How BP Got Screwed on Gulf Oil Spill Claims

Until this year, Tampa attorney Kevin McLean specialized in suing nursing homes for neglecting patients. In January he switched the focus of his practice to a fund BP established to compensate business losses from the 2010 oil spill in the Gulf of Mexico. In its attempt to dilute a legal and public-relations mess of epic proportions, BP began paying claims within weeks of the disaster and has so far spent more than $25 billion for cleanup and compensation. That hasn’t stemmed demands for more. The installation last year of a particularly generous claims administrator prompted scores of additional plaintiffs’ attorneys to swarm onto the scene, signing up a new wave of clients, many located far from the once-sullied shoreline. Just five months after his pivot, McLean’s three-attorney firm has 260 clients with claims ranging from $20,000 to $4 million apiece. “The craziest thing about the settlement,” he wrote in a solicitation letter, “is that you can be compensated for losses that are UNRELATED to the spill.”

One of McLean’s clients, a real estate agent in Brandon, Fla., an hour from the Gulf, wants $80,000 from BP, reflecting a revenue dip in 2010 that “had nothing to do with the spill,” the attorney candidly admits. (The culprit was the bursting of the Florida real estate bubble.) Under the settlement, though, “that’s a good claim,” McLean says, “and we’re going to get paid.”

He has millions of reasons to be confident. A construction company in northern Alabama, 200 miles from the coast, was recently awarded $9.7 million, even though it does no work near the Gulf of Mexico, according to court records. Attorneys are submitting claims on their own behalf. A law office in central Louisiana that actually enjoyed improved profits in 2010 collected $3.3 million. The compensation process is confidential, so claimants’ identities aren’t a matter of public record, though the amounts are.

The blowout of the Macondo well cost 11 men their lives and, according to the government, spewed 4 million barrels of oil into the Gulf. It shut down fisheries and despoiled beaches. Oystermen and charter boat captains lost months and, in some cases, years of work. While much of the Gulf economy has recovered, degraded oil remains in coastal marshes in Louisiana. Some ruined small businesses never reopened.

BP apologized and opened its checkbook to make amends. One component of the company’s response, an economic-damages fund initially expected to dole out $7.8 billion, now appears likely to cost billions more, BP said in an appellate court brief filed in May. The British company blames the overage on Patrick Juneau, a Louisiana-based court-appointed administrator whom it accuses of compensating “fictitious and inflated losses.” On June 21, the controversy intensified when Juneau suspended an attorney on his staff amid allegations of kickbacks. Juneau announced that he’s investigating. People familiar with the situation but who are not authorized to speak on the record say the FBI has been alerted.

Even as it continues a cheerful quarter-billion-dollar print and television ad campaign about how the Gulf has returned to normal, BP is crying foul. “It was never our intention for the company to become an open cash register for every claim or project anyone could dream up,” says spokesman Geoff Morrell. Locals say BP may have been naive. “This is Louisiana, after all,” says Danny Abel, a longtime New Orleans plaintiffs’ lawyer not involved in the case. “A big foreign company with deep pockets and you’re surprised there’s a feeding frenzy? Come on, man.”

by Paul M. Barrett, Bloomberg Businessweek |  Read more:

Photo: NASA