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BP Can’t Stop Seafood Payments, Gulf Spill Lawyers Say

BP Plc should keep paying more than $2.3 billion to seafood-industry interests as part of a settlement of claims over the 2010 Gulf of Mexico oil spill while a fraud probe tied to the accord is pending, plaintiffs’ attorneys said.

BP is overreaching by seeking to suspend all payments to seafood workers and companies while the U.S. Justice Department investigates whether a lawyer claiming to represent eligible deckhands falsified client lists, the plaintiffs’ committee overseeing the BP settlement said in a court filing yesterday.

The London-based oil company has no basis for seeking such an “extraordinary and drastic remedy” against all industry workers and companies that settled cases as part of BP’s $9.2 billion resolution of spill claims, Steve Herman and Jim Roy, lead lawyers for the plaintiffs’ group, said in the filing.

Last month, BP sued San Antonio-based lawyer Mikal Watts, alleging he fraudulently claimed to represent more than 40,000 deckhands on gulf fishing boats. Federal prosecutors in Mississippi have said they’re investigating the fraud claims against Watts.

Geoff Morrell, a BP spokesman, said yesterday in an e-mail that further payments from the seafood fund should be stopped ``until the full scope of Mr. Watts' fraud is understood.''

Macondo Disaster

The blowout of BP’s deep-water Macondo well off the coast of Louisiana in April 2010 killed 11 people and sent millions of barrels of oil into the Gulf of Mexico.

The worst offshore spill in U.S. history, it sparked thousands of suits against BP, as well as Transocean Ltd., owner of the Deepwater Horizon drilling rig that burned and sank, and Halliburton Co., which provided cement services for the well.

BP settled with most private plaintiffs in March 2012, just before a trial on liability for the disaster was to begin. BP initially valued the economic-loss accord at $7.8 billion. It boosted the cost to $9.2 billion in an Oct. 29 regulatory filing.

As part of the settlement, the company set aside $2.3 billion for the seafood compensation program, aimed at fishing interests harmed by the spill.

BP wants U.S. District Judge Carl Barbier in New Orleans, who is overseeing spill litigation against the oil company, to review the allegations against Watts and determine how much of the money still in the fund should be returned to BP.

‘Client List’

In court filings, BP said that U.S. Secret Service agents raided two of Watts’s San Antonio law offices over questions about “the legitimacy of his client list.”

Robert McDuff, a lawyer representing Watts’ in connection with the criminal probe, said in a court filing yesterday that there’s a “real, appreciable” chance prosecutors will seek indictments in the case “within two months.”

BP officials say Watts falsified his client list to become part of the plaintiffs’ group overseeing the cases and to extract fraudulent payments from the settlement.

Herman and Roy said that Watts’s alleged clients had low-dollar claims that would have made up about 2 percent of seafood compensation payments under the accord and that the rest of the class shouldn’t be penalized over the investigation of Watts’s clients.

Settlement Complaints

“BP has not provided any legal basis for seeking injunctive relief against the innocent party, the class,” the attorneys said.

It’s not the first time BP has sought to halt payments under the 2012 accord, which resolved claims by private-party plaintiffs.

BP officials have complained that they’ve been forced to pay claims for “fictitious” economic losses that weren’t related to the spill under Barbier’s interpretation of the accord’s language. Barbier still must decide whether the company is liable for more than $17 billion in environmental fines

A federal appeals court this month upheld Barbier’s certification of spill victims as a class and his finding that the settlement was a proper resolution of claims over the environmental disaster.

The Watts lawsuit is BP Exploration & Production Inc. v. Watts, 13-cv-06674, U.S. District Court, Eastern District of Louisiana (New Orleans). The settlement is part of In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 10-md-02179, U.S. District Court, Eastern District of Louisiana (New Orleans).

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