The federal judge overseeing the BP plc claims settlement process regarding the Macondo well blowout has expanded former FBI Director Louis Freeh’s duties after the special master found some problems with the claims office.
The New Orleans judge has ordered attorneys and law firms formerly involved in the claims office to explain why one firm’s $7.9 million claim shouldn’t be disallowed. Barbier also requested information, due by Sept. 20, as to why some attorneys and associated law firms shouldn’t be disqualified from representing people submitting claims.
Freeh was appointed a special master by Barbier in July to investigate allegations by BP and others that some of the claims for compensation related to Macondo are fraudulent (see Daily GPI, July 5). The report found nothing to warrant shutting down payments to victims of the oil spill, but Freeh concluded that former top members of court-supervised claims administrator Patrick Juneau’s staff engaged in conduct that was improper, unethical and possibly criminal.
“The nature and seriousness of this type conduct varied in degree but was pervasive and, at its extreme, may have constituted criminal conduct,” Freeh said.
The charges relate to Juneau’s former senior claims office attorney Lionel H. Sutton III, who was found to have expedited a claim on behalf of attorneys Glen Lerner and John Andry (see Daily GPI, Aug. 9). Sutton’s wife Christine Reitano, also a claims attorney, is targeted by the order as well.
Freeh discovered that Sutton had received more than $40,000 in fees from claims payments for referring them to the Lerner/Andry law firm before he joined the court-supervised settlement program (CSSP). Lerner and Andry now work for separate law firms.
Freeh recommended that the report be given to the U.S. Department of Justice and the U.S. attorney’s office in New Orleans to determine if Sutton, Reitano, Lerner and Andry violated any federal laws.
BP spokesman Geoff Morrell said Freeh’s report “confirms what 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.
“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 (settlement program),” Morrell said. “Judge Freeh’s continued investigation is essential to assuring public confidence in the integrity of the claims process.”
After the report was submitted, Barbier expanded Freeh’s duties following discussions with him and with attorneys representing BP, the Plaintiffs Steering Committee, attorneys representing private claims, and Juneau. The expanded investigative duties is to include “any past or pending claims” submitted to the CSSP that appear “suspicious.”
Freeh is charged with investigating allegations of misconduct, which may include recommending anti-corruption measures, and whether conflicts of interests exist among the parties involved. He is to report to Barbier every 30 days.
“The court notes that the special master has not found any evidence that the claims administrator, Patrick Juneau, engaged in any conflict of interest, or unethical or improper conduct,” Barbier stated in his order. Freeh also “did not find any evidence” that claims program officials or employees manipulated the valuation of claims. However, Freeh’s mandate until last Friday didn’t include a comprehensive examination of claims issues.
“While the conduct of certain claims administrator office employees and vendors described in the report is problematic, the special master finds that should not prevent the CSSP from continuing to fairly and efficiently process and pay legitimate claims in a timely manner,” Barbier said.
BP has challenged Juneau about the rules used to pay claims and has argued in motions before the U.S. Court of Appeals for the Fifth Circuit that if CSSP rules were not overturned, the entire settlement should be dismissed.
Juneau said the report vindicates the CSSP work to date. He also downplayed the alleged misconduct by his former staff.
“We will continue the job of processing claims,” Juneau stated. “We welcome the recommendations from the Freeh report and we look forward to working with him to help improve all aspects of the claims process.”
BP’s $20 billion compensation fund is running low, in part because of accelerated claims in the past few months, according to Group CEO Bob Dudley, who said in July the fund soon could be depleted (see Daily GPI, July 31).
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