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Tom Young
Tom Young
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False Negatives are a Positive for BP

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BP wants perfection from the judicial system. Fair enough. Yet it ceded that perfectionist desire when the company entered into a settlement agreement (pronounced sett-le-ment a-gree-ment) with business owners, that by BP’s own admission, is a compromise (pronounced com-pro-mise).

As Richard Godfrey, BP’s lead attorney, told Judge Barbier’s Court when seeking judicial approval of the settlement:

“Like any settlement, the settlement that has been reached to resolve this litigation is a compromise, a yielding of the highest hopes in exchange for certainty and resolution. The settlement stands alone, however, in its substantive generosity to the class members and in its procedural fairness.”

Mr. Godfrey made that statement a year ago. Fast forward to today and there is not one ounce of truth in his words.

The company has attacked its own settlement. Attacked the businesses of the Gulf who have played by the rules BP wrote. Attacked the judge overseeing the case. Attacked the claims administrator processing the claims. Blamed anyone and everyone but itself for the greatest environmental disaster and subsequent economic fallout in the history of the United States.

In fact, BP has not at all “compromised” as Mr. Godfrey claims above.

There is no “certainty” – far from it. No business loss claims are being paid today. None. And no one knows when or if they will ever receive a penny of recompense from BP.

There is no “resolution” – as the settlement has brought anything but. This is active and fierce litigation.

There is no “substantive generosity” – as the company hasn’t paid a dime to anyone in months.

And there is no “procedural fairness” – as BP has changed the rules of the game at halftime.

Massive Advertising Campaign & The Court of Public Opinion

Every American should be disgusted by this foreign bully and corporate felon. After all, what’s the point of a contract, a handshake and an agreement if one party can spend $500 million on advertisements in order to renege? In fact, there is a little known provision in the Settlement Agreement which requires BP to support the contract as written. It reads as follows:

“The Parties agree to support the final approval and implementation of this Agreement and defend it against objections, appeal, or collateral attack.” Settlement Agreement Section 17.1

Maybe BP feels that its advertisements and court filings are not really “objections, appeals or attacks?” The company is just exercising its First Amendment rights as part of its “Commitment to the Gulf,” no doubt.

BP’s disregard for the commitment it made to support the Settlement Agreement is just another example of a rule that does not seem to apply in the universe this corporate felon operates in.

Woe is Us

British Petroleum enjoys playing the victim card, but the real victims are the businesses, individuals and environment of the Gulf, into which BP is drilling deeper and taking greater risks than ever before.

Purporting to be eager to pay all businesses with “legitimate claims,” in reality the company is only willing to pay claimants who can meet some impossible standard of proof known only to BP. In effect, it wants to be the sole arbiter of “legitimacy.” If your claim for losses is not “good enough” in BP’s estimation (despite the fact that a Federal Judge approved your payment), watch out, as you may end up in a full page ad in the New York Times where BP calls you a thief.

The point of entering into a settlement in civil litigation is that both sides can hedge their bets. In a settlement the defendant (BP) enjoys certainty and closure, can avoid the potentially devastating application of punitive damages, and may not have to admit any wrongdoing. The plaintiffs (Gulf businesses), on the other hand, do not have to prove their cases to the jury.

Such is the compromise. Or as BP’s Mr. Godfrey put it, “a yielding of the highest hopes in exchange for certainty and resolution.”

Have Some Cake BP, and Eat it Too!

BP is fond of trotting out examples of what it calls “fictitious claims” or “false positives” – claims that the company believes are undeserving because the business, BP alleges, could not prove at trial a loss associated with the spill, even though it qualifies for payment under the Settlement Agreement’s 1,200 pages of unambiguous terms.

Putting aside for a moment that BP created said causation and compensation formulas and even enthusiastically agreed that same may on occasion allow for the odd outlier which, BP told the Court, is “an inevitable concomitant of an objective, quantitative, data-based test,” what about the flip side of that coin, the “false negatives?”

Snapshot of official court statistics as of December 11, 2013. Over 28,000 claims have been denied due to insufficient substantiating documentation. BP complains about a few hundred so-called "false positives." Yet there are tens of thousands of "false negatives" the company doesn't want you to know about. Click to see full report.

Snapshot of official court statistics as of December 11, 2013. Over 28,000 claims have been denied due to insufficient substantiating documentation. BP complains about a few hundred so-called “false positives.” Yet there are tens of thousands of “false negatives” the company doesn’t want you to know about. Click to see full report.

Cuts Both Ways

What, pray tell, is a “false negative?” Well, if a false positive is a successful claimant under the terms of the settlement who is otherwise “undeserving” in BP’s view, then a false negative is the opposite. There are thousands – tens of thousands – of businesses that were devastated by the economic fallout from the spill, but who do not, for any number of reasons, qualify for payment under the terms of the Settlement Agreement – the very same terms that BP is whining about.

In fact, as of December 11, 2013, over 28,000 claims have been DENIED by the claims administrator (who, oddly, BP dislikes) because they lack the necessary data and documentation to substantiate their claims under the program’s strict requirements.

