BP PLC will plead guilty to several criminal charges -- including 11 felony counts of manslaughter -- under an agreement reached with the Justice Department over its role in the 2010 Deepwater Horizon disaster.
The oil giant announced the terms of the agreement today after rumors circulated last night of the imminent settlement. As part of the agreement, BP will pay $4 billion to resolve criminal claims, which several sources said includes the largest-ever fine for criminal charges in U.S. history.
In addition to the manslaughter counts, BP will plead guilty to one misdemeanor count under the Clean Water Act, one misdemeanor count under the Migratory Bird Treaty Act and one felony count of obstruction of Congress.
"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," BP Group CEO Bob Dudley said in a statement. "From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf. 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."
DOJ has been in talks with BP for months in an effort to come to a so-called global settlement on both the criminal and civil charges, but that apparently proved unattainable. Instead, the agreement focuses solely on federal government criminal charges and Securities and Exchange Commission claims related to the April 20, 2010, incident that led to the unprecedented oil spill in the Gulf of Mexico.
Attorney General Eric Holder will speak about the agreement at a news conference in New Orleans today at 2 p.m. EST.
The announcement marks the winding down of an investigation that has included the efforts of dozens of investigators from the DOJ inspector general's office, the FBI, U.S. EPA's Criminal Investigations Division and other state and federal agencies. Interior acting IG Mary Kendall has said in the past that the investigation has taken up much of her staff's time; the office has contributed more than a dozen investigators and spent more than $7 million over the past couple of years.
In its statement, BP said 13 of the 14 criminal charges are based on "the negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon," which it contended was in line with its previous statements on the incident. The remaining charge -- obstruction of Congress -- is based on the company's lowball estimate to Congress on how much oil was leaking into the Gulf during the spill.
The agreement with DOJ requires BP to pay $2.394 billion to the National Fish and Wildlife Foundation and $350 million to the National Academy of Sciences over a period of five years. In addition to the criminal fines, BP will pay $535 million to resolve SEC claims, over a period of three years.
BP will also "further enhance the safety of drilling operations in the Gulf of Mexico," including third-party auditing and working with regulators to develop new technologies for deepwater drilling safety. Two people will also be appointed as monitors -- one to evaluate BP's safety procedures and another to recommend improvements to the company's Code of Conduct.
DOJ may be making history with a $4 billion criminal fine, but it is unclear what the next-highest fine has been. In 2009, several news outlets reported that a $1.2 billion fine against Pfizer for marketing fraud was the largest at the time.
Environmentalists welcomed the news, though some said the fine was still far too low to act as an effective deterrent. Jacqueline Savitz, deputy vice president of U.S. campaigns at Oceana, said the law allows the government to levy as much as $90 billion in fines on BP for both civil and criminal charges.
"BP is responsible for the largest and most costly environmental catastrophe in U.S. history, and the fine should fit the crime," she said. "It's not enough to say it's more than the XX case -- the spill was the worst-case environmental disaster ever, and should be evaluated based on its vast and unprecedented impacts."
But John Cruden, president of the Environmental Law Institute, commended DOJ for "exceptional work in obtaining the largest criminal plea agreement in environmental history." Cruden is a former senior Justice Department official who helped supervise the civil investigation into the disaster before joining ELI.
"A guilty plea of numerous felony counts, as well as misdemeanor counts under the Clean Water Act and the Migratory Bird Treaty Act, demonstrates the importance of a thorough investigation and the vigorous prosecutorial efforts by the government," he said.
"And the plea agreement obtains substantial additional actions, enforceable by court, to make drilling operations in the Gulf of Mexico more safe. In particular, the appointment of two independent monitors to oversee BP's future work and assure ethical compliance is a great step forward."
Remaining civil claims
Although criminal charges were always likely, the focus in the immediate aftermath of the spill was on the various civil claims filed against BP by the federal government, states, and individuals and businesses affected by the disaster.
A provisional $7.8 billion settlement between BP and private plaintiffs was reached in March. That did not include any government entities, including the federal government, which has a major civil enforcement action pending against BP and partners Transocean Ltd. and Anadarko Petroleum Corp.
The government is seeking penalties for violations of the Clean Water Act and the Oil Pollution Act. Under the Clean Water Act alone, BP faces penalties of $1,100 per barrel spilled. That amount could rise to $4,300 a barrel if the government could prove that the company was grossly negligent.
As an estimated 4.9 million barrels of oil were spilled, a potential civil settlement could therefore be in the billions of dollars.
DOJ has already settled claims against MOEX Offshore 2007 Ltd., which had a minor stake in the well, for $90 million.
A federal judge in New Orleans is due to preside over a trial in February on how to assign liability among the companies involved.
In its statement today, BP said it will "continue to vigorously defend itself" against the various civil claims.
"From the outset, we made a commitment to clean up the spill and pay legitimate claims -- and we've been fulfilling that commitment ever since," BP's Dudley said. "As we move forward, we are preparing to defend ourselves in court on the remaining claims. We are open to settlements, but only on reasonable terms."
At least one lawmaker is worried: In a statement, Sen. David Vitter (R-La.) highlighted the need for more money in Louisiana.
"With these unprecedented criminal penalties assessed, I urge the Obama administration to be equally aggressive in securing civil monies that can help save our Louisiana coast through the Restore Act and NRDA," said Vitter, who'll be the top-ranking Republican on the Senate Environment and Public Works Committee in the next Congress. "I certainly hope they didn't trade any of those monies away just to nail this criminal scalp to the wall."
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