Thursday, May 24, 2018

BP questioning oil spill payments to some Tampa Bay area businesses (w/video)

Who deserves to be compensated for the catastrophic BP oil spill of 2010?

A water scooter rental on John's Pass in Madeira Beach?

A restaurant on Gulfport's waterfront?

How about a septic tank cleaning service in Pasco County, a blueberry farm in Hernando or a funeral home in Plant City?

The answers may surprise you.

Under the terms of a class-action settlement signed two years ago, BP doesn't owe anything to the water scooter business or the waterfront restaurant.

The other three companies, meanwhile, meet the criteria for payouts.

In 2012, BP negotiated an agreement that was supposed to resolve the majority of claims from individuals and businesses for lost wages and sales.

Now the company is complaining that the compromise it once praised is being misinterpreted, with money going to people who don't deserve it.

The London-based energy giant has launched an aggressive campaign in the media and in the courts, trying to clamp down on what it considers outrageous payouts. In October, a judge put a halt on payments of business claims until the issues are resolved.

What was supposed to be a quick and equitable compensation process has devolved into mud slinging and legal motions.

Nearly four years after the disaster killed 11 workers, sent millions of gallons of oil into the Gulf of Mexico and disrupted businesses along the coast, the cleanup continues in the courts.

How we got here

In June 2010, while BP was still scrambling to stop the flow of oil, it tried to address the public relations debacle by setting aside $20 billion to pay for restoration, penalties and damages. The company hired attorney Kenneth Feinberg to run the operation and within 18 months, he had dispersed $6.2 billion to individuals and businesses.

But Feinberg's effort was criticized for its lack of transparency and inconsistency, which resulted in people with similar claims receiving vastly different amounts.

Lawsuits from businesses claiming losses began stacking up in the courts and BP was facing pressure from shareholders and the government to resolve the complaints. After 10 months of negotiations with plaintiffs' lawyers, the company agreed to a simple formula for determining who would get paid what.

According to the 1,200-page agreement, if a business near the Gulf Coast can show its revenue dropped in 2010 then rebounded in 2011, it qualifies for compensation.

The companies do not have to prove a direct link to the spill.

Before the settlement was finalized by a federal judge in New Orleans, the court-appointed claims administrator, Patrick Juneau, warned that the methodology could lead to payouts "without regard to whether such losses resulted or may have resulted from a cause other than the Deepwater Horizon oil spill." Nonetheless, BP joined plaintiffs' lawyers in asking U.S. District Judge Carl Barbier to approve the agreement.

Alexandra Lahav, a law professor at the University of Connecticut who has followed the case, said BP could have insisted that only companies touched by oil could be compensated. Or it could have forced businesses to convince a jury that their losses had been caused by the spill. Instead it agreed to use a company's location and its financial performance over time as criteria for compensation, avoiding years of expensive and risky litigation.

"It is a generous settlement," Lahav said. "But what it seemed to give BP was the certainty that it had managed its risk."

Within months of the settlement, however, BP began crying foul.

It started appealing all payments over $25,000 and challenging the claims administrator's accounting methods in legal motions. In the past seven months, BP has also taken more than a dozen full-page ads in the New York Times, Washington Post and Wall Street Journal, citing payments to an adult escort service and a celebrity chef, among others, as proof of a claims process run amok.

"Would you approve these claims?" one ad asked about a $60,000 payment to four colorectal surgeons. "The Gulf Settlement Program did."

Geoff Morrell, a former Pentagon press secretary who became BP's top spokesman in September, said in an email that the company "cannot stand by as the settlement agreement is interpreted to allow the claims program to make payments to business claimants for inflated and fictitious losses, or losses with no causal connection to the spill."

Lahav, the University of Connecticut law professor, called BP's change of heart "mysterious."

"My thesis is that things have changed from a public relations perspective," she said. "Before they were in the dog house. Now they feel they can complain."

Who's getting paid

It is impossible to identify exactly who is getting checks from BP because under terms of the settlement, the names of applicants and recipients are secret.

Since the claims process began in July 2012, about 260,000 claims have been submitted. So far only about 25 percent have been approved for nearly $5 billion in payouts.

In Florida, there have been more than 5,500 business claims approved for a total of $900 million. That's an average of $160,000 each.

Of the Florida business claims, nearly 60 percent are in industries unrelated to seafood or tourism. But proponents of the settlement say even businesses without direct ties to tourism felt the ripple effects of the spill.

Richard Love's printing company in St. Petersburg may be one of them. Part of its business involves coating and binding menus, brochures and tourist guides. And in 2010, his business was down.

"I don't really know if our financial downturn was tied to BP or if it was just the way the economy was going," said Love, whose company has a $116,000 claim pending.

Frank Monte, a real estate broker in Wesley Chapel, 30 miles from the gulf, said he lost money in 2010 on rental property he managed on the coast.

Though his claim had been denied by Feinberg, Monte got a check for $39,500 through the class-action settlement.

After filing the paperwork for his own company, Monte promptly went into the business of alerting others of possible paybacks. Working out of a strip center storefront, Monte charges a fee for walking clients through the application process.