What’s a P&L?

Some small businesses, particularly in the tourism dependent Florida Keys, are out of luck. Folks in the Conch Republic aren’t always big on financial records, organization, and general business best-practices. Nothing against them, but there’s a reason they live and work in the islands, and paperwork ain’t it.

Without that paperwork – preferably detailed, monthly profit and loss statements – a claim will not be considered for payment. A claim is a non-starter without substantiating data and documentation. Period. Many small businesses simply do not prepare P&L’s, and even fewer keep them on a monthly basis.

The submission of such documentation was a requirement BP insisted upon in order to prevent fraudulent filings. As part of the compromise inherent in the settlement, the plaintiffs agreed to the requirement, onerous as it may be for some.

Sir, May I Have Your Mailing Address?

Under a special provision of the agreement, businesses that are considered “start-ups,” meaning they are fairly new enterprises that commenced operations on or after October 20, 2008, must account for the geographic origin of 100% of their sales. In other words, the start-up claimant must know the physical address of each and every one of his customers.

Save for entities that invoice all of their customers, this is an impossible requirement for many new businesses to meet. One simply cannot know where every dollar of revenue originates. First, any business that does at least $1 in cash sales will have a hard time, as no one tracks the address of the guy who buys a stick of gum with a dollar bill at 7-Eleven. Second, even credit card only businesses rarely have access to such information due to the privacy policies of the major credit card issuers.

In essence, a significant percentage of businesses that opened their doors after October 20, 2008 (new enterprises that were particularly vulnerable to external economic events like an oil spill) are barred from receiving a dime of BP’s money, no matter how badly the Deepwater Horizon Disaster hurt their profits.

Another compromise by the plaintiffs and a free pass for BP.

Red Lobster is a Seafood Restaurant, Right? Nope.*

Seafood establishments were particularly hard hit by the spill. Restaurants purchasing shrimp, fish, oysters, etc had to pay considerably more as supply dwindled due to a harvesting ban in the Gulf. At the same time, demand for seafood dropped through the floor as consumers, rightly or wrongly, assumed it was not safe to consume. In short, costs were up while sales were down. To add insult to injury, the seafood industry still suffers from a perception, real or imagined, that product sourced from Gulf of Mexico waters is not safe.

For these reasons, BP and the plaintiffs negotiated long and hard over special benefits to provide to seafood restaurateurs. As a result, restaurants that qualify for a seafood designation receive higher payments. In practice though, few qualify.

In order to win special seafood compensation status, a restaurant must show that at least 25% of its food sales come from seafood “caught in Gulf waters.” Sounds reasonable, right?

It turns out that Red Lobster (and almost any seafood restaurant with more than two tables) purchases a significant portion of its inventory from asia and elsewhere. Of course, the consumer dining at the waterfront Red Lobster in Tampa assumes the clams are from out back and avoids the place like the plague. Red Lobster thus suffers a loss, but can’t do anything about it, because they get their perfectly good, oil-free clams from Thailand.

The 25% Gulf origin requirement was a compromise the plaintiffs agreed to, resulting in another BP free pass.

Lies, Damned Lies, and a Well Oiled PR Machine

There are many more examples of false negatives, at least 28,000 and counting. BP has about 100 false positives it likes to talk about. It is not hard to see where the equities lie once the facts come out.

At bottom, BP doesn’t want to pay false positives, false negatives, true positives or true negatives. The company doesn’t want to pay anything, and it is using its considerable advertising muscle to obfuscate and manipulate.

This settlement is not perfect. No settlement is. Neither side gets everything it wants. What the settlement does do – or was supposed to do before BP hijacked it – was to provide immediate relief to as many people and businesses of the Gulf who were impacted by the spill as possible.

Does it solve all problems? No way. Does it solve most? It would have if BP’s Mr. Godfrey kept his word from 2012:

“BP made a commitment to help economic and environmental restoration efforts in the Gulf Coast, and this settlement provides the framework for us to continue delivering on that promise, offering those affected full and fair compensation, without waiting for the outcome of a lengthy trial process.”

Of course now he and his legion of BP lawyers are suing in an effort to undo the agreement, inflicting upon the Gulf the pain of the “lengthy trial process” he feigned as being so eager to avoid.

But the buck must stop at the top with BP’s CEO, Bob Dudley, who had this to say about the settlement several months back when the company was seeking the Court’s approval of the agreement:

“The settlement is placing large sums of money today and tomorrow and next week into the hands and the communities of the Gulf, the victims of this tragic event. We believe that it’s fair, just and reasonable, and that this process should not be interrupted or stopped based upon the objections of the few for the purpose of injuring the many who need to be compensated now.”

What a load of bollocks Bob!

 

*For illustrative purposes only. I do not represent Red Lobster. I have no knowledge regarding whether it has filed a claim, and if so, whether it qualifies for a seafood designation. In my experience with similar seafood restaurants, it would not.

