Canadian Manufacturing

BP cites fraud and malfeasance in new bid to skip settlement payments

The company that caused to most damaging oil disaster in history said it shouldn't have to bear the risk of improperly filed claims.

NEW ORLEANS—British oil giant BP has asked a U.S. judge to temporarily halt all settlement payments to Gulf Coast businesses and residents who claim they lost money after the company’s 2010 oil spill while former FBI Director Louis Freeh investigates alleged misconduct by a lawyer who helped administer the multibillion-dollar settlement program.

BP PLC argued in a court filing Tuesday that it shouldn’t be required to take the risk that hundreds of millions of dollars in claims payments could be “tainted by fraud, corruption and malfeasance.”

The company, which reported first quarter profits of $4.2 billion,  did not say whom it thinks should bear the risk of the devastated ecosystem left behind after its Deepwater Horizon oil rig exploded and spent the next 87 days pumping 210 million gallons of oil into the gulf of Mexico.

The U.S. District judge didn’t immediately rule on BP’s most recent request to temporarily halt settlement payouts.

The April 2010 blowout of BP’s well off the Louisiana coast triggered an explosion that killed 11 workers on the Deepwater Horizon drilling rig and led to millions of gallons of oil spilling into the Gulf. Shortly after the disaster, BP agreed to create a $20 billion compensation fund.

BP initially estimated that it would pay $7.8 billion to resolve claims by tens of thousands of Gulf Coast residents and businesses. Now the company says it no longer can give a reliable estimate for how much the deal will cost.

In April, the judge refused to block what could be billions of dollars of payments to businesses after BP argued that he and the court-supervised claims administrator Patrick Juneau have misinterpreted the settlement and forced the company to pay for inflated and fictitious losses.

BP appealed that decision, and a panel from the 5th U.S. Circuit Court of Appeals heard the case last Monday.

Last month, Juneau announced that his office is investigating allegations that an attorney on his staff, Lionel H. Sutton III, received a portion of settlement proceeds for claims he had referred to a law firm before he started working on the settlement program. Sutton has resigned and denied the allegations.

Freeh was appointed July 2 to lead an independent probe of the allegations involving Sutton and to take a broader look at the settlement program.

BP spokesman Geoff Morrell said the company believes a temporary pause of all claims payments is “prudent and necessary” during Freeh’s investigation.

“Put simply, BP did not bargain for, and should not have to bear the risk of, improper payments due to fraud or corruption,” the company’s attorneys said.

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