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Administrator of BP Fund Says Scams Slowing Down Distribution of Claims Payments

Source: WSJ

Posted on 04 Oct 2010

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Kenneth Feinberg, the lawyer overseeing the $20 billion oil-spill claims fund set up after the Deepwater Horizon disaster, has referred a claim to the Justice Department for possible prosecution for fraud.

Mr. Feinberg, who is the independent administrator of the fund paid for by BP PLC, said Friday in an interview that a host of other claims he classified as "scams" were slowing down the efforts to pay out claims to victims of the oil spill.

Since he took over management of the fund in August, Mr. Feinberg has come under fire for making payments too slowly. He said he had started paying out claims more rapidly, and by Friday had distributed $850 million to cover 50,000 claims. That pleased some local officials who had formerly criticized him.

But Mr. Feinberg said the fund received 5,000 claims with no documentation at all, and 25,000 claims were deficient.

"Nothing will undercut the credibility of this program more than the payment of fraudulent claims," he said.

The fund is meant to compensate people who lost their livelihoods or were otherwise harmed by the Deepwater Horizon explosion on April 20, which killed 11 workers and triggered the worst offshore oil spill in U.S. history.

Among the dubious claims the fund has received, according to Mr. Feinberg:

A restaurant worker who made $18,000 last year—but requested an emergency payment of $5.9 million.

A production company that said that it was going to make a movie in the Gulf of Mexico, but that investors backed out because of the spill.

A shrimping company claimed a $15 million loss for "future events," because the spill disrupted its plans to construct a new building to process seafood.

Another person, claiming he was a special consultant for the Federal Bureau of Investigation, put in a claim for $5 million with little other explanation.

Another consultant, specializing in Internet domain names, claimed $4 million without providing any documentation.

The claim that was recently referred to the Justice Department had financial paperwork that appeared to be doctored. Mr. Feinberg declined to offer more specifics, including the amount of the claim.

Questionable claims stemming from the spill will be investigated by a special criminal unit the Justice Department established in Baton Rouge, La., after Hurricane Katrina. The agency has screened thousands of complaints of disaster fraud and has charged 1,300 defendants in cases related to Gulf Coast hurricanes.

The agency has said it would prosecute only people who deliberately lied in their aid applications, not those who may have made mistakes unwittingly.

One notable claim came from a company that asked for the fund's full $20 billion, saying that BP, the owner of the well, had harmed the environment with its spill, and that the Earth's resources were priceless.

Mr. Feinberg also received 4,000 form letters with the letterhead of Plaquemines Parish government that began: "To whom it may concern." The letters said that "Due to the hardship caused by the oil spill, seafood production costs have increased and have caused undue hardship on local residents," leaving a blank for people to fill in monetary damages.

Plaquemines Parish officials couldn't immediately be reached for comment.

Mr. Feinberg, 64 years old, has devised and administered programs to compensate victims and their families after disasters including 9/11 and the Virginia Tech shooting. A Massachusetts native who has long worked as a lawyer in Washington, he was appointed last year to serve as the Obama administration's "pay czar" overseeing Wall Street compensation after the federal government bailed out failing financial institutions.