 

11 Comments

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  1. Tom Young says:
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    lynnsrichardson – I’m not suggesting BP “pay claims to people who suffered no loss.” To the contrary.

    The question is, how does one determine if a loss was incurred as a result of the spill? We thought that question was answered in the 1,200 pages of formulas developed by BP. Now BP wants us to play by a different set of rules that unfairly favor the company at the expense of legitimately harmed businesses.

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    you are a very biased reporter. obviously you dislike bp. why would any company pay claims to people who suffered no loss or to people who cannot prove a loss? that makes no sense

  3. Whitney Ross says:
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    The vast majority of businesses that began operating in the 18 months preceding BP’s Oil Spill are functionally prohibited from receiving compensation no matter how materially they were injured. Each will be giving up all their legal rights nonetheless.

    No restaurant, bar, coffee shop, sunglass retailer, convenience store, clothing shop, gift store, or taxi service in Tampa, Naples, Tallahassee, Birmingham, and 95% of the Gulf Coast may qualify for a start-up claim.

    More than 40,000 start-ups have been legally disenfranchised.

  4. Alex says:
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    This reporter is biased. The oil spill is clearly a disaster and BP is to blame, but in its haste to help to get money to disaster hit areas, inevitably every situation and circumstance could not be covered in the agreement. The agreement must, even without explcitly saying this, require some sort of cause and effect relationship, to avoid funds ending up where it is undeserved. I am an accountant and the general rule of substance over form pervades every single accounting transaction on this earth, regardless of law or contract, from a commercial perspective what this means is that there must be some element of causation in order to receive payment.

    To elaborate, in 2008 the value of my home was cut by 40%, even though I know that this was a result of the financial debacle caused by a handful of global financial institutions and Bernie Madoff, I am not able to blame them entirely for the decrease in value of my house. As a result of the failing of one financial institution, depositors started withdrawing funds from investment instruments making the cash crunch even worse. This easily added to the failings of the industry at the time. The credit default swaps which caused the majority of the failings are quite separate from the lack of investor confidence which also helped bring down the system. What I am getting at is that customers believed rightly or wrongly that the clams were coming from the back yard, when in fact they were being imported from Asia, you cannot blame BP for the demand reduction at Red Lobster which resulted in some of the losses. That would be no better than me blaming Bernie Madoff for the reduction in value of my home in 2008. It was incumbent upon Red Lobster to advertise that their sea food was being sourced elsewhere. If Red Lobster wanted to lobby on BP to recover some of this advertising money because of the inconvenience of having to advertise in the first place, which one could argue was a direct result of the oil spill (to change the deleuded perceptions) then ok, I can see a case. And in this spirit there were many “other” payments made by BP since the spill to cover issue like this, to change perceptions about things where the wrong perceptions may have been made.

    I agree that many small business are feeling the pain, and not being able to quickly access deserving funds is a problem, but the problem is to get rid of the one or two bad apples that are spoiling the “spoils” for the many, because I don’t believe that BP’s intent on helping deserving individuals and business get back on their feet has changed. Constantly blaming them for everything under the sun is not the way forward, especially when they are trying to ensure that claims having SSN’s of dead people aren’t undeservedly receiving funds that should go to legitimate persons.

  5. Kim Lirette says:
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    the very true is BP destroy our living nothing ever gone get back better.shrimper are at it’s worst never seen it this bad. for what because BP destroy our living and never gone pay for it!!!!

  6. Craig Pays says:
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    Tom, I don’t know if anyone (who works on these claims) can add to that. None of this makes sense. It’s almost as if the courts (Fifth Circuit) have lost their minds. With all that you have said, Tom and you covered the ground, the question is WHAT are the representatives (attorneys) for the plaintiffs doing about this? We haven’t heard a peep from them. What is our recourse?

  7. Tom Young says:
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    Thank you for the comments.

    I am a firm believer that this Settlement Agreement was designed to help as many businesses and people impacted by the spill as possible, as expeditiously as possible.

    Is it perfect for either side? No, as a settlement never is. Such is the nature of a compromise.

    I felt it important to point out in this article that both sides had to give and take in arriving at this agreement. It seems that BP feels it is the only one feeling any pain. Poppycock.

    As BP’s attorney said, “the settlement of this litigation is a compromise, a yielding of the highest hopes in exchange for certainty and resolution. The settlement stands alone, however, in its substantive generosity to the class members and in its procedural fairness.”

    Is it too much to ask of the company to simply keep its word?

  8. up arrow

    Excellent analysis and comments. I appreciate your standing up for so many businesses who are being excluded from rightfully deserved compensation.

  9. Eyeswideopen says:
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    Hit the spot sure BP’s not complaining about the large amount of denied claims. A few more facts not reported, on p. 1 table 2 of the stats (IEL) claims filed 36,216 page 3 table 5 individual claims paid 3,640. Let’s celebrate only 10% of the claims filed received a check.

  10. rlichter says:
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    The more powerful the corporation, the less regard for the welfare of the land and the people. The law is for the poor, not the rich, exactly like it has been for two thousand years.