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|May 30, 2020|
BP to admit crimes and pay $4.5 billion in Gulf settlement
BP, the British oil company, said Thursday that it would pay $4.5 billion in fines and other payments to the government and plead guilty to 14 criminal charges in connection with the giant oil spill in the Gulf of Mexico two years ago.
The payments include $4 billion related to the criminal charges and $525 million to securities regulators, the company said in a statement. As part of the settlement, BP agreed to plead guilty to 11 felony counts of misconduct or neglect related to the deaths of 11 people in the Deepwater Horizon accident in April 2010, which released millions of barrels of oil into the gulf over the course of the next few months.
The Justice Department also filed criminal charges against three BP employees on Thursday.
The government charged the top BP officers aboard the drilling rig, Robert Kaluza and Donald Vidrine, with manslaughter in connection with each of the men who died, alleging that they were negligent in supervising tests before the well blowout and explosion that destroyed the rig.
Prosecutors also charged BP’s former vice president for exploration in the Gulf of Mexico, David Rainey, with obstruction of Congress and making false statements about the rate at which oil was spilling from the well.“All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region,” Robert Dudley, BP’s chief executive, said in a statement. “From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf. We apologize for our role in the accident, and as today’s resolution with the U.S. government further reflects, we have accepted responsibility for our actions.”
While the settlement dispels one dark cloud that has hovered over BP since the spill, others remain. BP is still subject to other claims, including billions of dollars in federal civil claims and claims for damages to natural resources.
In particular, BP noted that the settlement does not resolve what is potentially the largest penalty related to the spill: fines under the Clean Water Act. The potential fine for the spill under the act is $1,100 to $4,300 a barrel spilled. That means the fine could be as much as $21 billion.
In addition to the 11 felonies related to the men killed in the accident, the company agreed to plead guilty to one misdemeanor violation of the Clean Water Act and one misdemeanor violation of the Migratory Bird Treaty Act.
BP also acknowledged that it had provided inaccurate information to the public early on about the rate at which oil was gushing from the well.
The company agreed to plead guilty to one felony count of obstruction of Congress over its statements on that issue. It also agreed to pay a civil penalty of $525 million to the Securities and Exchange Commission, spread over three years, to resolve the agency’s claims that the company made misleading filings to investors about the flow rate.
As part of its resolution of criminal claims with the Department of Justice, BP will pay about $4 billion, spread over five years. That amount includes $1.256 billion in criminal fines, $2.394 billion to the National Fish & Wildlife Foundation and $350 million to the National Academy of Sciences.
The criminal fine is one of the largest ever levied by the United States against a corporation, roughly equal to the $1.3 billion fine paid by Pfizer in 2009 for illegally marketing an arthritis drug. BP has repeatedly said it would like to reach a settlement with all claimants if the terms were reasonable. The unresolved issue of the claims has been weighing on BP’s share price.
On Thursday, BP’s American shares were trading at about $40 at midday, roughly unchanged on the day and down about 34 percent since the accident.
“It’s one less thing to be negative on BP about and a minor step in the right direction toward the rehabilitation of BP,” Iain Armstrong, an equity analyst at the investment manager Brewin Dolphin, in London, said. But he added that there were still concerns about remaining claims and that “lawyers might yet have their day at court.”
As part of Thursday’s agreements, BP said it was increasing its reserve for all costs and claims related to the spill to about $42 billion.
Brian Gilvary, BP’s chief financial officer, said in a conference call with analysts that the board weighed the balance between the settlement struck with the government and the prospect of a much wider criminal indictment that would have involved more people in the company. “A criminal indictment would have been a huge distraction,” he said.
BP said that before Thursday’s announced payments, it had spent more than $14 billion on operational response and clean-up costs and $1 billion on early restoration projects. It had also paid out more than $9 billion to individuals, businesses and government entities.
BP in March agreed with the lawyers for plaintiffs to settle claims on economic loss, including from the local seafood industry, and medical claims stemming from the oil spill. BP said it expected the cost of that settlement to be an additional $7.8 billion, which it will pay from a trust the company set aside to cover such costs.
Thus far, the only BP employee to be arrested and indicted was a low-level engineer, Kurt Mix, who has been charged with obstruction of justice for deleting text messages about company estimates of the flow rate from the spill. The government has asserted that in October 2010, Mr. Mix, of Katy, Tex., deleted from his smartphone a string of more than 200 messages with a supervisor about the flow rate estimated at the time of a failed effort to contain the spill. He is also alleged to have deleted a second string of messages with a contractor in August 2011. Each count is punishable by up to 20 years in prison and a $250,000 fine.
The F.B.I. has asserted that the texts indicated that the well was spewing out more oil than the company was publicly suggesting. Mr. Mix has pleaded not guilty to both counts of impeding a grand jury probe, saying that the deletions were routine, and that other records of the communications still existed.
Civil penalties are still being negotiated by the government and the British-based oil company. The company could face penalties under either the Oil Pollution Act or the Clean Water Act, which has spurred political jockeying in Washington between the administration and several Gulf state lawmakers who want to maximize how much money the states receive to aid local communities impacted by the spill.
If a settlement is not reached, a nonjury trial to determine BP’s liability for the spill would begin in late February.
Under the Clean Water Act, civil fines for simple negligence would amount to $1,100 for every barrel spilled. If the company were found to be grossly negligent, fines would be increased to $4,300 a spilled barrel. The potential liabilities under the law would be between $5.4 billion and $21 billion.
Gulf Coast lawmakers succeeded in passing legislation called the Restore Act last summer under which 80 percent of fine funds paid by BP under the Clean Water Act would go to Gulf communities.
But the Justice Department could also levy fines under a provision of the Oil Pollution Act, under which BP could face a penalty of more than $31 billion to repair damages. Under this provision, BP would be allowed to take a tax deduction for damages paid. A settlement under the Oil Pollution Act would give federal agencies control over how the fine money would be spent.
Lawmakers from Florida, Mississippi, Alabama and Texas have been pressing the Attorney General, Mr. Holder, against reaching a settlement under the Oil Pollution Act. In a recent letter to President Obama, Sen. Bill Nelson, a Florida Democrat, said, “I urge you to hold BP fully accountable for the harm it caused and send the bulk of the fines to the Gulf as directed by the Restore Act. Anything less would be an injustice to the Gulf coast communities.”
Separately, United States District Judge Carl Barbier in May initially approved a proposed $7.8 billion class-action settlement between BP and more than 100,000 people and businesses claiming medical and economic damages from the spill. Earlier this month, he held a hearing to consider objections from over 10,000 claimants challenging the settlement, but he is expected to give his final approval within weeks.
Two other companies involved in the Gulf of Mexico accident, the rig operator Transocean and the cement contractor Halliburton, could also face potential liabilities in the complex web of claims and counterclaims.
David Uhlmann, a law professor at the University of Michigan and a former prosecutor of environmental crimes for the Justice Department, called Thursday’s agreement “a fair resolution of the Justice Department’s criminal investigation.”
Professor Uhlmann, who has been critical of the pace of the criminal investigation and settlement negotiations, said that while “the Justice Department chose to emphasize worker deaths, which is appropriate,” he believed that the department “could and should have placed greater weight on the environmental crimes that occurred, since this was the worst oil spill in U.S. history.”
Professor Uhlmann argued that the fines “are modest when you consider that BP faced up to $30 to $40 billion for the Clean Water Act violations." He also questioned the five-year payout of the penalties allowed by the government "since criminal fines are supposed to be paid immediately unless there are ability-to-pay issues." (Source: The New York Times)
Story Date: November 16, 2012