Having reached agreement with Justice Department lawyers, BP announced Monday that it has established a trust to pay “legitimate claims” arising from the Gulf of Mexico oil spill, and deposited the first $3 billion of the $20 billion it has committed to the fund.
“The purpose of the escrow account was to assure those adversely affected by the spill that we indeed intend to stand behind our commitment to them and to the American taxpayers,” said Bob Dudley, CEO of BP’s Gulf Coast Restoration Organization. “Establishing this trust and making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast.”
BP and the Obama administration have agreed to the naming of two individual trustees — retired federal District Court Judge John S. Martin of New York, and Kent Syverud, dean of the Washington University School of Law in St. Louis — who will independently oversee the trust, as well as the designation of Citigroup as the corporate trustee and paying agent for the account. Those who receive checks from the fund can cash them, free of charge, at any of the 160 branches of the Whitney National Bank in the Gulf region.
BP agreed to create the $20 billion escrow fund at a meeting with President Barack Obama and White House officials in mid-June. At the same time, BP and the White House agreed to the naming of Kenneth Feinberg to administer the Gulf Coast Claims Facility, which will determine which claims are legitimate and deserve payment from the fund.
Amy Weiss, a spokeswoman for Feinberg, confirmed Monday that he is replacing ESIS, the contractor who had been administering the claims process for BP. Instead, Weiss said, the Gulf Coast Claims Facility had chosen two subcontracting firms — the Garden City Group and BrownGreer. “Both firms are experts in the field of traditional claims administration processes and Feinberg Rozen (Feinberg’s law firm) has used the services of both companies for past projects and has complete confidence that they will competently and efficiently carry out the tasks of the administration of the GCCF,” Weiss said.
She also said “the GCCF will maintain the current office sites and staff of the Worley team now in place” to process the claims. ESIS had contracted with Worley, a claims service company based in Hammond to do that work.
“Once transition has been completed, the GCCF will review the site locations and staffing and make adjustments as deemed necessary and appropriate,” Weiss said.
Speaking for ESIS, Carla Ferrara, manager of media relations for the ACE Group, of which ESIS is a part, said that “after mobilizing more than 1,000 claims professionals, opening dozens of claim offices in four states, and processing more than 100,000 claims, ESIS is working closely with Mr. Feinberg and his team on a transition plan for the claims handling process.”
On the creation of the trust by BP, Associate Attorney General Tom Perrelli said, “we are pleased that BP made an initial contribution and has taken an important step toward honoring its commitment to the president and the residents and business owners in the Gulf region.” He said BP must still complete its agreement spelling out the U.S. holdings that will act as collateral for the remainder of the $20 billion commitment.
BP is due to make an additional $2 billion deposit the fourth quarter of 2010. Thereafter, $1.25 billion will be deposited per quarter until a total of $20 billion has been deposited.
Of his appointment as trustee, Syverud, an expert on complex litigation, said, “I think it’s a great public responsibility and honor.”
“I think our responsibilities are to ensure that BP lives up to its responsibility, its commitment to make this $20 billion fund available,” Martin said.
“The $3 billion deposit BP made today is a welcome first step toward making Louisianians whole,” said Rep. Charlie Melancon, D-Napoleonville.
But Sen. David Vitter, R-La., said, “I’m disappointed that this administration and BP have chosen to administer this escrow fund through Citigroup rather than place the money in local financial institutions and involve as many Gulf Coast community banks as possible. Only involving one Gulf Coast bank doesn’t cut it.”