"People say, 'I'm in Wesley Chapel, how was I affected?' " said Monte, whose office is decorated with maps of the gulf and big color photos of the Deepwater Horizon explosion. "I tell them it's a mathematical calculation. I can run the algorithms and in five minutes tell them if they're in or they're out."

Monte, who also is a licensed insurance agent, said about two-thirds of the businesses he has reviewed meet the settlement's financial criteria.

According to Monte's website, they include an ATM sales company seeking more than $600,000 and an adult retail store with a $12,000 claim. His biggest client is a drywall contractor who worked on beachfront condos; it has filed an $8.6 million claim.

Three blueberry farms are also among Monte's clients. Daniel Ebbecke, whose 13-acre farm in Hernando County had its worst year ever in 2010, is one of them.

"The whole region was impacted by what BP did," said Ebbecke, who declined to disclose the size of his claim. "I don't feel any remorse whatsoever. I'm just following the rules they wrote."

Timothy Haught, who owned a funeral home in Plant City in 2010, got fliers last year from companies like Monte's urging him to consider making a claim. When he heard that another funeral home in the town 50 miles from the gulf had filed, he asked his bookkeeper to look into it. It turned out he didn't have the necessary paperwork.

"I don't really think the spill hurt me," Haught said. "But hell, if I got a chance, I'd file."

The flip side

BP criticizes the fact that businesses not dependent on tourism are reaping benefits. On the flip side, plaintiffs' lawyers say plenty of tourism-related businesses are out of luck under the same guidelines.

Because the formula is based on gross revenues, not net, businesses don't get credit for any investments they made in equipment or marketing to stay afloat during the crisis.

In the months following the spill, Woody Pershing said he saw fewer Europeans coming to rent jet skis at his business on John's Pass. A study for Visit St. Pete-Clearwater showed that the number of visitors from Europe to the area dropped 5.5 percent in 2010, while total tourist spending was flat.

But Pershing bought more water scooters and generated more revenue that year, making him ineligible for BP money. He believes business at Woody's Watersports would have been even better if not for the oil spill.

"My increase in the fourth quarter was not as big as the first three quarters because the European business was down," Pershing said.

In Gulfport, Joe and Maddy Guenther were investing heavily in their newly expanded restaurant as fears of oiled beaches kept Europeans away. Joe Guenther said he doubled the advertising budget in 2010 for O'Maddy's, across from the town's waterfront. As a result, sales held steady even as profit dropped by $100,000. Since revenues were flat — not down — the restaurant doesn't qualify for compensation under the settlement.

Meanwhile, Guenther said O'Maddy's servers got checks from BP of up to $10,000 each for lost wages when their hours were cut after the spill.

"I still can't fathom how a server could prove her income went down and we couldn't," Guenther said.

And Bill Houghton, general manager of Madeira Beach Seafood, said the court's criteria doesn't take into account the steps his company took to mitigate the effects of having its suppliers' fishing grounds closed because of the spill.

"We got rid of trucks and the three partners that owned the business didn't pay themselves for eight months to maintain wages for the crew," he said. Despite these moves, the wholesale fish business lost $3 million in sales in 2010.

But because the settlement formula ignores cost-cutting measures, BP is offering the company far less than what it lost that year, "just a few hundred thousand dollars," Houghton said.

"What we're being offered is peanuts," said Houghton, whose company is appealing the offer. "And they're not even shelled."

Hardball in the future

Though BP's legal challenges have been largely rejected by U.S. appeals court judges, the company shows no sign of giving up its fight.

After the 5th U.S. Circuit Court of Appeals affirmed earlier this month that businesses do not have to prove their losses resulted from the oil spill, BP said it is considering yet another appeal.

The deadline for business claims, meanwhile, is fast approaching. It was originally set for April 22, two days after the fourth anniversary of the Deepwater Horizon explosion. It now has been extended to late summer.

BP's spokesman said the company has already spent more than $26 billion on response, cleanup and claims. BP also was ordered to pay a record $4 billion criminal fine and is facing up to $18 billion in additional civil penalties under the Clean Water Act.

Last week, BP moved one step closer to business as usual when the Environmental Protection Agency agreed to allow the company to bid on new oil leases in the gulf, lifting a suspension in place since the spill.

"No company has done more faster to respond to an industrial accident," BP's Morrell said.

But legal experts say if BP is paying too much in business claims, company executives have no one to blame but themselves.

Geoffrey C. Hazard Jr., professor at University of California's Hastings Law School and an expert on legal ethics, blames BP for drafting a sloppy settlement, not businesses trying to get a "freebie."

"It's a horrible mess," he said. "BP was trying to be a super-good citizen and it's hard to do that when you've got those kinds of liabilities."

Regardless of how the battle between BP and businesses plays out, Hazard and others said it will make corporations more cautious when responding to economic claims from future disasters.

Said Hazard, "There are going to be a lot of people telling companies, 'Don't try to be a good guy, this is hardball. Play accordingly.' "

Times researcher Caryn Baird contributed to this report. Kris Hundley can be reached at [email protected]

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