BP 2014 Annual Report Download - page 237

Judge Freeh submitted a written report to the district court in which he
presented his findings that the conduct of two attorneys in the office of
the claims administrator may have violated federal criminal statutes
regarding fraud, money laundering, conspiracy or perjury. In an order
issued the same day, the court instructed Judge Freeh to promptly
recommend, design, and test enhanced internal compliance,
anti-corruption, anti-fraud and conflicts of interest policies and
procedures, and assist the claims administrator in the implementation of
such policies and procedures. On 17 January 2014, Judge Freeh
submitted a second written report that described the behaviour at the
DHCSSP that led to the resignations of senior staff members.
PSC settlements – Seafood Compensation Fund
On 17 December 2013, BP filed a civil lawsuit in MDL 2179 against
former PSC lawyer Mikal C Watts, accusing him of having fraudulently
claimed to represent more than 40,000 deckhands who allegedly
suffered economic injuries as a result of the Incident. BP’s action alleges
that BP relied on Mr Watts’s representations when it agreed to pay
$2.3 billion to the Seafood Compensation Fund (the Fund), which was
established under the Economic and Property Damages Settlement to
compensate those who earn their livelihood from Gulf waters and were
directly affected by the spill, and that the Economic and Property
Damages Class stands to benefit unjustly from the full distribution of the
money remaining in the Fund. In addition, BP filed two motions asking
the district court to suspend further distributions from the Fund and to
determine the extent of the fraud and what portion, if any, of the Fund
should be returned as a result. On 17 January 2014, Mr Watts filed a
motion to stay the litigation pending a parallel criminal investigation and
the PSC also filed a brief opposing BP’s motion seeking an injunction. On
26 February 2014, the district court granted Mr Watts’s motion to stay
the litigation and denied BP’s motion to suspend further distributions, on
the basis that no further payment from the Fund was imminent. The
district court deferred ruling on BP’s motion seeking to determine the
extent of the fraud and what portion, if any, of the Fund should be
returned as a result.
On 19 September 2014, the district court designated-neutrals appointed
to preside over the settlement of the seafood program (the Neutrals)
submitted to the district court their report on recommendations for the
Seafood Compensation Program supplement distribution
(Recommendations). The Neutrals observed that there remain some
claims against the Fund which have not been paid, and that BP has filed a
motion which seeks a return of part of the Fund, on the basis that it is
currently impossible to fully distribute the balance of the Fund. The
Neutrals recommended that the district court target a $500 million partial
distribution in the second round of payments using a proportionate
distribution method. The district court issued an order filing the
Recommendations into the court record and requiring that any objections
to or comments on the Recommendations to be filed by 20 October
2014. BP filed a response asserting that the district court should not yet
order second round distributions on the basis that, amongst other things,
the first round distributions are not complete. On 18 November 2014, the
district court approved the Neutrals’ Recommendations and
disbursement of funds commenced in early 2015.
Medical Benefits Class Action Settlement (Medical Settlement)
The district court approved the Medical Settlement Agreement (MSA) in
a final order and judgment on 11 January 2013. The effective date was
12 February 2014. As of 9 January 2015, the claims administrator under
the Medical Settlement (the Medical Claims Administrator) had received
12,418 claim forms, including 11,703 for certain Specified Physical
Conditions (SPCs), and has determined 774 claims to be eligible for
monetary compensation totalling approximately $1,542,500. For those
claimants seeking benefits under the Periodic Medical Consultation
Program, approximately 8,411 claims have been determined to be
eligible. The deadline for submitting claims for SPCs under the MSA was
12 February 2015. BP does not yet know the total number of claims
submitted, however a large volume of such claims is anticipated. The
Medical Claims Administrator issued a policy statement, with which BP
agrees, classifying physical conditions first diagnosed after 16 April 2012
as Later-Manifested Physical Conditions (LMPC), which requires a class
member seeking compensation to file a notice of intent to sue that
allows BP the option to mediate the claim in lieu of litigation. On 23 July
2014, the district court issued an order affirming the policy statement. On
26 November 2014, the district court directed the Medical Claims
Administrator to issue another policy statement regarding the impact of
the release provisions under the MSA on the filing of SPC claims and
LMPC claims, which was filed on 17 December. The district court’s
decision to either adopt, modify or reject the policy statement remains
pending.
