UPDATED: The “largest criminal penalty in U.S. history” still isn’t enough to make BP pay for its crimes against the Gulf

UPDATE: The settlement has been announced and there’s bad news and good news. The criminal fine — while on one hand it is indeed the largest in American history, at $4.5 billion — falls far short of making good on the damage BP did to the Gulf and is in fact less than the company typically earns in just one three-month quarter, according to its financial reports.

The good news is that Attorney General Eric Holder announced there’s no civil settlement with BP and that in fact there may well be a trial over damages in 2013. That indicates that the Justice Department actually agrees with the headline of this post. That, and the manslaughter indictment of two BP executives, is a strong start in the right direction.  Congratulatiions to the federal prosectors for what they have accomplished today. But there’s much more work to be done. 

ORIGINAL POST: There’s major news this morning for all of us who’ve been fighting to preserve the Gulf Coast in the wake of the 2010 Deepwater Horizon case:

LONDON — British oil company BP said Thursday it is in advanced talks with U.S. agencies about settling criminal and other claims from the Gulf of Mexico well blowout two years ago.

A person familiar with the deal says BP agrees with U.S. to pay billions of dollars in fines related to the spill.

The person, who spoke on condition of anonymity because they were not authorized to speak on the record about the deal, also said two BP employees face manslaughter charges over the death of 11 people in the explosion of the Deepwater Horizon oil rig that triggered the massive spill.

The person said BP will plead guilty to obstruction for lying to Congress about how much oil was pouring out of the ruptured well.

The Deepwater Horizon rig, 50 miles off the Louisiana coast, sank after the April 2010 explosion. The well on the sea floor spewed an estimated 206 million gallons of crude oil, soiling sensitive tidal estuaries and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing.

Politically, it’s interesting that this news comes so soon after President Obama’s election to a second term. One has to wonder whether BP was waiting to see if it could get a better deal with a Mitt Romney administration with its known pro-Big Oil bias, and whether Obama’s victory forced the company back to the negotiating table. And given the likely size and severity of the penalties, you’ll be hearing a lot of spin in the coming days about what a great deal this is for the citizens of the Gulf. I will say this, it’s about time that the feds — who’ve appeared at many times over the last 31 months to be in the tank for BP — took a more aggressive posture toward the firm.

Still, it’s hard to believe the hype.

Ask yourself, if this is such a great deal for the American taxpayer and such a harsh rebuke to a company whose negligence killed 11 people and spewed 5 million barrels into the Gulf, why is BP so eager to sign off on this? I would argue that any settlement that is OK with BP must, by definition, not be enough of a penalty for the thousands of Gulf residents that the oil company’s wanton misconduct made sick, or the marine life that’s been damaged for generations to come.

Here are a few things to consider:

1) Is a BP settlement really better than bringing the company to trial before a jury of Gulf Coast residents who’ve seen their family and friends suffer harsh economic consequences and medical distress because of the company’s wrongdoing? Remember, it was less than three months ago that the Justice Department filed court papers in New Orleans accusing BP of gross negligence, which would dramatically increase the penalty that BP would have to pay.

 ”The behavior, words, and actions of these BP executives would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall,” government lawyers wrote in the filing on Aug. 31 in federal court in New Orleans.

Some experts said a gross negligence finding could have added $21 billion in penalties. Is that money to restore the Gulf that’s been left on the table?

2) Oil from the Deepwater Horizon site is still contaminating the Gulf. Twice in the last 15 months, this blog and our friends — particularly the pilot and environmentalist Bobby Schumaker from the group Wings of Care — have exposed fresh sheens of Macondo oil near the site of the Deepwater Horizon accident. Most recently, BP and the feds insisted that the oil was a small leak from a containment dome and that the problem has been fixed. But in recent days, Schunaker’s flyovers have continued to discover fresh oil, raising the question of whether the actual source is a crack in the sea floor — as we have long suggested.

In other words, how can you reach a settlement in a crime that’s still ongoing?

3) I’m currently involved in a fairness hearing over a related matter: BP’s proposed $7.8 billion settlement with residents and business owners in the Gulf. I’ve been arguing on behalf of my clients in that case for a do-over of the agreement — in part because the boundaries for damages, along with other disparities, seem arbitrary and capricious, and in part because of the arguments above, that we’re still coming to terms with the extent of BP’s destruction.

So it concerns me that a too hasty or inadquate settlement with the feds may aid the rush to judgment in the $7.8 billion case.

