Gulf of Mexico Oil Spill: BP Fails Again to Halt Compensation Payments over Fraud Claim

British oil giant BP has failed in its second attempt to halt compensation payments over the 2010 Deepwater Horizon oil spill.

US district judge Carl Barbier ruled there was no credible evidence of fraud in the compensation process as claimed by the oil major. The company asserted that its compensation bill was inflated because of fraud and false compensation claims.

Patrick Juneau, the administrator of the compensation programme, had asked the judge to reject the company's demand to temporarily halt payments.

The company "has failed to submit evidence that would even arguably justify the granting of such an overbroad request," Juneau's lawyers said in a filing in the federal court in New Orleans.

In July, Barbier rejected BP's request to halt payments as the claims programme was being investigated by Louis Freeh, former FBI director, over allegations of misconduct. The judge ordered BP to pay $130m in fees to the administrator.

BP renewed the request on 5 August as a fraud hotline set up by the company found "new evidence of more widespread and potentially systemic improprieties" in the claims programme.

The oil company claimed that it had discovered that two lawyers, tasked with reviewing appeals of disputed claims, were also partners at law firms that represent applicants in the Court Supervised Settlement Programme (CSSP).

BP said that showed a conflict of interest but Barbier said that an internal probe by the claims administrator's office did not find credible evidence of fraud.

Reviewing options

The company continues to believe that widespread fraud and misconduct is present in the compensation system. An attorney working in the settlement programme was suspended for accepting fees from law firms while processing their clients' claims.

"As we await the completion of this broad investigation, we continue to believe a temporary pause in payments is warranted," BP said.

"BP is reviewing its options."

An explosion on BP's Deepwater Horizon rig in April 2010, which killed 11 workers, resulted in one of the worst environmental disasters in history. BP has since forked out $42.4bn in oil spill-related charges.

BP's costs are still mounting as it has taken a substantial hit in the running of the victims' settlement programme. This includes payments to court-appointed vendors and appeals panellists. It also has to bear administrative costs to process remaining claims from the Gulf Coast Claims Facility, a fund set up to pay claimants before the current settlement was reached.

The company originally expected the programme to cost $7.8bn, but recently it lifted its estimate to $9.6bn and said it could go higher.