GULF SPILL:
Leader of 'bureaucratic hell' is undeterred by claims, controversies
Greenwire:
Kenneth Feinberg has earned many reputations since he accepted the oversight of BP PLC's $20 billion claims fund for last year's Gulf of Mexico oil spill. Wasteful, stingy, slow, biased, dishonest, overpaid -- the attorney has heard it all.
BP complains he's too generous. Mississippi Attorney General Jim Hood (D) says he's too far in the corporation's pocket. And last month, Lousiana Sen. David Vitter (R) accused him of overseeing a "bureaucratic hell" that has prevented residents from collecting.
But in a recent interview, Feinberg seemed unfazed. With about $3.8 billion distributed since August, he said his agency will be able to settle all claims before it closes in August 2013.
"I think during the next year, you will see a comprehensive solution of virtually all remaining claims," he said. "I think as time goes by, as the future scenario in the Gulf becomes more certain, I think more and more claimants will opt for a final payment."
One year after the Deepwater Horizon oil rig exploded, the Gulf Coast Claims Facility has written checks to almost 180,000 claimants. The checks range from hundreds to millions of dollars.
But of the $3.8 billion distributed so far, $2.6 billion was used to issue emergency payments to keep residents and businesses afloat in the six months after the spill. Feinberg only recently entered what he calls phase two: issuing the payments aimed at making claimants whole.
Most of those payments are "Quick Payments" or "Final Payments," which require the recipients to waive their right to sue BP. So far, about 106,000 claimants have accepted the quick option, which is set at $5,000 for individuals and $25,000 for businesses. Far fewer have pursued the more in-depth final payment; about 11,000 have been paid out of the 60,000 claims GCCF has reviewed.
That hasn't sat well with politicians, particularly Hood, who recently filed a motion asking the U.S. District Court in Louisiana to audit the awarding process. Last week, Hood told the Associated Press that he believed Feinberg was intentionally delaying legitimate claims to force people to take the quick payment option.
"At some point, I'm going to put his tail in a chair and make him raise his right hand in a deposition and get to the bottom of whether him and BP conspired to force people into the Quick Pay process," he said.
Feinberg shot back, filing a response that called Hood's request unlawful and counterproductive. Such monitoring, Feinberg's lawyer wrote, would "only harm claimants because it would require the GCCF to divert critically important resources to these tasks, and chill the ability of GCCF personnel to work expeditiously without fear of running afoul of an independent auditor."
However, Feinberg pointed out that claimants can appeal their awards -- or simply file for interim payments that don't require them to sign away their right to sue.
"For those who say that we're being too restricted in finding legitimacy or we're being too conservative and lacking generosity in paying claims, under the federal laws which we're guided by, anybody who thinks we're being restrictive or insufficient can appeal to the Coast Guard," he said.
To date, the Coast Guard has rendered decisions in 574 cases. The agency, Feinberg was quick to point out, has so far backed up GCCF in all its decisions.
An opportunity for fraud
Administering BP's claims fund is nevertheless a daunting task; so far, the GCCF has received more than 500,000 claims. It's unclear how many of those claims were fraudulent. Feinberg said an internal anti-fraud unit has found 8,000 claims that are suspicious and referred about 1,000 of those to the Department of Justice.
But prosecuting such cases can take years. DOJ, for example, was still handing out indictments last year for fraud committed in the aftermath of Hurricane Katrina, which hit Louisiana in 2005. A DOJ spokeswoman said that as of December, the agency had charged just seven individuals with attempting to defraud the Gulf spill claims process.
Those individuals had forged paychecks, invented businesses and used aliases in attempts to get tens of thousands of dollars out of the GCCF, according to indictments.
One claimant allegedly pretended to be her deceased sister to collect $15,500 in purported lost wages. Sabrina Ann Conner died in Phenix City, Ala., a few weeks after the Deepwater Horizon exploded. But in August, her sister Charlotte Blount Johnson filed a claim in Conner's name. A Secret Service agent filed charges against her in October.
Another claimant invented a business called "Sea Shell Jewelry & Collectibles." And a third, Travis Sigler, tried to claim $13,000 in lost wages at the restaurants Camille's Seafood and Willie's. But Russell Steiner, the former owner of Camille's, told FBI investigators that Sigler "only worked at Camille's for approximately three days and was let go not because of the oil spill but because he was a poor employee."
Such scams are perhaps more common since Feinberg expanded the claims process to businesses that aren't directly associated with fishing and ocean activities. When GCCF was handing out emergency funds, Feinberg said, "we were less likely to consider a dentist eligible." But now, that dentist can claim that a drop-off in visiting tourists meant less clientele -- as can a hair salon, an ice cream parlor and a variety of other businesses.
In an executive summary released yesterday, GCCF officials pointed out that some claimants request wildly unrealistic payments. One claimant, for example, demanded all $20 billion; another asked for $10 billion.
"In general, amounts requested by many claimants are well out of proportion to the damage actually substantiated in the claimant's submission to the GCCF," officials wrote. "As a result, the distinction between the amount claimed and the amount paid is not a useful barometer of progress."
Unprecedented claims
The distribution of the BP funds -- and the controversy that has come along with it -- stand in stark difference from Feinberg's experience administering the Sept. 11 Victim Compensation Fund. That fund processed only 7,300 claims for death and physical injury, and 98 percent of the families of the deceased decided to accept payments rather than go to court.
Feinberg did that job pro bono and earned accolades for his unbiased oversight. This time around, his law firm is receiving $1.2 million each month, and Feinberg is facing criticism on all sides.
Feinberg said the oil spill fund is much more complicated and nuanced; while the Sept. 11 claims were based on death or injury, the GCCF must calculate claims based on how the spill affected income.
"The sheer magnitude and volume of the claims are unprecedented," he said. "Although there are 11 dead in the explosion on the rig, this is largely and qualitatively a damage model based on lost income."
Yesterday's executive summary made a similar point, warning the public that the GCCF could make "midcourse adjustments to promote expeditious resolution, transparency, and consistency of the claims process."
Furthermore, as time goes on, the GCCF won't have to operate under a deluge of claims, Feinberg said.
"New claims are continuing to come in in the hundreds each day," he said, "but I think that over time, based on improved resources in the Gulf ... I think the new filings will slow down."