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BP agrees to $4.5 billion settlement in gulf oil spill

NEW ORLEANS — A day of reckoning arrived for BP on Thursday as the oil giant agreed to plead guilty to a raft of charges in the deadly Gulf of Mexico spill and pay a record $4.5 billion, including the biggest criminal fine in U.S. history. Three BP employees were also charged, two of them with manslaughter.

The settlement with the federal government came 2½ years after the fiery drilling-rig explosion that killed 11 workers and set off the nation's largest offshore oil spill.

In announcing the deal, Assistant Attorney General Lanny Breuer said the tragedy "resulted from BP's culture of privileging profit over prudence."

BP will plead guilty to 11 felony counts of misconduct or neglect of a vessel's officers, one felony count of obstruction of Congress and one misdemeanor count each under the Migratory Bird Treaty Act and the Clean Water Act. The workers' deaths were prosecuted under a federal law that protects seamen.

The settlement appears to be easily affordable for BP, which made a record $25.8 billion in profits last year. And it will have five years to pay. But the oil giant still faces several billion dollars in additional claims for damage to people's livelihoods and the environment.

Separately, BP rig workers Robert Kaluza, 62, of Henderson, Nev., and Donald Vidrine, 65, of Lafayette, La., were indicted on federal charges of seaman's manslaughter and involuntary manslaughter, accused of repeatedly disregarding abnormal high-pressure readings that should have been glaring indications of trouble just before the blowout. They could serve up to 10 years in prison for each seaman's manslaughter count and eight for each involuntary manslaughter count. Their attorneys accused the Justice Department of making scapegoats out of them. Both men are still with BP.

In addition, David Rainey, BP's former vice president of exploration for the Gulf of Mexico, was charged with obstruction of Congress and making false statements. Prosecutors said Rainey, 58, of Houston withheld information that more oil was gushing from the well than he let on.

The settlement, which is subject to approval by a federal judge, includes payments of nearly $2.4 billion to the National Fish and Wildlife Foundation for environmental restoration and conservation efforts on the Gulf Coast, $350 million to the National Academy of Sciences for development of spill prevention and response efforts, and $525 million to the Securities and Exchange Commission, which accused BP of misleading investors by lowballing the amount of crude that was spilling. It also includes nearly $1.3 billion in fines.

"This marks the largest single criminal fine and the largest total criminal resolution in the history of the United States," Attorney General Eric Holder said at a news conference in New Orleans.

Holder said the criminal investigation is still going on. Before Thursday, the only person charged in the disaster was a former BP engineer who was arrested in April on obstruction of justice charges, accused of deleting text messages about the company's handling of the spill.

British BP can easily absorb the $4.5 billion settlement, analysts said. In the third quarter alone, BP raked in sales of more than $93 billion and had a net profit of more than $5.2 billion. In addition, BP has raised $35 billion from asset sales. On the New York Stock Exchange, BP rose 14 cents Thursday to close at $40.30.

Still, BP has yet to close the books on the tragedy, and the cost for the company could climb much higher. For one thing, the U.S. government and the gulf states are still seeking billions of dollars in civil penalties against BP over the environmental damage under such laws as the Clean Water Act. If the government can prove that BP committed "gross negligence" when it allowed nearly 5 million barrels of crude to escape from the deep-water well, BP could face up to an additional $20 billion in fines.

Florida Gov. Rick Scott's office criticized Thursday's settlement. Melissa Sellers, a spokeswoman for the governor, called the deal unacceptable because it does not direct any of the money to the state. Sellers said the agreement does not adequately compensate the state for spill impacts.

The Deepwater Horizon rig blew up 50 miles off Louisiana on April 20, 2010, in an explosion that investigators blamed on time-saving, cost-cutting decisions by BP and its drilling partners in cementing the well shaft. BP finally capped the well on the sea floor after more than 85 days. By then, the well had spewed an estimated 172 million gallons of crude into the gulf.

So far BP has spent $14 billion responding to and cleaning up the spill. It has also paid $9 billion mostly to individuals and businesses. Additional private civil claims are being pursued in a separate lawsuit in a New Orleans federal court, where a settlement that BP estimates will cost $7.8 billion is being finalized.

Information from the Associated Press, Los Angeles Times, Washington Post, McClatchy Newspapers and Wall Street Journal was included in this report.

How can a company be charged with a felony?

The Wall Street Journal explains that under federal law, corporations may be criminally liable for the illegal acts of officers and employees that were within the scope of their duties and were intended, at least in part, to benefit the company. A company can't be imprisoned, obviously. So a company that pleads guilty to or is convicted of a crime must pay a fine, the size of which is calculated based on a number of factors, including its size and how high within the company the illegal conduct rose.

Record fines

BP's $4.5 billion settlement agreement includes nearly $1.3 billion in criminal fines. The criminal fine is the largest in U.S. history. Here's a look at the largest criminal fines assessed against companies in the United States, according to the Justice Department:

1. $1.256 billion in criminal fines, November 2012, against BP
2. $1.195 billion, October 2009, against Pfizer Inc. as part of a settlement of criminal and civil allegations that it promoted the anti-inflammatory drug Bextra for uses and dosages the Food and Drug Administration had rejected because of safety concerns.
3. $956.8 million, plus $43.2 million in forfeitures, October 2010, as part of a GlaxoSmithKline PLC settlement for misbranding the drugs Paxil and Wellbutrin and for failing to report post-approval studies of the drug Avandia to the Food and Drug Administration.
4. $700 million, May 2012, against Abbott Laboratories Inc. as part of a settlement for unlawful promotion of the prescription drug Depakote.
5. $515 million fine and

$100 million forfeiture,

January 2009, against Eli Lilly and Co. as part of a settlement for off-label marketing of antipsychotics.


The 11 workers who died

Jason Anderson35Midfield, Texas
Aaron Dale "Bubba" Burkeen37Philadelphia, Miss
Donald Clark49Newellton, La.
Stephen Ray Curtis40Georgetown, La.
Gordon Jones28Baton Rouge, La.
Roy Wyatt Kemp27Jonesville, La.
Karl Kleppinger Jr.38Natchez, Miss.
Keith Blair Manuel56Gonzales, La.
Dewey A. Revette48State Line, Miss.
Shane M. Roshto22Liberty, Miss.
Adam Weise24Yorktown, Texas

BP agrees to $4.5 billion settlement in gulf oil spill 11/15/12 [Last modified: Thursday, November 15, 2012 11:18pm]

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