BP to Ask Judge to Suspend Oil Spill Settlement Payments

BP Plc will ask a federal judge in New Orleans today to temporarily halt payments from the court-supervised program administering its settlement over the 2010 Gulf of Mexico oil spill.

The payments awarded may be “tainted by improprieties” and should be suspended while Louis Freeh, former director of the Federal Bureau of Investigation, probes possible misconduct in the claims program, BP said in court filings.

Lawyers for the plaintiffs and the claims administrator have disputed allegations of tainted payments, calling BP’s bid for a freeze unnecessary.

U.S. District Judge Carl Barbier, who is conducting a hearing today at BP’s request, ordered the investigation by Freeh on July 2, after a staff attorney at the program was suspended for allegedly taking fees from law firms while processing their clients’ claims from the oil spill settlement.

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

BP is also battling claims administrator Patrick Juneau over what the company has called his misinterpretation of settlement terms. BP contends this interpretation has resulted in the payment of hundreds of millions of dollars in claims for “fictitious” business economic losses.

Barbier has three times rejected BP’s request to force Juneau to adopt the interpretation the company prefers. A U.S. appeals court heard arguments in the dispute July 8, and a decision is pending.

Unknown Cost

BP initially estimated the value of the settlement, reached in March 2010, at $7.8 billion. The London-based oil company has since revised that to $8.2 billion, while saying in regulatory filings that the ultimate cost is unknown.

BP alleged in court papers July 16 that Juneau hired key people for the claims program “without performing adequate diligence.” Two of the settlement program’s “three senior legal counsel recently were terminated after apparently intervening in the processing of claims in which they appear to have had a financial stake,” BP said in the filing.

The program is paying an average of more than $73 million a week and “it would be impractical if not impossible to recover all tainted payments” made during the investigation, BP said in its filing this week. An injunction freezing payments “is the only way to ensure that BP is not further irreparably harmed” by paying awards that may be “tainted by improprieties,” according to the filing.

No Harm

“BP has not identified a single claim that it contends was ‘tainted’ or otherwise affected by the alleged conflict of interest,” Stephen Herman and James Roy, the plaintiffs’ lead attorneys, said in a filing yesterday. “BP has not suffered, nor does it face the threat of, ‘irreparable harm,’ nor indeed any harm.”

BP’s request is “unnecessary” and “in part based on premature speculation,” claims program administrator Patrick Juneau said in a filing with the court yesterday. The claims administrator’s office “already has placed on ‘hold’ those claims with any remote connection to the parties under investigation,” Juneau’s lawyers said in the filing.

“There is no proof to support BP’s contention that each and every claim must be presumed to have some imputed ‘taint,’” they said.

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).

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