April 25 (Bloomberg) -- A former BP Plc engineer was arrested on charges of intentionally destroying evidence requested by the U.S. about the size of the 2010 Gulf of Mexico oil spill, in the first criminal case arising from the incident.
The U.S. said Kurt Mix, who worked on internal BP efforts to estimate the amount of oil leaking from the well, deleted text messages between him and a supervisor. Mix, 50, was charged with two counts of obstruction of justice in a criminal complaint unsealed yesterday in federal court in New Orleans.
“Mix deleted numerous electronic records relating to the Deepwater Horizon disaster response, including records concerning the amount of oil potentially flowing from the well, after being repeatedly informed of his obligation to maintain such records,” FBI Special Agent Barbara O’Donnell said in a sworn statement filed in the case.
A judge in New Orleans is set today to consider preliminary approval of a $7.8 billion proposed settlement between BP and lawyers suing the company over the spill. BP in March agreed to resolve most private plaintiffs’ claims for economic loss, property damage and spill or pollution-related injuries.
The settlement, reached March 2, days before a scheduled trial on liability for the 2010 spill, doesn’t cover federal government civil claims for oil pollution law violations and those of the Gulf Coast states Louisiana and Alabama.
Halliburton Co. is opposing the settlement, according to a court filing. The Houston-based company ``objects to the limited amount of time available to analyze the settlement agreements and files these preliminary objections,'' Donald E. Godwin, a lawyer for the Houston-based company, said in yesterday's filing.
Halliburton, which provided cementing services for the BP well, also objects to the agreement because it assigns BP's claims against the company to the plaintiffs lawyers and attempts to make Halliburton ``liable in part for settlement payments,'' Godwin said. The settlement also restricts Halliburton's ability to settle claims, he said.
Mix entered no plea at a hearing yesterday in federal court in Houston. Mix, who appeared in court shackled at the wrists and ankles, said little during the hearing. “I understand,” he told U.S. Magistrate Judge Stephen Smith several times when asked about the charges against him and what will happen next.
Smith set bond at $100,000 and ordered Mix to surrender his passport, on the government’s request. The judge set a preliminary hearing for May 3 in federal court in New Orleans.
“These misguided charges over failure to retain text messages constitute startling government overreaching,” Joan McPhee, Mix’s lawyer, said in an e-mailed statement. “We have every confidence that Kurt will be exonerated at trial.”
The blowout and explosion on the Deepwater Horizon drilling rig killed 11 workers and caused the worst offshore oil spill in U.S. history. The Justice Department has been investigating the incident and the spill-rate estimates, O’Donnell said in her affidavit. A federal grand jury had been investigating the spill estimates, she said.
“The Deepwater Horizon Task Force is continuing its investigation into the explosion and will hold accountable those who violated the law in connection with the largest environmental disaster in U.S. history,” U.S. Attorney General Eric Holder said in a statement.
BP declined to comment on the case against Mix and said it would continue to cooperate with the U.S. investigation. Mix resigned from BP in January 2012, according to O’Donnell.
“BP had clear policies requiring preservation of evidence in this case and has undertaken substantial and ongoing efforts to preserve evidence,” the London-based company said in a statement.
Mix surrendered to authorities yesterday, David Gerger, the lawyer who represented him only for yesterday’s proceeding, said before the hearing. Mix will be released on bond and appear at court next week, Gerger said.
Mix can’t travel outside Texas and Louisiana, according to Scott Cohen, an attorney with the Justice Department’s New Orleans-based Deepwater Horizon Task Force. Cohen declined to comment on Mix’s case or the criminal investigation after the hearing.
“Kurt Mix was part of the team that responded to the accident to figure out how to stop the well from flowing,” said McPhee, of Ropes & Gray in Boston.
“The government says he intentionally deleted text messages from his phone, but the content of those messages still resides in thousands of emails, text messages and other documents that he saved,” McPhee said. “Indeed, the emails that Kurt preserved include the very ones highlighted by the government.”
David Uhlmann, a former head of the Justice Department’s environmental crimes section, said it wasn’t surprising that the U.S. would pursue a case concerning the deletion of information about the spill.
