BP Holdings, BP Code 85258080768: BP presents evidence of fraudulent claims, demands temporary halt of claims payments again
BP on Monday renewed its request for a federal judge to temporarily halt the payment of millions of dollars of economic claims stemming from the 2010 Deepwater Horizon disaster, charging it has found new evidence of improper payment of claims by an employee at a Mobile, Ala., claims office and of apparent conflicts of interest involving attorneys handling appeals in the payment process.
"These new incidents demonstrate a fundamental lack of oversight or internal controls," said a motion filed by the company. "When BP first asked for a preliminary injunction, it had compelling evidence of one scheme only. Now, the evidence shows the existence of 'a systemic or widespread problem' with the (Court Supervised Settlement Program)."
The motion filed with U.S. District Judge Carl Barbier said a temporary pause in the payment program, which is averaging more than $100 million in approved claims a week, according to BP, "serves the public interest because 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."
In mid-July, BP filed its first request for an emergency preliminary injunction, arguing that two of three top lawyers involved in the settlement program "apparently intervened" in the claims process -- and due to the tremendous amount of money involved in the payouts -- the court should grant the injunction to prevent potentially wrongful claims payments.
Barbier denied the motion after BP was unable to produce any evidence of fraudulent claims.
In June, court-appointed claims administrator Patrick Juneau announced that he was conducting an internal investigation after hearing rumors that a top-ranking staff attorney had received portions of settlement payments from clients he had referred to the office before his employment there. On July 2, Federal Judge Carl Barbier appointed former FBI Director Louis Freeh to conduct an investigation. That investigation is not yet complete.
BP again asked in its new motion that payments be suspended until the Freeh investigation is complete.
In its Monday motion, BP said a tip passed on to the company via its fraud phone hotline on July 15, the day after hotline started, claimed an employee at a Mobile, Ala., claims processing office was processing fraudulent claims and receiving part of the claims proceeds.
After BP told officials with the Court Supervised Settlement Program of the allegation, an investigation resulted in an employee of the Mobile office being suspended, the motion said.
"According to the tip, the employee was assisting individuals, including family members, in submitting fraudulent subsistence claims to the CSSP in exchange for payment of a portion of settlement awards that may be paid to these individual claimants," said a legal brief accompanying the motion. "The employee allegedly recruited individuals to submit fraudulent claims, provided advice regarding what claim details would yield the maximum claim possible, and received a portion of the awards."
"After investigation, the CSSP concluded that the employee's mother had filed a claim, and that the employee indeed had 'initiated' other subsistence claims, one of which already had been approved," the brief said. A subsistence claim is for damages alleged by a fisherman who catches fish for his or her own family.
"The claims were placed on hold and the employee was suspended pending investigation," the brief said. "In addition, a second employee at the Mobile facility was suspended for violating security protocol by accessing claims data at the request of the first employee, suggesting the possibility of more widespread misconduct at the Mobile facility."
The brief said a BP review of claims approved by the Mobile claims center found that it had originated more than 7,400 claims, significantly more than the just over 3,000 claims processed by the next most active claims office. And the 86 percent rate of offers to subsistence claimants at the Mobile office "is more than three times the average of the other claims centers," the filing said, adding that senior claims officials should have recognized the high rate as a red flag.
A BP comparison of business economic claims filed by law firms with the names of attorneys who were chosen to serve on panels hearing appeals of claims turned up as many as three lawyers who had worked at companies that represented claimants at the same time they served on appeals panels.
The company contends that is a conflict of interest, based on both state and federal laws and rules governing court settlements.
In its motion, BP said "the law firms of two appeal panelists were representing claimants and submitting claims on the firms' own behalf while the panelists were issuing rulings over disputed claims."
BP said a third appeals panelist also had an apparent conflict of interest, and resigned.
"Simply put, an Appeal Panelist cannot adjudicate BP disputes while his or her firm (and therefore he or she) is adverse to BP, without first obtaining an informed waiver," BP said in its brief.
One of the law firms represented at least five claimants who submitted business loss claims between October 2012 and April 2013, during the time its partner served in the pool of appeal panelists, while the other firm represented at least nine business loss claimants between April and June while its partner was an appeal panelist. Both of the firms also had filed their own claims for business losses, the memorandum said.
In the case of the attorney conflicts, BP said Juneau's office was aware of the conflicts, but failed to inform BP before taking or after taking actions involving the panelists.
"While BP has been informed by the CSSP that it was aware of the conflicts of interest of the two appeal panelists, and while the CSSP has apparently taken limited remedial steps in response, the CSSP failed to disclose these pertinent and troubling issues to BP until confronted by the newly discovered facts," said the motion. "While the conflicts and the alleged misconduct at Mobile are indicative of a lack of internal controls and oversight, the CSSP's failure to disclose these failings to BP is equally troubling."
"The claims administrator informed BP that he told (a federal) magistrate judge of the situation and the panel lawyer left the law firm and opened his own practice, where he continues to serve as an appeal panelist," the filing said.