BP Says It Has ‘New Evidence’|of Fraud in Claims Process

     NEW ORLEANS (CN) – Citing what it calls new evidence, BP asked again to suspend oil spill claims payments until court-appointed Special Master Louis Freeh completes his investigation of allegations of fraud in the claims process.
     In a second attempt to stop payments until Freeh’s review is complete, BP claims it has found new evidence of improper conduct in the Court Supervised Settlement Program (CCSP).
     “Any short delay in CSSP payments is outweighed by the potential harm to BP if fraudulent payments are made,” BP attorneys wrote in a 25-page memorandum in support of its renewed motion for preliminary injunction.
     U.S. District Judge Carl Barbier, who is overseeing the multidistrict oil spill litigation, denied BP’s first request to temporarily suspend payments, at a July 19 hearing . Barbier said he would not shut down the process “without evidence of some systemic problem within the court settlement program.”
     BP’s memorandum, filed Monday, claims that “since the July 19 hearing … BP has learned of new evidence of more widespread and potentially systemic improprieties in the CSSP.”
     The memo states: “In particular at least two Appeal Panelists had apparent conflicts of interest – specifically, their law firms were representing claimants and submitting claims on their firms’ own behalf while the Appeal Panelists were issuing rulings over disputed claims. Thus, the appeals process can no longer be counted on to provide the necessary safeguards against the risk of improper payments.
     “Second, while the Court also denied BP’s motion because of a perceived lack of specific evidence that the misconduct actually impacted the calculation or payment of any claims, BP now has learned of evidence that individual CSSP employees (who allegedly received ‘referral’ fees similar to those at issue in BP’s prior motion) in fact may have been able to cause the CSSP to approve and pay improper claims. Specifically, BP learned through its fraud hotline of allegations that a CSSP employee in the Mobile, Alabama claims center assisted claimants in submitting fraudulent subsistence claims in exchange for payment of a portion of settlement awards for those claims. After BP promptly referred this matter to the CSSP, the CSSP suspended two employees. … Moreover, a review of the claims approved by the CSSP’s Mobile claims center indicates that the reported scheme may be more extensive than the CSSP has acknowledged or even recognized thus far, as the office’s overall claims approval rate is three times the average of the other offices. …
     “In sum, there is now new, additional evidence to show a substantial likelihood of a breach of fiduciary duty based on the lack of sufficient controls within the CSSP. In light of this additional evidence of apparent conflicts, likely improper payments, and lack of proper oversight, BP submits that the prudent course is to briefly pause CSSP payments (but not claims processing) until Judge Freeh completes his court-ordered ‘evaluati[on of] the internal compliance program and anti-corruption controls within the CSSP, and mak[es] any necessary recommendations to design and to implement additional such controls, policies, procedures, and practices.’ 7/2/13 Order (Dkt. No. 10564) at 2. Given the evidence of a lack of effective controls, until that investigation is complete the parties and the public can no longer have confidence that improper claims are not being paid.” (Brackets and parentheses in original.)
     BP says the claims center is making $93 million in payments a week.
     “Any short delay in CSSP payments is outweighed by the potential harm to BP if fraudulent payments are made. … Preventing even the risk of fraudulent payments is in the public’s interest and sends a clear message to future litigants that misconduct in settlement programs will not be tolerated,” BP says in the memo.
     Patrick Juneau is the Louisiana lawyer who was chosen jointly by BP and plaintiff attorneys to oversee the payout program.
     Barbier appointed former FBI Director Freeh as special master to look into BP’s allegations of fraud in the claims process after Juneau announced that he was conducting an internal investigation based on rumors that an attorney at the claims office was taking kickbacks for ensuring that certain claims were processed.
     The claims program was put in place to compensate people and businesses harmed by the April 20, 2010 explosion of the Deepwater Horizon rig. The disaster killed 11 people and set off the worst offshore oil spill in U.S. history.
     BP is awaiting a ruling from the 5th Circuit on its challenge to the claims payment process after Judge Barbier ruled against it.
     In March, after alerting investors that claims payments paid by BP could be “much higher” than the $7.8 billion BP originally estimated, BP filed a lawsuit against Juneau, alleging the claims process is paying “hundreds of millions of dollars” in false business claims that bear no “rational connection to the oil spill,” and that could cost BP “billions of dollars” for “fictitious losses.”
     Barbier ruled in April that BP must pay claims according to the terms of the far-reaching settlement agreement BP spent the better part of 2011 hammering out with plaintiffs’ attorneys.

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