billion in damages.
The loophole found by many of the claimants was that the original terms of the settlement did not require plaintiffs to show they were harmed as a direct result of the record-breaking spill. BP originally seemed prepared to pay out as many damages as were needful in order to avoid another scandal like that which occurred after the Exxon Valdez spill in 1989. That event cost Exxon Mobil 20 years of legal entanglements, and upwards of 8,000 claimants in that spill never saw their claims paid.
In the case of Deepwater Horizon, however, BP has shown that many of the claims assessed damages that occurred prior to the spill, making these claims entirely unrelated to the event. Juneau’s inquiry has attempted to be fair to all parties, and Freeh’s oversight has removed some other claims, including claims which have been found to be fictional. Thus far 63,128 eligible claims have been awarded and 52,525 claims have been denied. Total payouts ordered have come to about $5 billion as of Friday.
Meanwhile, the formerly contrite BP has begun discussions with Federal District Judge Barbier about how much they will pay per barrel of oil spilt. Barbier can assess damages up to $4,300 per barrel through the Clean Water Act, though no oil company has ever been charged more than $111 in fines per barrel. BP also contends that the spill accounted for only 2.5 million barrels of oil, where the Justice Department states that the spill measured more than 4.3 million barrels.
The Deepwater Horizon disaster, no matter its size, has generated more than oil; it has generated barrels of cash for claimants, and brought people and companies out of the woodwork to seek a piece of the pie. It may take as many years to sort out this legal tangle as it did to arrange matters after Exxon Valdez.
By Kat Turner