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BP Accused by Victims of Racketeering Law Violation

BP Plc was accused by oil-spill victims’ lawyers of breaking civil racketeering law by engaging in acts that led to the worst such disaster in U.S. history.

“BP engaged in a pattern of fraudulent conduct directed at regulators from the inception of the Macondo project, continuing through and after the spill and to this day,” victims’ lawyers Stephen Herman and James Roy, said yesterday in a court filing in New Orleans. “BP’s fraudulent actions and omissions were part of a broader pattern of unlawful conduct that it has employed over the years to place profits over safety.”

Herman and Roy are liaison counsel for a committee representing plaintiffs in more than 400 lawsuits over personal and economic injuries caused by last April’s explosion of the Deepwater Horizon drilling rig off the Louisiana coast.

The rig, owned by a unit of Transocean Ltd., was drilling the well, named Macondo, for BP at the time of the blast. BP is the only company named as a defendant in the spill victims’ master civil complaint under the Racketeer Influenced and Corrupt Organizations Act, or RICO, originally aimed at organized crime.

Daren Beaudo, a BP spokesman, declined to comment on the filing.

BP’s own report into the Deepwater Horizon disaster placed much of the blame on its contractors, including rig owner Transocean and Halliburton Energy Services, which provided cementing services for the well. BP says cost considerations don’t compromise safety in company operations.

Feinberg Fund ‘Deficiencies’

In another development yesterday, Mississippi Attorney General Jim Hood asked the judge overseeing oil-spill litigation against London-based BP to take an oversight role to “correct deficiencies” in the $20 billion spill-claims fund run by Kenneth Feinberg.

Feinberg has been criticized by spill victims’ lawyers for his administration of the claims process through which BP has said it would pay “all legitimate claims” filed by people and businesses.

Critics contend Feinberg has delayed or denied claims without adequate explanation and established protocols that encourage cash-strapped claimants to accept small, quick payments to avoid years of litigation.

“It is the state’s position that this court has jurisdiction over the Gulf Coast Claims Facility, including its administrator Kenneth Feinberg,” Hood said in papers in the court in New Orleans.

Company ‘Surrogate’

Feinberg’s fund “is nothing more than a surrogate for BP in the administration of the claims process that BP is required to provide” under federal law, Hood said.

Amy Weiss, a spokeswoman for Feinberg, declined to comment.

Hood said Feinberg hasn’t cooperated with attorneys general of the five Gulf Coast states or changed the fund’s claims payment process as they requested. He attached 61 pages of letters between the state lawyers and the Feinberg fund.

Requiring claimants to release BP and other involved companies from liability for future damages to settle their claims quickly is unfair, Hood wrote to Feinberg on Nov. 9.

“Only people who are beaten down, poor, and/or desperate would agree to the terms of the proposed release,” Hood wrote. “The excessive breadth of the release will lead the public to believe” that the fund’s goal “is not to assist people in the Gulf, but to assist BP in taking advantage of this downtrodden group of people,” he said.

New Filing

Herman and Roy today filed additional papers asking U.S. District Judge Carl Barbier. to require Feinberg to disclose his BP ties to claimants seeking compensation from his Claims Facility. The lawyers want the judge to order Feinberg to “refrain from referring’’ to his fund, himself or his lawyers, who are hired by the fund and paid by BP to advise on settlements, as “independent or neutral.’’

“The Gulf Coast Claims Facility is nothing more than an alter ego of the BP defendants,’’ with Feinberg and his law firm “acting as BP’s attorney,’’ Herman and Roy wrote.

They asked that Feinberg be required to inform claimants they can submit a three-page short form that lets them participate in the litigation against BP and other companies involved in the spill.

Barbier placed an electronic copy of the short form, which doesn’t require a lawyer or any filing fees, on his court’s website two weeks ago to ease public access.

RICO Filing

Herman and Roy claimed in yesterday’s 93-page RICO filing that BP knowingly broke U.S. environmental laws, skirted federal rules on offshore oil and gas extraction, and misrepresented its ability to stop and clean up a deepwater spill.

They cited examples of BP conduct taken from reports issued by the Obama administration’s presidential spill commission and the University of California at Berkeley’s Deepwater Horizon Study Group. Details are also drawn from documents and testimony presented to Congress and a joint panel of offshore regulators and the U.S. Coast Guard, which is also investigating the incident.

The explosion and spill “were foreshadowed by a string of disastrous incidents and near misses in BP’s operations on land and at sea,” the attorneys said. “BP has, since at least 2001, used this enterprise to conduct the related acts of mail and wire fraud comprising the pattern of racketeering.”

The victims’ lawyers claim BP overlooked or downplayed the importance of “significant problems related to the Deepwater Horizon’s equipment and maintenance.” The rig was leased to BP for its entire nine-year history.

Notice of Flaws

BP was “on notice” of flaws with the rig’s blowout preventer, alarm systems, ballast systems and other “significant deficiencies” after a September 2009 company audit of the Deepwater Horizon found 390 overdue maintenance jobs, many of which were of high priority, the lawyers said.

They also claim BP well managers intentionally misrepresented portions of the Macondo well-drilling plan to regulators and misled spill responders on the best methods for stopping the underwater gusher, which released more than 4.1 million barrels of crude into the Gulf of Mexico.

The case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 2:10-md-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

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