Gulf Oil Spill Claims Fund, Kenneth Feinberg Under Fire


NEW ORLEANS, La. — President Barack Obama vowed during a White House speech last June that the $20 billion he helped coax out of BP for an oil spill compensation fund would take care of victims “as quickly, as fairly and as transparently as possible.”

Eight months later, that’s not how things look to many people along the Gulf Coast.

Tens of thousands of fishermen, oyster shuckers, business owners, hotel operators, and hairdressers still await payment. Many others whose claims have been turned down question the evenhandedness. And without the data to determine who is right, attorneys general and members of Congress question the openness.

An Associated Press review that included interviews with legal experts, government officials, and more than 300 Gulf residents found a process beset by red tape and delay, and at the center of it all a fund administrator whose ties to BP have raised questions about his independence.

Now, the dissatisfaction has reached a fever pitch: Lawmakers in Washington are demanding the White House step in, the Louisiana governor and others want a federal judge to intervene, and the people most affected by the Deepwater Horizon disaster are threatening to line the courthouse steps if they don’t get the changes they seek from administrator Kenneth Feinberg.

“A lot of promises were made by Feinberg and President Obama that this would be a very open process, and I just don’t feel that’s the case,” said Rep. Steve Scalise, a Louisiana Republican.

Feinberg, the Washington lawyer who runs the fund and was lauded for his work overseeing the compensation fund for 9/11 victims, has insisted he is being fair.

He has acknowledged that the system is clogged by the sheer volume of oil spill claims, along with inflated or outlandish requests. Among them: One person filed a claim for the entire $20 billion, while another asked for $10 billion; a boat captain sought reimbursement for lost income for himself and four deckhands, but it turns out he didn’t have any deckhands; and a fisherman claimed he lost a month on the water, but his boat had a hole in it and was dry-docked even before the spill.

Feinberg recently said he believes the Gulf of Mexico should largely recover from BP’s oil spill by the end of next year, and he doesn’t think the entire $20 billion will be needed to compensate victims. Only half of that should suffice, he said.

“Overall, I think the program has worked well,” Feinberg told the AP. “I think the program has been fairly transparent.”

The fund and Feinberg’s agency, the Gulf Coast Claims Facility, were an extraordinary response to an extraordinary situation – more than 200 million gallons of oil spewing from a well a mile beneath the Gulf of Mexico, fouling the coastline from Florida to Texas. The normal course in an oil spill is for the responsible party – in this case BP – to pay claims directly.

BP was doing that until August, when it turned over the process to Feinberg as part of the President’s promise that payments would now be “administered by an impartial, independent third party.”

So far, nearly 490,000 claims have been filed, and roughly half have been turned down. The fund has handed out $3.4 billion to 169,000 claimants. Nearly all the money dispensed so far has been in the form of either emergency payments for short-term losses or one-time checks handed out in exchange for a promise not to sue.

To date only two final settlements for long-term losses – including a $10 million payment to a BP associate the fund refuses to identify – have been paid out.

While the government helped force BP’s hand to set up the fund, it did not include a mechanism to oversee Feinberg’s operations, which are not subject to state or federal open records laws. Citing confidentiality requirements, Feinberg refused requests by The AP for information about who is getting the money, broken down not by name or address but by county, occupation, and amounts requested versus amounts granted.

“I have to strike a very careful balance between the public’s right to know and the confidentiality of data submitted to the GCCF in the strictest confidence,” Feinberg said.

Without that information, there is no way to independently verify if the total amount paid so far is too little, whether those receiving money are the ones who need it most, whether the funds are being distributed equitably, or whether BP is unduly influencing the process. There are suspicions in some quarters that the oil giant may be doing just that: Feinberg told The AP that the fund did not review the $10 million claim paid to the BP associate, even though he has insisted that everyone else’s claim be reviewed. He said BP asked him to make the payment, and he did. He would not further explain why he handled it that way.

