BP agrees to pay $4.5B; 3 employees charged
A day of reckoning arrived for BP on Thursday as the oil giant agreed to plead guilty to a raft of criminal charges and pay a record $4.5 billion in a settlement with the government over the deadly 2010 disaster in the Gulf of Mexico. Three BP employees were also charged, two of them with manslaughter.
The settlement and the indictments came 2 1/2 years after the fiery drilling-rig explosion that killed 11 workers and set off the biggest offshore oil spill in U.S. history.
The settlement includes nearly $1.3 billion in fines, the largest criminal penalty in the nation’s history. 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 Carl-Henric Svanberg, BP chairman. “It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims.”
Assistant Attorney General Lanny Breuer said the deaths and the oil spill “resulted from BP’s culture of privileging profit over prudence.”
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.
“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.”
The settlement, which is subject to approval by a federal judge, includes payments of nearly $2.4 billion to the National Fish and Wildlife Foundation, $350 million to the National Academy of Sciences and about $500 million to the Securities and Exchange Commission. The SEC accused BP of misleading investors by lowballing the amount of crude that was spilling.
“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.
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.
The settlement appears to be well within BP’s means, considering the oil giant made a record $25.8 billion in profits last year. And it will be given five years to pay. The company still faces huge additional claims.
For one thing, the settlement does not cover the billions in civil penalties the U.S. government and the Gulf states are seeking from BP over the environmental damage.
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.
Under the settlement with the U.S. government, BP will plead guilty to 11 felony counts of misconduct or neglect of a vessel’s officers, one felony count of obstruction of Congress and one misdemeanor count each under the Migratory Bird Treaty Act and the Clean Water Act. The workers’ deaths were prosecuted under a federal law that protects seamen.
The largest previous corporate criminal penalty assessed by the Justice Department was a $1.2 billion fine against drug maker Pfizer in 2009.
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.
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.”
The Deepwater Horizon rig blew up 50 miles off Louisiana on April 20, 2010, in an explosion that investigators blamed on time-saving, cost-cutting decisions by BP and its drilling partners in cementing the well shaft.
The well on the sea floor spewed an estimated 172 million gallons of crude into the Gulf, fouling marshes and beaches, killing wildlife and shutting vast areas to commercial fishing.
Following several failed attempts that introduced the American public to such industry terms as “top kill” and “junk shot,” BP finally capped the well after more than 85 days.
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. They want us to forget about it, but they don’t know what they’ve done to the families that lost someone,” she said.
Sherri Revette, who lost her husband of 26 years, Dewey Revette, of State Line, Miss., 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. I feel for them, of course. You never know what impact your actions will have on others,” she said.
Frank Parker, a shrimper from Biloxi, Miss., said: “I just hope the money gets down to the people who need it.”
Scientists warn that the spill’s full effect on the Gulf food chain may not be known for years. They have reported oil-coated coral reefs that were dying, and fish have been showing up in nets with lesions and illnesses that 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, worked to make it safer and developed better disaster plans. BP’s environmentally friendly image was tarnished, and CEO Tony Hayward stepped down after gaffes that included his saying 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 U.S. government for $1 billion, which would be about $1.8 billion today.
The government and plaintiffs’ attorneys have also sued Transocean Ltd., the rig’s owner, and cement contractor Halliburton, but a string of pretrial rulings by a federal judge undermined BP’s legal strategy of pinning blame on them.
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