Portion of $4.5 billion criminal fine will benefit Mississippi

Published in the Sun Herald

A day of reckoning arrived for BP on Thursday as the oil company agreed to plead guilty to criminal charges and pay a record $4.5 billion in a settlement with the government over the deadly 2010 Deepwater Horizon disaster in the Gulf of Mexico. Three BP employees also were charged, two of them with manslaughter.

“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. He said much of the money will be used to restore the Gulf.

Assistant Attorney General Lanny Breuer said the tragedy “resulted from BP’s culture of privileging profit over prudence.”

“This is just the beginning, the first step of making BP accountable,” said Trudy Fisher, director of the Mississippi Department of Environmental Quality.

The settlement announced Thursday was only for criminal charges. Still pending against BP is the case for civil damages, scheduled to go to court in February, and damage to natural resources and the economies of Mississippi and other Gulf states.

Mississippi will receive a portion of the $4.5 billion criminal fine, but it remained unclear Thursday how much money and how it will be spent.

Separately, BP rig workers Robert Kaluza and Donald Vidrine were indicted on federal charges of manslaughter and involuntary manslaughter, accused of repeatedly disregarding abnormal high-pressure readings that should have been glaring indications of trouble just before the blowout.

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 he withheld information that more oil was gushing from the well than he let on.

Rainey’s lawyers said he did “absolutely nothing wrong.” And attorneys for the two rig workers accused the Justice Department of making scapegoats out of them. Both men are still with BP.

“Bob was not an executive or high-level BP official. He was a dedicated rig worker who mourns his fallen co-workers every day,” Kaluza attorneys Shaun Clarke and David Gerger said in a statement. “No one should take any satisfaction in this indictment of an innocent man. This is not justice.”

RESTORE Act money

Holder said at the news conference the fine won’t be distributed in the usual way. Instead, the federal government will use the RESTORE Act as a guideline for directing portions of the money to the Gulf states.

The settlement, subject to approval by a federal judge, includes payments of $2.4 billion to the National Fish and Wildlife Foundation, $350 million to the National Academy of Sciences and $500 million to the Securities and Exchange Commission. The SEC accused BP of misleading investors by low-balling the amount of crude that was spilling. It also includes nearly $1.3 billion in fines.

BP will have five years to pay. The fine is not tax-deductible for BP and can’t be applied to other settlements.

“Now that a criminal deal has been struck, our job is to find ways to maximize our opportunities for the Mississippi Gulf Coast,” Fisher said.

At the same time, she said, the state is vigorously pursuing civil penalties against BP. At the direction of Gov. Phil Bryant, GoCoast 2020 was formed and about 100 people are identifying how South Mississippi can best use the money when the RESTORE Act is funded.

“The settlement in the criminal case could indicate progress towards settlement of the civil case, which triggers RESTORE Act funds for the five Gulf states,” said John Hairston, chairmen of GoCoast 2020’s tourism committee. Tourism in South Mississippi was hit hard during the oil spill, and he said, “The faster we see a civil case settlement, the faster we deploy funds to remediate economic and environmental damage.”

In June, Congress passed the RESTORE Act, which directs to the states affected by the oil spill 80 percent of the fines BP will pay in civil penalties under the Clean Water Act. U.S. Sens. Thad Cochran and Roger Wicker and U.S. Rep. Stephen Palazzo supported that legislation and on Thursday called for a speedy settlement in the civil case.

“There is still a considerable amount of restitution to be made by BP,” Wicker said. “How these fines will be distributed is going to be a bit complicated, but clearly it will benefit our state and the entire Gulf Coast region.”

Palazzo said the long-term effects of the oil spill on the Gulf are still being realized.

BP to plead in deaths

As part of the deal, BP will plead guilty to charges involving the 11 deaths and lying to Congress about how much oil was spewing from the blown-out well.

“We believe this resolution is in the best interest of BP and its shareholders,” said BP Chairman Carl-Henric Svanberg. “It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims.”

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.

Greenpeace blasted the settlement as a slap on the wrist. “This fine amounts to a rounding error for a corporation the size of BP,” the environmental group said.

The largest previous corporate criminal penalty assessed by the Justice Department was a $1.2 billion fine against drug maker Pfizer in 2009.

Nick McGregor, an oil analyst at Redmayne-Bentley Stockbrokers, said the settlement would be seen as “an expensive positive.”

“This scale of bill is unpleasant,” he said. But “the worst-case scenario for BP would be an Exxon Valdez-style decade of litigation. I think that is the outcome they are trying to avoid.”

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.

Also, a federal judge in New Orleans is deciding whether to approve an estimated $7.8 billion settlement between BP and more than 100,000 businesses and individuals who say they were harmed by the spill. They include fishermen, charter boat captains, restaurants, hotels and property owners.

After the criminal settlement was announced Thursday, John Jopling, managing attorney for Mississippi Center for Justice in Biloxi, said, “Though this particular announcement does not directly compensate our claimants, BP’s acknowledgement of criminal guilt on this level will be applauded across the region.” His organization is working pro bono to represent poor people who have economic losses or medical claims against BP. The criminal settlement announced Thursday was about the 11 men — four from Mississippi — who died at the Deepwater Horizon site April 20, 2010.

Nelda Winslette’s grandson Adam Weise of Yorktown, Texas, was killed in the blast. She said somebody needs to be held accountable.

“It just bothers me so bad when I see the commercials on TV and they brag about how the Gulf is back, but they never say anything about the 11 lives that were lost,” she said. “They want us to forget about it, but they don’t know what they’ve done to the families that lost someone.”

Sherri Revette, who lost her husband of 26 years, Dewey Revette, of State Line, said the indictments against the employees brought mixed emotions.

“I’m saddened, but I’m also happy at the same time that they will be prosecuted,” she said. “I feel for them, of course. You never know what impact your actions will have on others.”

Frank Parker, a shrimper from Biloxi, said: “I just hope the money gets down to the people who need it.”

Scientists warn the spill’s full effect on the Gulf food chain may not be known for years. But they have reported oil-coated coral reefs that are dying, and fish have been showing up in nets with lesions and illnesses biologists fear could be oil-related. Oil churned up by storms could be washing up for years.

The spill exposed lax government oversight and led to a temporary ban on deep-water drilling while officials and the industry studied the risks and worked to make it safer. BP’s environmentally friendly image was tarnished, and CEO Tony Hayward stepped down after some gaffes that included lamenting at the height of the crisis: “I’d like my life back.”

The cost of the spill far surpassed that of the Exxon Valdez disaster in 1989. Exxon ultimately settled with the government for $1 billion, which would be about $1.8 billion today.