‘Testimony Against Others’
“The fact that the government announced the first charges in the BP case against a relatively low-level employee may suggest they intend to enter into a plea agreement with Mr. Mix in return for his testimony against others,” said Uhlmann, a law professor at the University of Michigan in Ann Arbor.
Mix was involved in BP’s efforts to stop the flow of oil after the explosions, according to O’Donnell, the FBI agent. On May 18, 2010, BP employees including Mix and his supervisor concluded that one method, called Top Kill, might work if the oil was flowing at a rate of about 5,000 barrels of oil a day, or BOPD, she said.
“BP’s internal data suggested that Top Kill was unlikely to succeed if the oil flow rate was 15,000 BOPD or more,” she said.
Mix texted a supervisor on May 26, 2010, that the flow rate was too high, O’Donnell said.
“Over 15,000 and too large an orifice,” Mix said, according to the U.S. Mix later deleted this text, O’Donnell said.
Two days later, “BP continued publicly to state that Top Kill was broadly proceeding according to plan,” O’Donnell said.
The company abandoned Top Kill on May 29, 2010, and publicly announced the failure, the U.S. said. “BP’s stock price dropped approximately 15 percent on the next trading day,” O’Donnell said.
Investors suing BP over the loss of share value from the 2010 oil spill have claimed that the company underestimated the extent of the oil spilled to bolster the stock price. A federal judge in Houston in February denied the company’s request to dismiss the claims brought by holders of BP American depositary receipts.
The accident prompted hundreds of lawsuits against BP as well as Transocean Ltd., the Vernier, Switzerland-based owner and operator of the rig, and Halliburton.
The U.S. also sued BP, Transocean and BP’s partners in the well, Mitsui & Co.’s MOEX Offshore 2007 and The Woodlands, Texas-based Anadarko Petroleum Corp., alleging violations of federal pollution laws. Louisiana and Alabama sued as well. MOEX has settled the federal lawsuit.
The non-investor lawsuits have been combined before U.S. District Judge Carl Barbier in New Orleans, who will consider preliminary approval of the partial settlement of claims at a hearing today.
Plaintiffs’ lawyers and BP filed the proposed partial settlement in Barbier’s court April 18. Both sides asked the judge to hold a Nov. 8 fairness hearing before final approval of the accord and to postpone any trial on liability until after that hearing.
Barbier said this week he would consider this request at a closed-door hearing May 3.
The U.S. will oppose postponing the trial, acting U.S. Associate Attorney General Tony West said in an interview April 20.
The proposed settlement doesn’t cover claims by governments, or by multiple private parties including financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration’s moratorium on deep-water drilling prompted by the spill.
The deal will allow victims who aren’t satisfied with it to opt out and pursue lawsuits against BP. Plaintiffs not covered in the overall settlement, such as those claiming harm from the drilling moratorium, can continue to pursue their claims, according to the April 18 court filing.
The American Shrimp Processors Association asked Barbier this week to delay preliminary approval of the settlement, calling it biased against some members of the shrimp industry. The accord treats shrimp harvesters and boat captains better than owners of docks and plants that receive the catch and prepare it for market, the organization said in court papers April 23.
The proposed settlement also cuts out some Florida residents, Pam Bondi, the state’s attorney general, said in an April 13 filing asking Barbier to delay immediate approval of the deal.
“It appears that the settlement will apply only to claims from Florida businesses and residents located in the Panhandle or along the west coast of Florida,” she said. BP and the Gulf Coast Claims Facility have previously “paid claims from almost every county in Florida.”
As prosecutors continue the criminal probe, some witnesses have declined to testify for the civil lawsuits. Three BP officials, including Mark Hafle, a Houston-based drilling engineer who consulted with a supervisor on the rig the night of the explosion, have taken their Fifth Amendment rights not to testify, according to court filings.
The criminal complaint is U.S. v. Mix, 12-47-MAG, U.S. District Court, Eastern District of Louisiana (New Orleans). The civil spill lawsuits are combined in 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). The investor case is In re BP Plc Securities Litigation, 4:10-md-2185, U.S. District Court, Southern District of Texas (Houston).
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