BP Judge Refuses to Suspend Spill-Settlement Payments

BP Plc (BP/) lost a bid to persuade a judge to temporarily halt payments from the court-supervised program administering its settlement of claims tied to the 2010 Gulf of Mexico oil spill.

U.S. District Judge Carl Barbier in New Orleans today rejected the company’s request to stop the payments while Louis Freeh, former director of the Federal Bureau of Investigation, probes allegations of misconduct in the claims program.

BP contends two lawyers working for the settlement administrator, Patrick Juneau, improperly took fees from law firms while processing their clients’ claims. The staff attorneys were ousted after the alleged improper payments came to light.

“BP has not produced any evidence to take the drastic step of shutting down the entire” claims process, Barbier said today at a hearing.

Officials of the London-based oil company said they were disappointed with Barbier’s decision.

“There is a material risk that payments going out the door have been and continue to be tainted by possibly fraudulent or corrupt activity, and BP should not be forced to bear the risks of improper payments,” Geoff Morrell, a BP spokesman, said in an e-mailed statement.

The dispute is the latest complaint from BP over the claims process set up by last year’s settlement of suits filed by private-party victims. BP set up a hotline July 15 seeking reports of alleged fraud or corruption in the claims process.

‘Fictitious’ Claims

The oil company has also accused Juneau of approving hundreds of millions of dollars in claims for “fictitious” business economic losses under a liberal interpretation of the accord.

The company contends Juneau misinterpreted the settlement’s terms and allowed Gulf Coast claimants to recover millions for economic losses that aren’t directly tied to the spill.

It has been forced to add hundreds of millions of dollars to the estimated $7.8 billion cost of the settlement and may have to pay billions more than expected, BP said.

Barbier has repeatedly rejected BP’s requests to force Juneau to adopt a more restrictive interpretation of the accord. A U.S. appeals court heard arguments in the dispute earlier this month.

BP asked Barbier today for the “temporary pause” in settlement payments to give Freeh time to finish his corruption investigation, Jeffrey Clark, one of BP’s lawyers, said at the hearing.

‘Black Mark’

“This has placed a black mark on the program,” Clark said. Juneau violated his legal duties to BP and the claimants by failing to properly oversee the attorneys, he added.

The company’s request for a payment halt is “unnecessary” and “based on premature speculation,” lawyers representing Juneau said yesterday in a court filing. “There is no proof to support BP’s contention that each and every claim must be presumed to have some imputed taint,” they wrote.

The case is In Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Allen Johnson Jr. in federal court in New Orleans at allenmct@gmail.com; Jef Feeley in Wilmington, Delaware, At jfeeley@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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