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BP says found new fraud in Gulf spill payouts

BP logo is seen at a fuel station of British oil company BP in St. Petersburg, October 18, 2012. REUTERS/Alexander Demianchuk
BP logo is seen at a fuel station of British oil company BP in St. Petersburg, October 18, 2012. REUTERS/Alexander Demianchuk

By Jonathan Stempel

(Reuters) - BP Plc said Monday it has discovered new evidence of fraud and conflicts of interest in the program that is paying billions of dollars to businesses and residents who claimed they were harmed by the 2010 Gulf of Mexico oil spill.

The oil company made the disclosure in a filing with the U.S. District Court in New Orleans as part of a renewed effort to suspend payouts until a court-appointed monitor, former FBI Director Louis Freeh, finishes investigating the payout program.

BP said it learned within the last week that two lawyers reviewing appeals of disputed claims were partners at law firms representing claimants before the Court Supervised Settlement Program (CSSP), and thus had apparent conflicts of interest.

It also said it learned through its fraud hotline of allegations that a worker at a Mobile, Alabama spill claims center helped people submit fraudulent claims in exchange for a share of the settlement amounts. BP said the CSSP suspended two employees in connection with this matter.

"BP should not have to face the substantial risk of irreparable harm from improper payments," the company said.

Temporarily halting payments until Freeh finishes his report is "modest relief" that will at most "slightly delay" payouts, which have been running at $93 million a week, it added.

Patrick Juneau, the Louisiana lawyer who administers the payout program, previously announced an internal probe of allegations that a former worker in the payout program referred claimants to lawyers in exchange for a share of payments.

Juneau said in an email on Monday after BP's latest filing: "As has been the case since day one, we have investigated all allegations brought to our attention, and until our investigation is complete, we will not and should not comment."

The program was designed to compensate victims of the April 20, 2010 explosion of the Deepwater Horizon drilling rig and rupture of BP's Macondo oil well, a disaster that killed 11 people and resulted in the largest U.S. offshore oil spill.

BP has already incurred about $42.4 billion of charges related to the disaster. It originally expected the payout program to cost $7.8 billion, but last week boosted its estimate to $9.6 billion and said it could go much higher.

The company considers Juneau's payout formula too generous and believes it compensates people who were not harmed. About $3.1 billion has been paid so far, the program's website shows.

BP is awaiting a decision by a federal appeals court on its challenge to the payment formula, which U.S. District Judge Carl Barbier in New Orleans had previously rejected.

Barbier on July 19 rejected an earlier BP request to suspend payouts pending Freeh's review. He also oversees a consolidated civil lawsuit against BP and its contractors over the spill.

The case is In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.

(Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman)

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