Kenneth Feinberg’s use of industry categories in scoring claims is criticized


The U.S. Justice Department sent a harsh rebuke Friday to oil spill claims czar Kenneth Feinberg, criticizing him for using broad industry categories to determine whether claimants should be paid for damages from the BP oil spill in the Gulf of Mexico, a move that a senior federal attorney said is more restrictive than the standard set by law.

Feinberg has often boasted that claimants should come to him instead of the courts because he would be more generous than the private claims parameters set by the Oil Pollution Act of 1990. But Associate U.S. Attorney General Thomas Perrelli, who oversees civil matters at the Justice Department, sent a letter to Feinberg telling him that the categories of eligible and ineligible claims that his Gulf Coast Claims Facility applied when determining emergency payments is not part of the Oil Pollution Act of 1990.

Perrelli’s letter says an individual claimant’s connection to the spill zone and activities affected by the spill – not the type of business he owns or works in – should be the factors used in determining eligibility.

The letter then reminds Feinberg that he must apply the legal standard set out by the Oil Pollution Act.

Feinberg is in the midst of accepting public comment about final payment calculation methods he disclosed earlier this week, and said he would consider Perrelli’s input as a part of that process.

“The Department of Justice has been a constructive force in making the program stronger,” he said.

But the Justice Department is clearly not happy with Feinberg for imposing a standard for eligibility that is more strict than what the law allows. Feinberg has not responded this week to questions from The Times-Picayune about his use of industry categories to evaluate claims.

He’s also been asked repeatedly about how GCCF evaluated emergency claims, but has been vague about what types of claims qualified for payment and which didn’t.

While Perrelli is the first government official to address Feinberg’s method of evaluating claims based on industry categories, those who work for the claims agency have known about it for months.

Olga Souders, a former GCCF claims adjuster, said she and her colleagues were ordered to assign “scores” to different industry groups when they processed claims.

She said some industries and jobs got “0 scores” automatically, rendering them ineligible, regardless of their location or the context in which they operated.

“Auto repair, financial services, accountants, bail bonds, tax office CPAs, doctors and attorneys were some of the ones that qualified as 0 scores,” Souders said.

Perrelli said in his letter that the problem with that type of categorizing is this: a decision about a particular industry operating inland may not apply to that same industry when it operates on the shores that were affected by oil.

Souders, who lives in the Dallas area and says she is a licensed insurance adjuster, was among about 500 claims evaluators at a warehouse in Hammond who were laid off in November by GCCF subcontractor Worley Catastrophe Services.

She was so upset about the opaque way claims were handled that she established a consulting company, Gulf Coast Claims Assistance, to use her insider’s knowledge to help claimants through GCCF’s complex process. She said she charges $350 up front and up to 15 percent of any compensation collected.

Souders said that five of the 13 claimants she represents have been miscategorized by GCCF, likely yielding an improperly low industry score on their emergency claim.

Possibly the most egregious example is Slidell-based Louisiana Rock Oyster Resources, a company that provides the rock beds laid by oyster farmers. Souders said higher-ups in GCCF told her the company was categorized as a construction business. On Friday, when company owner J.R. Durham called the GCCF hotline, a claims specialist told him his claim was filed under the industry category “retail sales and service.”

Durham said he should be considered part of the oyster harvesting industry, the one that Feinberg said this week would get final claims payments based on four times uncompensated losses from 2010.

Durham said he gets a different answer every time he calls the GCCF, but Friday was different. That’s because the specialist told him the emergency claim period was officially closed and, even though his claim was still under review and hadn’t been denied, he would not get an emergency payment.

That may have been a death-knell for a firm that claims it lost $2.8 million in revenue in the six months after the April 20 oil spill. It can’t pay its leases and has thousands of tons of rock sitting unused at the docks in Hopedale, Durham said.

Durham also was told his claim is being reviewed by Guidepost Investigations, another GCCF subcontractor paid by BP to handle cases of suspected fraud. Durham said he knows the claim is large and welcomes the scrutiny. But as long as Guidepost has his file, he can’t get any information about his claim.

“This was going to be our best season ever and then they canceled the oyster season,” Durham said. “We had to close the office on Gause Boulevard and now I’m operating out of my house. We’ve got three job sites we had to evacuate from because we don’t have the money to pay the leases. I give GCCF all our bank statements, all our taxes, all our financial records and we’re still waiting.”

David Hammer can be reached at or 504.826.3322.

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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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