Reporting from New Orleans — The administrator of the $20-billion compensation fund for gulf oil spill victims is not independent from BP and must stop telling potential claimants that he is, a federal judge said in a ruling Wednesday that may spur more people to sue rather than settle.
U.S. District Judge Carl Barbier said claims czar Kenneth R. Feinberg and his agents must change the way they communicate with people seeking money from the fund. The ruling came hours after Feinberg released details on how final payments would be determined.
The ruling cuts at the heart of one of Feinberg’s central arguments: that because he’s independent, thousands of people who have been denied money or less money than they feel they deserve should trust his decisions. And it could prompt more people to sue rather than accept relatively quick settlements with the fund, raising the potential for further uncertainty and liability for BP.
Barbier said Feinberg must clearly disclose in all communications that he is acting for and on behalf of BP in fulfilling its obligations as the responsible party under the Oil Pollution Act.
But Barbier stopped short of ordering changes to a release form that people who accept final payments from the fund must sign. He asked lawyers to submit additional briefs to the court on that, as well as address the question of whether BP is fully complying with the law in the processing of claims.
Feinberg was appointed in June by BP and the White House to oversee the fund. His Washington law firm was paid $850,000 a month for its work through the middle of January, and now Feinberg is discussing with BP how much he should be paid going forward.
Barbier said, “The court finds that BP has created a hybrid entity, rather than one that is fully independent of BP.”
BP said in a statement it respects the court’s decision. Feinberg did not return a call to his cellphone. A Feinberg spokeswoman said the Gulf Coast Claims Facility would not comment.
Earlier Wednesday, Feinberg said the Gulf of Mexico should largely recover from BP’s oil spill by the end of next year, and all final settlement offers to victims who lost revenue from the disaster will be based on that assessment.
Feinberg said the claims facility relied on experts to determine that a 30% recovery is likely in 2011, with full recovery in 2012. He notes, however, that oyster harvesting will take longer.
The fund was set up by BP PLC to compensate people for lost revenue after BP’s oil well blowout off Louisiana in April. It has so far paid about $3.3 billion to 168,000 claimants, but many are still waiting for money, and thousands of others claim they were shortchanged. About half of the total 485,000 claims filed have been denied because of ineligibility or lack of documentation.
Feinberg has faced repeated criticism about the slow pace of payments and the small size of checks to victims, as well as complaints about lack of transparency and perceived influence from BP.
Feinberg’s new draft proposal for how final settlements will be paid, based on the assessment, calls for claimants to receive twice their documented 2010 losses. Oyster harvesters will be offered four times their losses.
Documents released by Feinberg indicate he based the assessment largely on expert reports from a Texas professor and a consulting firm to determine the long-term effects on seafood harvests, the tourism industry and the gulf economy.
“I think I have canvassed the universe,” Feinberg said.
Those who aren’t ready to take a final settlement can instead file for interim quarterly payments through August 2013, provided they can show proof of continued losses. Claimants can also file for a one-time cash payment of $5,000 for individuals and $25,000 for businesses, but they would have to give up their right to anymore money or to sue responsible parties. The same release is required for a final settlement.