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BP, the British oil company, said on Thursday that it had agreed to pay $4.5 billion in fines and
other penalties and to plead guilty to 14 criminal charges related to the rig
explosion two years ago that killed 11 people and caused a giant oil spill in
the Gulf of Mexico.
In a rare instance of seeking to hold individuals accountable for
company misdeeds, the Justice Department also filed criminal charges against
three BP employees in connection with the accident. “This is unprecedented,
both with regard to the amounts of money, the fact that a company has been
criminally charged and that individuals have been charged as well,” Attorney
General Eric H. Holder Jr. said at a news conference in New Orleans to announce the settlement.
The government said that BP’s negligence in sealing an exploratory well
caused it to explode, sinking the Deepwater Horizon drill rig and unleashing a
gusher of oil that lasted for months and coated beaches all along the Gulf
Coast. The company initially tried to cover up the severity of the spill,
misleading both Congress and investors about how quickly oil was leaking from
the runaway well, according to the settlement and related charges.
While the settlement dispels one dark cloud that has hovered over BP
since the spill, it does not resolve what is potentially the largest penalty
related to the incident: the company could owe as much as $21 billion in
pollution fines under the Clean Water Act f it is found to have been grossly
negligent. Both the government and BP vowed to vigorously contest that issue at
a trial scheduled to begin in February. Under its deal with the Justice Department, BP will pay about $4 billion
in penalties over five years. That amount includes $1.256 billion in criminal
fines, $2.394 billion to the National Fish and Wildlife Foundation for
remediation efforts and $350 million to the National Academy of Sciences. The
criminal fine is one of the largest levied by the United States against a
corporation.
BP also agreed to pay $525 million to settle civil charges by the
Securities and Exchange Commission that it misled investors about the flow rate
of oil from the well. In addition, the company will submit to four years of
government monitoring of its safety practices and ethics. “All of us at BP
deeply regret the tragic loss of life caused by the Deepwater Horizon accident,
as well as the impact of the spill on the Gulf Coast region,” Robert W. Dudley,
BP’s chief executive, said in a statement. “We apologize for our role in the accident, and as today’s
resolution with the U.S. government further reflects, we have accepted responsibility
for our actions.”
A broader settlement that would have resolved the Clean Water Act claims
failed to win agreement from some parties, in particular the state of
Louisiana. BP and the government now intend to go to trial on those claims in February.
The government charged the top BP officers aboard the drilling rig, Robert
Kaluza and Donald Vidrine, with manslaughter in connection with each man who
died, contending that the officials were negligent in supervising tests to seal
the well. Prosecutors also charged David Rainey, BP’s former vice president for
exploration in the Gulf of Mexico, with obstruction of Congress and making
false statements for understating the rate at which oil was spilling from the
well.
As part of its plea agreement, BP admitted that, through Mr. Rainey, it
withheld documents and provided false and misleading information in response to
the House of Representatives’ request for information on how quickly oil was
flowing. While Mr. Rainey was publicly repeating BP’s stated estimate of 5,000
barrels of oil a day, the company’s engineering teams were using sophisticated
methods that generated significantly higher estimates. The Flow Rate Technical
Group, consisting of government and independent scientists, later concluded that
more than 60,000 barrels a day were leaking into the gulf during that time.
Lawyers for all three men charged denied that their clients had
committed any criminal wrongdoing. “This is not justice,” Mr. Kaluza’s lawyers,
Shaun Clarke and David Gerger, said in a statement. “After nearly three years
and tens of millions of dollars in investigation, the government needs a
scapegoat.” Mr. Holder, the attorney general, said that the government’s
investigation was continuing and that other criminal charges could be filed. Under
the settlement announced on Thursday, BP agreed to plead guilty to 11 felony
counts of misconduct or neglect related to the deaths in the explosion. The
company pleaded guilty to one misdemeanor violation of the Clean Water Act and
one misdemeanor violation of the Migratory Bird Treaty Act. It also agreed to
plead guilty to one felony count of obstruction of Congress over its statements
about the flow rate.
