WASHINGTON (CN) – The administrator of the $20 billion BP escrow fund said Monday that his plan to award compensation to victims of the Gulf of Mexico oil spill is better than BP’s solution. “BP was putting Band-Aids on the problem,” Kenneth Feinberg told the Economic Club in Washington.
“There are certain tragedies in American life where policy makers seek a creative alternative to public policy,” Feinberg added. “Conventional thinking won’t work.”
Feinberg was appointed jointly by BP and the Justice Department to oversee the $20 billion fund created to compensate victims of the BP oil spill, taking over the claims process from 1,600 BP contractors who are currently handling claims in the Gulf. Feinberg is working independently of both the government and BP.
Feinberg previously administered the 9/11 victim compensation fund and set executive pay for seven giant financial and automotive companies who received TARP funds in the wake of the financial collapse.
So far, BP has paid out $200 million in claims, mostly related to wage loss. “I give BP some credit here,” Feinberg said.
But he said when he gets the new Gulf coast claims facility up and running next month, the system will be much more streamlined. He said he will not need the 1,600 claims personnel BP did because the system will be more efficient and will include an online claims-filing process.
“BP didn’t do that. BP was putting band-aids on the problem,” Feinberg said.
Feinberg’s job is to develop a methodology for awarding damages for economic loss, lost profits and other claims for businesses including charter boats, motels and restaurants. Participants in the program will be offered a lump sum payment for all present and future injuries. If they decide to take the check, then they waive any rights against BP. If they are dissatisfied with the amount, they can take BP to court instead.
“Anybody can decide, ‘Id rather go to court or implement my other legal rights,'” Feinberg said. “Go ahead. You’re crazy to do so, though….I’ll be much more generous than any court would be,” he said. “It is, to my way of thinking, an easy call.”
Feinberg said the biggest challenge with the process will be determining at what point claims are so attenuated that they cannot be compensated. A seafood restaurant in Boston that files a claim for losing profits on their shrimp scampi, for instance, would be highly unlikely to receive compensation from the fund.
Then, there is the problem of proof.
“I can be very lenient as to proof,” Feinberg said, citing a hypothetical scenario of a fisherman coming to him without a paystub and asking to be compensated for cash loss. “There is nothing illegal about a cash business,” Feinberg said. Feinberg said he would accept as proof the fisherman’s ship captain vouching for his income.
The fund will last for three years.
“That $20 billion is not just for me,” Feinberg said, explaining that government claims for cleanup costs are also included in the fund. But he added that BP has publicly promised to pay all claims.
Feinberg said he has been visiting Gulf coast states to sell the program and set up the infrastructure, hiring locals to receive and process claims.
“This job requires a certain emotional perspective on what people are going through,” Feinberg said. “No matter how creative you may be in making a reasonable program, you still have to sell it to people who are emotionally distraught. And that is a big part of what I have to do.”