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BP's Oil Spill Settlement Is Engulfed in Fraud

Smoke rises in 2010 from a controlled burn near the site of the BP Deepwater Horizon oil spill in the Gulf of Mexico

Photograph by Derick E. Hingle/Bloomberg

Smoke rises in 2010 from a controlled burn near the site of the BP Deepwater Horizon oil spill in the Gulf of Mexico

Look under rocks, and you’re likely to find worms. Dig into a multibillion-dollar legal settlement, and you’ll probably discover financial shenanigans. That’s proving the case with the BP-claims mess in the Gulf of Mexico.

Quick review: As I reported in a recent Bloomberg Businessweek cover story, the private claims process following BP’s (BP) 2010 Gulf spill led to some pretty far-fetched demands for oil-company dough. BP, which has already paid out more than $25 billion in damage claims and cleanup costs, asked the presiding federal judge, Carl Barbier of New Orleans, to intervene. He declined, but in early July he appointed former FBI Director Louis Freeh to investigate. The next day, I predicted that based on my brief exposure to the court records, Freeh would have a field day.

Now BP has made a renewed request that Barbier temporarily suspend the claims process because of fresh accusations of fraud. First, the company points out that two private lawyers have been working for the claims facility—assessing disputed cases while their own law firms represent claimants seeking money from BP. If true, that sounds like a pretty obvious conflict of interest, indicating lax management over the claims.

Second, BP says in its new court filing that two other staffers in a claims office in Mobile, Ala., have been suspended because of allegations that one of them was helping relatives and other people obtain inflated payments in exchange for kickbacks. This revelation follows the earlier suspension of two senior attorneys working for the claims operation in New Orleans, also on kickback suspicions. These whiffs of apparent rot are becoming evident without any exertion by Freeh. Certain that it has been taken advantage of, BP is turning up alarming evidence simply by cross-indexing lawyer partnerships and by operating a fraud tip line.

The striking thing about this situation is how unnecessary it is. BP has acknowledged wrongdoing in connection with the spill and opened the money spigot, which is what we should want a company to do in the wake of an industrial disaster. Plaintiffs’ lawyers collectively stand to make hundreds of millions of dollars for their trouble, but that apparently hasn’t been enough. Overreaching has given BP the chance to don the victim’s mantle. This ensures extra years of litigation and prolonged distraction from whatever ecological and economic fallout still deserves attention in the Gulf region.

And now that a former FBI director is turning over rocks, who knows what he’ll find wiggling beneath?

Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, tells the story of the Chevron oil pollution case in Ecuador.

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