Feinberg's $2 Billion in BP Oil-Spill Payments Fail to Halt Gulf Criticism

Kenneth Feinberg has paid out almost $2 billion from BP Plc’s oil-spill compensation fund without quelling criticism by Gulf Coast residents such as casino workers seeking to recover lost tips.

Today is the deadline for spill victims to apply to the Gulf Coast Claims Facility run by Feinberg for emergency payments, which are intended to provide immediate relief without requiring recipients to waive their rights to sue BP later. The fund draws on a $20 billion account set up by the London-based oil company to compensate those affected by the U.S.’s biggest offshore spill.

Feinberg, a Washington lawyer, has paid out about five times the amount BP provided directly before he took charge of the payments on Aug. 23. Justice Department officials, lawmakers and business groups say claims continue to be compensated inconsistently, with little explanation for why some are rejected or checks are smaller than victims requested.

“People are frustrated, and they get more frustrated when they hear about people who are doing the same job in some other industry but are getting checks,” said Beverly Martin, director of the Mississippi Casino Operators Association.

As of yesterday, more than 423,000 claims had been submitted to Feinberg’s fund, with more than 125,000 claims paid or approved, for a total of $1.99 billion, and 135,000 needing further documentation, according to a status report issued by the facility. More than 67,200 claims have been denied.

‘Working Correctly’

“Something is working correctly when you get 400,000 claims in three months and pay out over $2 billion,” Feinberg said in a phone interview yesterday.

Feinberg, 65, who also administered a fund for victims of the Sept. 11 attacks, has said the BP facility offers a better deal than claimants are likely to get by going to court.

Thomas Perrelli, U.S. associate attorney general, urged Feinberg in a Nov. 19 letter to pay claims more quickly.

“Many of the individuals and businesses whose claims are under review do not have the means to get by while they await” processing by the facility, Perrelli wrote.

He said speedier reimbursement would build confidence in the program at a “critical time” as the emergency payments end.

Earnings Halved

A casino worker who usually makes $90,000 stands to earn half as much this year because tourism has declined since the BP spill in April, Martin said. Feinberg and the fund haven’t fairly accounted for the loss of that money when reviewing claims, and few gaming employees have received any compensation, she said.

Feinberg said the facility has written checks to casino workers who can prove a loss, and he said he will continue to review these claims.

The complaints by casino workers follow earlier protests by Gulf Coast Realtors and hotel and restaurant owners in Florida who said they feared being shut out of the process.

Feinberg, whose firm is being paid $850,000 a month by BP to administer the fund, has adjusted his stance along the way to attract more spill victims to participate.

He set aside money for real estate agents and brokers to be distributed by state Realtor groups, and he agreed to review applications from owners of hotels and restaurants far from the spill after initially indicating he wouldn’t pay such claims.

‘Absolutely Devastating’

Tony Kennon, the mayor of Orange Beach, Alabama, said some residents have received only a small portion of their claims with little explanation.

The spill has been “absolutely devastating here,” Kennon said in a phone interview. “We are in the middle of a depression. This isn’t a recession, it is an economic shutdown.”

The claims facility is “not acting with appropriate urgency,” Senator Richard Shelby, an Alabama Republican, said in a statement after meeting with Feinberg on Nov. 18.

Feinberg needs to provide claimants more of an explanation when claims are denied or payments fall short of requests, Shelby said. He also said Feinberg should reduce the backlog of claims.

While today marks the last day people and businesses can apply for emergency payments, claimants will still be able to receive “interim” checks as they continue to calculate future losses.

Claimants relinquish their legal claims against BP only when they accept a final lump-sum payment.

Pressure on Victims

Florida Attorney General Bill McCollum, a Republican and once a critic of the claims process, wrote in a Nov. 8 letter to Feinberg that he was pleased such payments will continue. Otherwise victims would face pressure to agree to final compensation without knowing the extent of the damage caused by the spill, McCollum has said.

Mississippi Attorney General Jim Hood, a Democrat, criticized Feinberg’s draft of protocols for final payments requiring victims to waive their legal rights to sue BP and other companies tied to the spill.

“Only people who are beaten down, poor, and/or desperate would agree to the terms of the proposed release,” Hood wrote Feinberg in a Nov. 9 letter.

Perrelli urged Feinberg to write interim checks more often than the once every three months called for in the draft protocols because many of the claimants “are living paycheck to paycheck.”

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

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