Feinberg Says Judge Should Stay Out of BP Oil Spill Claims Fund

(BLOOMBERG)   The U.S. judge in charge of hundreds of BP Plc (BP/) oil spill-related damages lawsuits shouldn’t — and legally can’t — take charge of the claims-payment process, said the head of BP Plc’s $20 billion spill fund.

The attorneys general of four Gulf Coast states had asked U.S. District Judge Carl Barbier in New Orleans to monitor fund administrator Kenneth Feinberg to ensure fair and prompt payment of thousands of oil spill damage claims, as required by law. On April 7, Mississippi Attorney General Jim Hood asked Barbier to intervene, conduct an independent audit of Feinberg’s Gulf Coast Claims Facility and hold public hearings on the findings.

“The court does not have the power under the Oil Pollution Act to impose upon the GCCF the monitoring sought by the attorney general,’’ David Pitofsky, Feinberg’s lawyer, said in court papers filed yesterday.

“Even if it did’’ have legal authority, imposing the court’s supervision over Feinberg’s fund would divert resources and “chill the ability of GCCF personnel to work expeditiously without fear of running afoul of an independent auditor and a court-imposed evidentiary hearing,’’ Pitofsky said.

Hood said he analyzed recent claims-payment data and accused Feinberg of using “economic duress to manipulate financially desperate claimants’’ into accepting quick, inadequate settlements that would prevent them from later suing BP for damages.

‘Barely 3 Percent’

Hood claimed Feinberg’s fund has paid “barely 3 percent of interim business claims and 9 percent of individual interim claims’’ for economic damages resulting from the worst offshore oil spill in U.S. history. He said the claims facility imposed “unreasonable’’ documentation requirements and then used claimants’ inability to provide the records as grounds for denying legitimate claims.

The Mississippi attorney general said that after conducting a series of town hall meetings, he determined “a breaking point in the health and economic viability of our coastal citizens and communities has now been reached as a result of the failure of the claims process to timely and fully compensate claimants with legitimate claims,’’ according to the April 7 filing.

Feinberg denied Hood’s accusations in yesterday’s filing. He said that since Feb. 18, he’s paid 5,495 interim damage claims and rejected 44,000 interim claims that “lack the necessary proof to document their eligibility and damages attributable to the spill.’’

Feinberg also defended a January pay raise he received for administering the claims facility, which Hood had suggested was proof of collusion between the administrator and BP to deny claims. According to court records, BP boosted monthly payments to Feinberg’s law firm to $1.25 million from the $850,000 it had been receiving.

‘Gratuitous Swipe’

Feinberg said Hood’s “gratuitous swipe’’ at his compensation “almost rises to the level of defamation.’’ He said the raise was justified by the fund’s accomplishments. In the nine months since the Deepwater Horizon spill began, Feinberg said the claims facility has paid out “almost $4 billion to over 174,000 claimants’’ to resolve about 300,000 claims.

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).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, atmcfisk@bloomberg.net; Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha in San Francisco atmhytha@bloomberg.net.


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