BP renews attempt to have court halt oil spill claims

BP on Monday renewed its request for a U.S. federal judge to temporarily suspend settlement payments to Gulf Coast residents and businesses following its massive 2010 oil spill, citing a scathing report on alleged misconduct within the court-supervised program.

In a court filing, BP attorneys said the report issued earlier this month by former FBI director Louis Freeh shows the settlement program is plagued by problems that need to be fixed.

U.S. District Judge Carl Barbier already has rejected two previous requests by BP to suspend settlement payments, but both rulings preceded Freeh's Sept. 6 report.

Freeh concluded that top members of claims administrator Patrick Juneau's staff engaged in conduct that was improper, unethical and possibly criminal but said he didn't see a need to shut down settlement payments.

3rd request to court

BP lawyers questioned whether Barbier would have authorized Juneau to begin processing and paying claims more than a year ago if he had known the settlement program would be "riven by conflicts of interest," lacked adequate anti-fraud controls and operated in a "grossly inefficient and over-costly manner."

"While BP does not presume to know for certain, it submits that the answer most likely would have been an emphatic 'no'," company lawyers wrote. "Instead, the settlement program would have been instructed to fix its problems first, before being allowed to open its doors to the claims of class members."

On Aug. 28, Barbier rejected BP's second request to suspend all payments to businesses and residents who claim the oil spill in the Gulf of Mexico cost them money.

The judge said an internal probe by Juneau's office didn't find credible evidence of fraud involving employees of the settlement program's Mobile, Ala., claims centre. Barbier also ruled that BP's separate complaints about alleged conflicts of interest inside the settlement program didn't warrant a halt in the claims process.

Lawyers used contacts to expedite claim

Freeh's report said two private attorneys — Glen Lerner and Jon Andry — used Lionel Sutton, a lawyer on Juneau's staff, to expedite a claim by their firm for nearly $8 million. In return, Sutton received more than $40,000 in fees from payments on claims he had referred to their law firm before joining Juneau's staff, according to the report.

Sutton resigned from Juneau's staff in June.

BP also noted that Freeh's report said BrownGreer, a vendor for the settlement program, has resisted efforts to control its costs. BrownGreer has averaged more than $15 million per month in fees for its work on the program.

"BrownGreer appears to be part of the problem, not part of the solution," BP lawyers wrote.

Freeh's report said his work is "ongoing" and will result in recommendations for strengthening the settlement program's operations and anti-fraud measures. BP urged Barbier to suspend all settlement payments until Juneau and Freeh can reform the program, "bringing a satisfactory resolution" to the problems Freeh uncovered.

Juneau has said Freeh's report validates his team's work, calling his staff's alleged misconduct an "isolated situation."

"The Freeh report specifically recommended we continue to process and pay claims. That is what we have been doing, and we will continue to do so," Juneau said in a statement Monday.

A well blowout near BP's Deepwater Horizon drilling rig in April 2010 killed 11 people and spilled more than 200 million gallons of oil into the Gulf of Mexico. The company has agreed to pay about $7.8 billion in compensation to businesses and residents for damage caused by the spill — on top of the $4 billion in criminal penalties it was ordered to pay earlier this year.