Two final things to consider. BP made $25.7 billion in profits in 2011 — a year it was supposedly still reeling from the aftermath of the spill — and so its capacity to truly address the damage it caused is more than available. And since news of this supposedly harsh penalty, the company’s shares have been trading about 1.5 percent higher on Wall Street this morning. Tens of thousands of Gulf Coast residents are still suffering from the aftereffects of the Deepwater Horizon catastrophe.

Is BP?

 To read more about BP’s settlement talks with the federal government, please check out: http://www.nola.com/news/gulf-oil-spill/index.ssf/2012/11/bp_close_to_settlement_with_us.html#incart_m-rpt-2

To find out more about the federal allegations of gross negligence against BP, please read: http://www.reuters.com/article/2012/09/05/bp-oilspill-negligence-idUSL2E8K50HN20120905

Check out my Nov. 12 argument for a do-over in the $7.8 billion BP settlement at: http://www.stuarthsmith.com/arbitrary-and-capricious-bp-settlement-needs-a-do-over/

© Smith Stag, LLC 2012 – All Rights Reserved

2 Responses to UPDATED: The “largest criminal penalty in U.S. history” still isn’t enough to make BP pay for its crimes against the Gulf

  1. do-gooder says:

    Timing is everything. My theory is that people are starting to die. I represent 100s of small businesses, fishermen, crabbers, oystermen and coastal residents from Grand Isle to the East Coast of Florida. Real people with no big money or political connections. We see the pattern that our people get sicker after a big wind or storm event that brings the oil and Corexit onto the land. These regular working people in various occupations, in various locations, are becoming incapacitated and deathly ill. We have had six people we know die from exposure. Fishermen and oyster shuckers don’t have helath insurance, unemployment, Worker’s Comp and don’t know how to qualify for SS benefits. I have one woman who worked with a charity on Grand Isle for 2 months in the beginning and she is totally disabled with COPD and chemical burns on her eyes. Her eyes stay swollen shut most of the time. She needs to be on oxygen, but she has no health insurance. I have written the AGs of each state and said that if we do not get the Feds to pay for the carrying costs of these disabled, sick and out of work people the responsibility and financial burden will fall to the states–who have no money to carry this load. The number of sick children is staggering. God be with us and do not leave us destitute.

  2. Lindsay Selkirk says:

    I live on the Gulf Coast and have watched this tragedy unfold. I am astounded at the level of oversight the Federal Government has allowed to happen. They absolutely do not care, and I agree with the previous post. This is factual and happening everyday in the coastal states. I have a friend that is critically ill from the exposure. She has called and emailed for months and has not received anything. She has since filed a claim with the Deepwater Horizon Settlement and it basically was thrown in a black hole. She calls to get a progress report and they have read from the same script every day. They don’t know when or if she will be paid, they don’t know if she will qualify. Or if she does how long it will take to issue the payment. The businesses and coastal property claims are being paid. But to my knowledge only a few personal economic injury claims have been paid. Everyone seemed disgruntled with Kenneth Feinberg, but in his defense, he did pay people in some form of consistency. The Deepwater Horizon is more inclined to polish their website than to pay claims. They seem to be more concerned about having a lavish website than paying DYING PEOPLE! The sad part about this is most of the people don’t have internet to even access their claim. And the others have sold their computers to put food on their tables. So why it is that DWH feels a need to revamp the website weekly? Feinberg was investigated for various things while in charge of the claims process. I think it is time for the higher up’s to investigate the new claims facility. And find out why people are not being paid, and why months pass without so much as an update to their claim. Nothing about this process has been fair to the people, they were placed behind the eight ball with the opt out dead line. How can a person know if they want to opt out of something when they have not so much as received an offer of eligibility? This is one sided.

    If more attorneys would stand up for what is right as Mr. Smith has this mess would not have been allowed to get to this point. Three years into this mess and they have changed administrator three times, placed a stay to prevent people from moving forward with litigation and set up delayed fairness hearings. Sad but true people are dying from the exposure of BP’s toxic waste. I am sure they are hoping if enough people dye they will eliminate the majority of their liability. Do they not know charges can still be brought by family member and such? So they are not obverting anything. I think when this happened they should have been made to shut done every well & rig in North America until the entire mess was resolved. Yes every single claim against them. That would have ensured that they “DO THE RIGHT THING” as they so proudly boast about. Which is willful LIE! The eleven men that died a needless death was cause enough to stop the company from drilling here in the US. My heart breaks for those men and their families.

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