State and local civil claims, including under OPA 90
On 12 August 2010, the State of Alabama filed a lawsuit seeking
damages for alleged economic and environmental harms, including
natural resource damages, civil penalties under state law, declaratory and
injunctive relief, and punitive damages as a result of the Incident. On
3 March 2011, the State of Louisiana filed a lawsuit to declare various BP
entities (as well as other entities) liable for removal costs and damages,
including natural resource damages under federal and state law, to
recover civil penalties, attorney’s fees and response costs under state
law, and to recover for alleged negligence, nuisance, trespass, fraudulent
concealment and negligent misrepresentation of material facts regarding
safety procedures and BP’s (and other defendants’) ability to manage the
oil spill, unjust enrichment from economic and other damages to the
State of Louisiana and its citizens, and punitive damages.
On 10 December 2010, the Mississippi Department of Environmental
Quality issued a Complaint and Notice of Violation alleging violations of
several state environmental statutes.
The Louisiana Department of Environmental Quality has issued an
administrative order seeking environmental civil penalties and other relief
under state law. On 23 September 2011, BP removed this matter to
federal district court, and it has been consolidated with MDL 2179.
District Attorneys of 11 parishes in the State of Louisiana filed suits under
state wildlife statutes seeking penalties for damage to wildlife as a result
of the Incident. On 9 December 2011 and 28 December 2011, the district
court in MDL 2179 granted BP’s motions to dismiss the District
Attorneys’ complaints, holding that those claims are pre-empted by the
Clean Water Act. The Fifth Circuit affirmed the district court’s ruling on
24 February 2014. Several of the parishes sought Supreme Court review,
which BP opposed. On 20 October 2014, the US Supreme Court declined
to hear the appeal.
On 14 November 2011, the district court in MDL 2179 granted in part
BP’s motion to dismiss the complaints filed by the states of Alabama and
Louisiana. The court’s order dismissed the states’ claims brought under
state law, including claims for civil penalties and the State of Louisiana’s
request for a declaratory judgment under the Louisiana Oil Spill
Prevention and Response Act, holding that those claims were pre-
empted by federal law. It also dismissed the State of Louisiana’s claims
of nuisance and trespass under general maritime law. The court’s order
further held that the states have stated claims for negligence and
products liability under general maritime law, have sufficiently alleged
presentment of their claims under OPA 90 and may seek punitive
damages under general maritime law.
On 9 December 2011, the district court in MDL 2179 granted in part BP’s
motion to dismiss a master complaint brought on behalf of local
government entities. The court’s order dismissed the plaintiffs’ state law
claims and limited the types of maritime law claims the plaintiffs may
pursue, but also held that the plaintiffs have sufficiently alleged
presentment of their claims under OPA 90 and that certain local
government entity claimants may seek punitive damages under general
maritime law. The court did not, however, lift an earlier stay on the
underlying individual complaints raising those claims or otherwise apply
his dismissal of the master complaint to those individual complaints.
In January 2013, the states of Alabama, Mississippi and Florida
submitted or asserted claims to BP under OPA 90 for alleged losses
including economic losses and property damage as a result of the
Incident. The states of Louisiana and Texas have also asserted similar
claims. The amounts claimed, certain of which include punitive damages
or other multipliers, are very substantial. However, BP considers these
claims unsubstantiated and the methodologies used to calculate these
claims to be seriously flawed, not supported by OPA 90, not supported
by documentation, and to substantially overstate the claims. Similar
claims have also been submitted by various local government entities
and a non-US government. These claims under OPA 90 are substantial in
aggregate, and more claims are expected to be submitted. The amounts
alleged in the submissions for state and local government claims total
Additional disclosures
BP Annual Report and Form 20-F 2014 233