BP to pay $4 billion for felonies in spill deaths; workers also charged

November 15th, 2012

BP to pay $4 billion for felonies in spill deaths; workers also charged

Posted on November 15, 2012 at 10:20 am by Harry R. Weber in BP, Deepwater drilling, Drilling, Gulf of Mexico, Legal issues

British oil giant BP agreed Thursday to pay $4 billion to the U.S. government over five years to resolve manslaughter and other criminal claims stemming from the 2010 Gulf of Mexico rig explosion and oil spill, and three of its workers were charged with crimes related to the disaster. It’s by far the largest criminal penalty in American history.

A criminal complaint filed by the Justice Department singled out two BP well-site leaders for the failure of a pressure test on BP’s blown-out well, and a former BP executive for providing government officials with flow estimates that were lower than what the company actually knew at the time. All three were charged separately.

As part of its plea deal, BP said it has agreed as a company to plead guilty to 11 felony counts of misconduct or neglect of ships officers — specifically, seaman’s manslaughter is cited in the complaint — relating to the deaths of the 11 workers on the Deepwater Horizon drilling rig.

It also 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. This resolution is subject to U.S. federal court approval.

It also said Thursday it will pay $525 million to settle Securities and Exchange Commission claims stemming from the disaster. That money will be paid over three years. In a related filing in federal court in New Orleans, the SEC charged that BP “materially misrepresented and understated the estimated range of flow rate of oil leaking from the well in three public filings furnished to the commission,” and also omitted material information from the public filings regarding its own internal data, estimates and calculations indicating that the flow rate estimate contained in the filings was “unjustifiably” low.

“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 chief 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.”

Thirteen of the 14 criminal charges relate to the accident itself and are based on the negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon, BP said.

The remaining criminal count pertains to two BP communications made to a member of Congress during the spill response about flow rate estimates. BP has been accused of intentionally underestimating how much oil was flowing for weeks after the disaster.

Attorney General Eric Holder was on hand for a news conference in New Orleans to discuss the fast-moving developments.

“We specifically structured this resolution to ensure that more than half of the proceeds directly benefit the Gulf Coast region so that residents can continue to recover and rebuild,” Holder said.

The negative pressure test allegation that BP admitted has ensnared two BP well-site leaders involved with the blown-out well.

One of BP’s representatives on the Deepwater Horizon voiced concern about the well pressure test hours before the rig exploded. That was BP well-site leader Donald Vidrine, 65, of Lafayette, La.

Vidrine’s attorney, Robert Habans, declined to comment on Thursday’s charges.

Shaun Clarke, an attorney for BP well-site leader Robert Kaluza, said after he received a copy of the indictment against his client and Vidrine that he is stunned. Both were charged with seaman’s manslaughter.

“The government is trying to sell the fiction that the deaths of 11 men and the worst environmental disaster in our nation’s history was caused because two guys working on a rig misinterpreted a test,” Clarke said. “It is beyond ludicrous.”

Clarke said Kaluza, 62, of Henderson, Nev., will surrender at the appropriate time.

The criminal complaint against BP alleged that   “the negligent conduct of defendant BP, through Kaluza and Vidrine,  proximately caused the death of these eleven men.”

The complaint also singles out  David Rainey, a former BP vice president in charge of exploration in the Gulf of Mexico.  Rainey, 58, of Houston – a former BP executive who served as a Deputy Incident Commander and BP’s second-highest ranking representative at Unified Command during the spill response – is charged with obstruction of Congress and making false statements to law enforcement officials.

A lawyer for Rainey couldn’t be reached for comment.

BP said it will now focus on resolving remaining claims, which include Clean Water Act fines that could add billions more to BP’s already hefty tab. Thursday’s settlement doesn’t address that issue.  It previously paid out or committed tens of billions of dollars for cleanup costs and on compensating victims.

BP has also agreed to a term of five years’ probation.

Pursuant to the terms of the plea agreement, BP has also agreed to take additional actions to further enhance the safety of drilling operations in the Gulf of Mexico. The resolution also provides for the appointment of two monitors, both with terms of four years, BP said.

It was not clear if BP’s partners involved in the disaster, Deepwater Horizon rig owner Transocean and cement contractor Halliburton, also would resolve any criminal liability they might face now that BP has. Officials at those companies did not respond to requests for comments late Wednesday and early Thursday.

BP’s Macondo well blew out in the Gulf off Louisiana in April 2010, spewing nearly 4.9 million barrels of oil, according to government estimates that to this point BP has disputed. It was the worst offshore oil spill in U.S. history. Eleven rig workers were killed when the Deepwater Horizon drilling rig exploded.

The mother of a Transocean rig worker killed in the 2010 disaster says she’s still struggling for answers and for justice, as news of  BP’s settlement  broke.

“I’m just a little bit upset about it,” said Peggy Kemp, whose 27-year-old son Roy Wyatt Kemp was working on Transocean’s Deepwater Horizon rig when the facility exploded.

Kemp started to cry when asked whether the criminal settlement  provided any consolation. She said she hadn’t had time to sort through her emotions about the deal.

You can read the SEC filing against BP here.