Shelley Anderson, whose husband, Jason, died in the Deepwater Horizon
disaster, said she was happy to hear about the settlement. “I think it’s a good
thing that BP has owned up to their responsibility,” she said. But Ms. Anderson
said the agreement did not change her own situation. “Everybody has asked about
closure, closure, closure,” she said. “It’s not necessarily closure for us,
because we still live every single day. We get up every single day and do it
again. Life goes on.” BP has repeatedly said it would like to reach a
settlement of all claims against it if the terms were reasonable. The
unresolved claims have been weighing on the company’s share price.
On Thursday (Nov. 15), BP’s American shares closed at $40.30, up
slightly on the day and down about 34 percent since the accident. The
settlement is “one less thing to be negative on BP about and a minor step in
the right direction toward the rehabilitation of BP,” said Iain Armstrong, an
equity analyst at the investment manager Brewin Dolphin in London. But he added
that there were still concerns about the remaining claims, and that “lawyers
might yet have their day at court.” As part of Thursday’s announcement, BP said
it was increasing its reserve for costs and claims related to the spill to
about $42 billion.
Brian Gilvary, BP’s chief financial officer, said in a conference call
with analysts that the board weighed the settlement struck with the government
against the prospect of a much wider criminal indictment that would have
involved more people in the company. “A criminal indictment would have been a
huge distraction,” he said. BP said that before Thursday’s announced payments,
it spent more than $14 billion on operational response and cleanup costs and $1
billion on early restoration projects, and paid out more than $9 billion to
individuals, businesses and government entities.
In March, BP agreed with the lawyers for plaintiffs to settle claims of
economic loss, including from the local seafood industry, and medical claims
stemming from the oil spill. The company said it expected that settlement to be
an additional $7.8 billion, which it will pay from a trust it set aside to
cover such costs. Until this week, the only BP employee to be arrested and
indicted was a low-level engineer, Kurt Mix, who has been charged with
obstruction of justice for deleting text messages about company estimates of
the flow rate from the spill. The government has asserted that in October 2010,
Mr. Mix, of Katy, Tex., deleted from his smartphone a string of more than 200
messages with a supervisor about the flow rate estimated at the time of a failed
effort to contain the spill. He is also accused of deleting a second string of
messages with a contractor in August 2011.
Mr. Mix has pleaded not guilty to both counts of impeding a grand jury
investigation, saying that the deletions were routine and that other records of
the communications still existed. David Yarnold, chief executive of the
National Audubon Society, said Thursday’s settlement “matches the unprecedented
offense BP committed.” “But BP needs to compensate the Gulf Coast in the form
of civil damages,” he said. “The rule has to be: You break it, you buy it.” The
company could still face billions of dollars in penalties under the Oil
Pollution Act or the Clean Water Act. This possibility has spurred political
jockeying between the Obama administration and Gulf Coast politicians who want
to maximize the amount of money the states receive to help local communities
affected by the spill.
Under the Clean Water Act, fines could range from $1,100 for every
barrel spilled through simple negligence to as much as $4,300 a barrel if the
company were found to have been grossly negligent. With an estimated 4.9
million barrels of oil spilled in the accident, the company faces liabilities
of as much as $5.4 billion to $21 billion. Gulf Coast lawmakers passed
legislation called the Restore Act last summer under which 80 percent of fines
paid by BP under the Clean Water Act would go to gulf communities. The Justice
Department could also levy fines under a provision of the Oil Pollution Act, in
which case BP would face a bigger penalty — more than $31 billion — to repair
damages. But BP would be allowed to take a tax deduction for damages paid, and
federal agencies would control how the fine money was spent.
While the government will no longer be able to hold the threat of
criminal charges over BP in negotiations about a civil fine, its quiver is not
empty. Brandon L. Garrett, a law professor at the University of Virginia who
studies corporate prosecutions, said the government could still invoke the
threat of “debarment,” or disqualification from getting federal contracts.
Although debarment is rare, he said, “that could be a very large blow both to
reputation and to business BP does with the federal government.”
Two other companies involved in the Gulf of Mexico accident, the rig
operator Transocean and the cement contractor Halliburton, also face potential
civil and criminal liabilities. Representative Ed Markey, the Massachusetts
Democrat who was chairman of the House committee that received false
information from BP about the spill rate in 2010, said: “The Obama
administration and the Department of Justice have held BP to the highest level
of accountability that the law allows, including for their lies to Congress.
Now it is up to Congress to enact laws that raise both the safety standards for offshore drilling and the liability cap for companies that still spill.”
Source: NY Times
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