Gulf spill payout chief is under fire as claims pile up

Critics allege delays, lack of transparency

By Brian Skoloff
Associated Press / February 15, 2011

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NEW ORLEANS — President Obama vowed during a White House speech last June that the $20 billion he helped coax out of BP for an oil spill compensation fund would take care of victims “as quickly, as fairly, and as transparently as possible.’’

Eight months later, that’s not how things look to many people along the Gulf Coast.

Tens of thousands of fishermen, oyster shuckers, business owners, hotel operators, and even hairdressers still await payment. Many others whose claims have been turned down question the evenhandedness. And without the data to determine who is right, attorneys general and members of Congress question the openness.

An Associated Press review that included interviews with legal specialists, government officials, and more than 300 Gulf Coast residents found a process beset by red tape and delay, and at the center of it all a fund administrator whose ties to BP have raised questions about his independence.

Now, the dissatisfaction has reached a fever pitch: Lawmakers in Washington are demanding that the White House step in, the Louisiana governor and others want a federal judge to intervene, and the people most affected by the Deepwater Horizon disaster are threatening to line the courthouse steps if they don’t get the changes they seek from administrator Kenneth Feinberg.

“A lot of promises were made by Feinberg and President Obama that this would be a very open process, and I just don’t feel that’s the case,’’ said Representative Steve Scalise, a Louisiana Republican.

Feinberg, the Washington lawyer who runs the fund and was lauded for his work overseeing the compensation fund for 9/11 victims, has insisted that he is being fair.

He has acknowledged that the system is clogged by the sheer volume of oil spill claims, along with inflated or outlandish requests.

Among them: One person filed a claim for the entire $20 billion, while another asked for $10 billion; a boat captain sought reimbursement for lost income for himself and four deckhands, but it turns out he didn’t have any deckhands; and a fisherman claimed he lost a month on the water, but his boat had a hole in it and was dry-docked even before the spill.

Feinberg recently said he believes the Gulf of Mexico should largely recover from BP’s oil spill by the end of next year, and he doesn’t think the entire $20 billion will be needed to compensate victims. Only half of that should suffice, he said.

“Overall, I think the program has worked well,’’ Feinberg said in an interview. “I think the program has been fairly transparent.’’

The fund and Feinberg’s agency, the Gulf Coast Claims Facility, were an extraordinary response to an extraordinary situation — more than 200 million gallons of oil spewing from a well a mile beneath the Gulf of Mexico, fouling the coastline from Florida to Texas. The normal course in an oil spill is for the responsible party — in this case BP — to pay claims directly.

BP was doing that until August, when it turned over the process to Feinberg as part of the president’s promise that payments would be “administered by an impartial, independent third party.’’

So far, nearly 490,000 claims have been filed, and roughly half have been turned down. The fund has handed out $3.4 billion to 169,000 claimants. Nearly all the money dispensed so far has been in the form of either emergency payments for short-term losses or one-time checks handed out in exchange for a promise not to sue.

To date only two final settlements for long-term losses — including a $10 million payment to a BP associate the fund refuses to identify — have been paid out.

While the government helped force BP’s hand to set up the fund, it did not include a mechanism to oversee Feinberg’s operations, which are not subject to state or federal open records laws. Citing confidentiality requirements, Feinberg refused requests by the AP for information about who is getting the money.

There are suspicions in some quarters that the oil company is unduly influencing the process. Feinberg said the fund did not review the $10 million claim paid to the BP associate, even though he has insisted that everyone else’s claim be reviewed. He said only that BP asked him to make the payment, and he did.

Earlier this month, a federal judge in New Orleans ordered Feinberg to stop saying that he is independent of the oil giant, writing that the administrator is “acting for and on behalf of BP.’’ Until last month, Feinberg’s firm was receiving $850,000 a month from BP, and it is now negotiating a new fee package with the company.

Lawmakers from both parties are up in arms, and the Justice Department has urged Feinberg to speed up payments, reminding him in a recent letter that he is not there to save BP money.

Hundreds of angry fishermen and business owners have flooded the Gulf Coast Claims Facility’s website over past last two weeks with complaints.

According to Feinberg, claims were rejected because they were ineligible, lacked documentation, or were fraudulent. By Feinberg’s own count, fraudulent claims make up only 1.5 percent of the total filed.

About 188,000 people have decided to give up their right to sue BP in exchange for final payments. Some opted for one-time checks of up to $25,000. Others — 97,000 — are waiting on much bigger checks based on proof of losses. top stories on Twitter

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