Earlier this month, a federal judge in New Orleans ordered Feinberg to stop saying he is independent of the oil giant, writing that the administrator is “acting for and on behalf of BP.” Until last month, Feinberg’s firm was receiving $850,000 a month from BP, and it is now negotiating a new fee package with the company.

Lawmakers from both parties are up in arms, and the Justice Department has urged Feinberg to speed up payments, reminding him in a recent letter that he is not there to save BP money.

Hundreds of angry fishermen and business owners have flooded the Gulf Coast Claims Facility’s website over past last two weeks with complaints. One Alabama fisherman says he faces bankruptcy because of the perception that his catches are not safe to eat. A Mississippi resident had two vehicles repossessed and his house foreclosed. A Louisiana business lost everything and suggests the process is lining the pockets of lawyers and accountants at the expense of spill victims.

According to Feinberg, claims were rejected because they were ineligible, lacked documentation, or were fraudulent. By Feinberg’s own count, fraudulent claims make up only 1.5 percent of the total filed.

About 188,000 people have decided to give up their right to sue BP in exchange for final payments. S ome opted for one-time checks of up to $25,000. Others – 97,000 – are waiting on much bigger checks based on proof of losses.

Release forms promising not to sue are not uncommon in such matters, but critics say the one Feinberg is requiring is overly broad and may even be illegal because those who sign give up the rights of relatives and third parties to sue and also can’t go after other responsible parties.

A number of people are opting to sue. More than 300 federal lawsuits against BP and others have been filed.

It’s not just fishermen who are filing claims. So are restaurant and hotel owners who saw their businesses plummet after the April 20, 2010, disaster. Hairdressers along the Gulf Coast say customers are staying away because they can no longer afford to go to a beauty salon. Similar complaints are heard from dentists, veterinarians, and owners of mom-and-pop convenience stores.

Many who have received emergency payments that are meant to compensate them for six months of lost revenue until a final settlement is offered say the money falls short. Thousands more have yet to receive any money.

“They’re just trying to stall us, hold us off until our bills pile up and we have to accept anything,” said Alabama shrimper Robert Barbour. He said his deckhands got checks for up $30,000, while he – the employer and owner of the three shrimp boats – received just $1,000. Barbour said he was told that he couldn’t prove he was a fisherman and that he needed more documentation he didn’t have. “It doesn’t make sense,” said Barbour, who estimates he has lost $162,000 in revenue.

Feinberg’s agency would not discuss any individual cases.

Feinberg urges people unhappy with the fund’s decisions to appeal to the Coast Guard. As of late January, the Coast Guard had processed 264 out of 507 appeals and in every case agreed with the fund’s decisions.

Rudy Toler, 30, a shrimper and oysterman from Gulfport, Miss., may soon add to those appeals. The father of four said he filed a claim for losses of about $140,000 for the six months he couldn’t work. He said he has been told repeatedly he needs more documentation, even though he has provided the fund with everything it has asked for. In the meantime, Toler said, he is struggling to feed his family. “They’re just trying to make me jump through so many hoops,” he said.

Not everyone is unhappy with the process. Lawyers for roughly 900 condo owners and other small businesses in Florida say they are close to a settlement with Feinberg regarding their final payments, and expect a fair resolution within days. The amount is still being worked out.

“Mr. Feinberg has been extremely responsive and expeditious in working through what is a tremendous amount of information and cases. Given the complexity and enormity of this situation, I think Mr. Feinberg has done a tremendous job,” said attorney Jerrold Parker.

The White House and BP declined to comment.

The Justice Department, despite the concerns it has publicly raised, says the claims process is in better hands than it would be if BP paid claims directly, under the usual process spelled out in federal pollution law.

Democratic Senator Bill Nelson of Florida recently wrote Obama, urging a top-to-bottom review of the fund. “I want to know who’s running this fund,” Nelson told The AP, suggesting he thinks the answer is BP.

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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