Freeh's BP Report Finds No Conflict of Interest

Probe clears spill claims administrator despite staff misconduct

Greg Lindenberg, Editor, CSP

Louis Freeh

NEW YORK -- An investigation led by former FBI Director Louis Freeh cleared the BP claims administrator of misconduct in handling settlement payouts from the 2010 oil spill in the Gulf of Mexico, but found some of his staff took kickbacks for referrals, said Reuters.

BP has said the multibillion-dollar settlement is being mishandled by Louisiana lawyer Patrick Juneau and called for an independent inquiry into allegations against a lawyer working for the administrator.

U.S. District Judge Carl Barbier, who is overseeing the civil case on the spill in New Orleans federal court, named Freeh a "special master" handling the probe in July.

Freeh found there was no evidence that Juneau "engaged in any conflict of interest, or unethical or improper conduct," although he could not say the same of some employees.

"Despite the clear ethical 'tone at the top' and sound written policies established by Mr. Patrick Juneau, many of his key executives and senior attorneys engaged in conduct which the Special Master finds to be improper," Freeh said in the 93-page report.

Freeh found Louisiana lawyer Lionel Sutton, known as "Tiger," received a "referral fee" of around $40,000 to pass a claimant to another lawyer while working for the administrator. The probe also named Christine Reitano, another administration office employee, who worked with Sutton on the deal.

Juneau placed Sutton on administrative leave when the allegations first surfaced, and he later resigned.

BP said Freeh's report confirmed its suspicions of fraud and unethical conduct within the claims process and company spokesman Geoff Morrell said "immediate steps need to be taken to prevent it in the future."

But Juneau said the incidents were isolated and that the report found no evidence that the two employees "directly manipulated the valuation of claims."

"We will continue the job of processing claims," said Juneau.

The program was designed to compensate victims of the April 20, 2010, explosion of the Deepwater Horizon drilling rig and rupture of BP's Macondo oil well, a disaster that killed 11 people and resulted in the largest U.S. offshore oil spill.

BP has already incurred about $42.4 billion of charges related to the disaster. It originally expected the payout program to cost $7.8 billion, but has said the bill could be much higher.

The company considers Juneau's payout formula too generous and believes it compensates people who were not harmed.

BP is awaiting a decision by a federal appeals court on its challenge to the payment formula, which Barbier had previously rejected. Barbier on July 19 rejected an earlier BP request to suspend payouts pending Freeh's review. The judge also oversees a consolidated civil lawsuit against BP and its contractors over the spill.

"Judge Freeh's initial investigation report confirms what BP has suspected for some time: There has been fraud and unethical conduct within the facility itself and among various claimants and their lawyers--and immediate steps need to be taken to prevent it in the future,"  Geoff Morrell, BP's newly appointed senior vice president of communications and external affairs said in a statement provided to CSP Daily News.

"Judge Freeh has confirmed that 'many' of the [court supervised settlement program] CSSP's 'key executives and senior attorneys' engaged in 'pervasive' improper and unethical conduct, some of which may have been criminal," Morrell said. "He also found that at least one outside law firm sought to exert undue influence on claims determinations on behalf of itself and its clients. What's more, the report revealed that, contrary to repeated assurances to BP and the public that the CSSP's ability to detect fraud was 'robust,' in fact the CSSP's key vendor responsible for, among other things, in-house fraud detection was ineffective and had conflicts of interest. The evidence of conflicts of interest and misconduct assembled in Judge Freeh's report is shocking, but it simply underscores that neither BP nor the public has had any idea of what's really going on within the CSSP. Judge Freeh's continued investigation is essential to assuring public confidence in the integrity of the claims process."