Last Spring Claims Administrator Patrick Juneau was given the unenviable task of crafting a protocol for sufficiently “matching” otherwise “unmatched” profit and loss statements supporting claims filed pursuant to the BP Settlement Agreement. The result was Policy 495, an eighty-eight page exercise in byzantine accounting that bears little resemblance to Exhibit 4C, the original compensation formula agreed to by the parties.
“Vast Majority” of Accrual P&Ls Matched
Policy 495 applies to both cash and accrual P&Ls, despite the fact that Judge Barbier determined that “[o]rdinarily, such ‘matching’ will occur naturally when a claimant maintains its accounting records on an accrual basis” and 5th Circuit Court of Appeals Judge Edith Clement opined that “the parties apparently agree that matching is required and occurring with respect to the vast majority of accrual-basis claims” (emphasis mine). Policy 495 requires settlement program accountants to exercise their professional judgement in determining the matched or unmatched status of P&Ls. Assuming program accountants perform their jobs correctly, then according to both the District Court and the 5th Circuit, the vast majority of claims supported by accrual based P&Ls will be sufficiently matched and not subject to Policy 495. Here’s hoping that’s the case.
Claims Administrator Juneau and Judge Barbier have both received high praise from neutral third-party observers (not BP of course) for their handling of this most complex of claims programs. Recently, Mr. Juneau’s operation received a clean bill of health from auditor McGladrey, LLP as well as a finding from Special Master Louis Freeh that Mr. Juneau “sets an ethical tone at the top” of his administration. Likewise, legal observers have given Judge Barbier high marks in the face of unprecedented legal maneuvering by BP.
That said, a program of this scope requires thousands of accountants and bureaucrats to effectively process claims. While I have confidence in Mr. Juneau and Judge Barbier, I lose sleep at night at the prospect of claims administration accounting vendors making nuanced decisions about whether a claimant’s accrual P&Ls are “sufficiently matched.” Both Judge Barbier and the 5th Circuit have said that the vast majority of accrual P&Ls are sufficiently matched, so why get the bean counters involved?
Policy 495’s Multiple Compensation Models
Equally troubling is the differing treatment given to certain industries under Policy 495. In particular, construction, agriculture, education and professional services are subjected to varying degrees of medieval accounting machinations. In some instances such claimants will lose causation altogether, in others, such as the professional services model, it is not clear how the Claims Administration will even begin to go about computing loss.
BP of course is pouncing on the opportunity to take advantage of the confusion. The company’s BEL appeal du jour involves real estate agents. And like the “alternative causation” issue with which BP failed to pique the interest of the Supreme Court, the company’s position in this instance is hard to argue with a straight face. But a substantive victory is not what BP is interested in. Rather the aim is obfuscation, confusion, and misdirection. Most importantly, BP’s goal is to delay paying those with legitimate claims. When the Supreme Court of the United States tells you to pound sand, most people pack it in. Not BP. They simply imagine some new travesty to complain about.
With all this in mind, most notably Judges Barbier and Clement’s holdings regarding the inherently matched nature of accrual claims, one wonders what has become of Class Counsel’s Motion to Reconsider Policy 495. Even BP seems puzzled as to why the motion has not been addressed, noting in its recent quarterly earnings reports that it remains under consideration. I wonder if it does?