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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?


  1. Gravatar for Dave Simoneaux

    I'm not an attorney, but I assume a judge has to rule on a motion. if he planned to deny it, I would assume he would've by now. maybe he is waiting for a substantial amount of 495 claims completed to support his decision?? maybe he will wait until after the deadline, that way a definitive amount of claims submitted will be available???

    1. There was a school of thought that said Judge Barbier would address this issue once the Supreme Court denied cert. It's been six weeks, so that theory seems to have lost its luster. Your points are well taken though and just as likely as any other to explain the Court's thinking. That said, if we are waiting for a sufficient corpus of 495 casualties to support a roll back, what's to become of those guinea pigs?

  2. Gravatar for Kyle

    Being a CPA and reading 495 several times I have yet to make sense out of any of it. Other CPAs have told me the same thing. There is only two methods of accounting both with the purpose of properly matching revenues and exenses either when earned (accrual) or received (cash). That's it! There is no other accepted method of accounting. How can our judicial system overturn and rewrite General Accepted Accounting Principles (GAAP). I believe Barbier and the appellate courts have completely overstepped their bounds and authority and through contract law and accounting principles out the door. I don't have a clue what the governing legal bodies will do concerning the breakdown of contract law but I feel like the CPAs governing bodies will not stand for the rewriting of GAAP. No company and no judge will not and should not be allowed to circumvent GAAP to suit their needs. That is the very reason why there is General Accepted Accounting Principles. Judge Barbier seems to have went underground on this issue. I suggest he get back on his bench and try to find out the truth about accounting principles and put a stop to this. It is obvious that he don't have a clue what 495 actually means but it should be thrown out and move in with the original agreement. That will stop the destruction of GAAP and contract law and show a company like BP they have to be held accountable for destruction of the environment, loss of income individuals and businesses and the loss of the lives of the people on that rig. Who's got the balls to do that? I thought it was Barbier but what hole did he go in or maybe it's what pocket??? I don't know but it's time to see the forest and not the trees that BP keeps throwing in front of him.

  3. Gravatar for Bruce

    The problem is simply lawyers and judges operating in areas and making decisions in areas where they are not experts (accounting). Daubert challenge to all :)

  4. Gravatar for LJ

    What I want to know is why haven't we seen the reviewers issue a single new eligibility notice (or denial notice, for that matter) on claims processed under the new professional services, construction, agriculture, or education methodologies yet? How long should it take them to figure out how to implement those methodologies, and if they are having trouble, then why hasnt Juneau gone to the court for assistance? We should be able to see at least a few examples of each type BEFORE the claims filing deadline passes so we will know whether we need to refile any claims or file different ones. Until that happens it will be difficult to impossible to determine which claims in those categories meet causation because we don't know when or how they might reallocate revenues on the claimant's contemporary P&Ls.

    On top of that, some reviewers are now claiming that they have the right to reallocate revenues from the month they were correctly reported in to the months they were "earned" BEFORE applying the seven matching criteria and Policy 495's AVM method despite there being no "errors" in how the books originally allocated revenues. There are a million appeal decisions saying that they can't do"pre-matching" like that, but we keep getting inquiries on cash basis claims from reviewers seeking to find out when the claimant "really earned" their revenues. That should be irrelevant since its a cash basis claimant, but they claim to be authorized to correct what they view as "mismatches of revenues and expenses" outside of and before applying the seven criteria and AVM's method for achieving "sufficient matching." Allowing such moves will almost certainly lead to wildly inconsistent treatment of similarly situated claimants. Not to mention the illogical result pre-matching leads to anytime AVM is still required.....because whatever improved "matching" achieved through pre-matching would necessarily be destroyed by the latter application of AVM since it would move the "corresponding variable expenses" out of the months to which the reviewer reallocated the allegedly unmatched revenue while performing their pre-matching adjustment of revenues. Not to mention the illogical attempt to move revenues to the month earned when 495 doesn't deal with when revenues were earned, but instead simply asks whether the revenues, wherever reported, are reported in the same month as their "corresponding" variable expenses. So, moving revenues based on when they were earned isn't a "matching" adjustment at all since it doesn't take into account expenses at all and the month revenues were earned may have little to no relationship to which months contain corresponding variable expenses.

  5. Gravatar for Dave Simoneaux

    I think is unbelievable the top CPA firms did not address these issues in the 1st place. I'm a small sole proprietor CPA and the 1st thing I thought of when I read the settlement was the issue regarding monthly P&Ls in which expenses and revenues being posted properly. we all know small businesses run their companies from the checkbook. usually, year end is the only P&L that matters. to them, revenue is anytime when they put money in the bank and expenses are when they write the checks. they could've made it simple and borrowed the rule from tax law. if the gross revenue was over a certain amount then the P&Ls would have to be on accrual-basis. say, more than $500,000 annual gross revenue the P&Ls have to be on accrual basis, under that cash basis is allowed, supported by bank statements. it would be a little more complicated than that, but you get the point. thing is, for a year and 1200 pages it never was addressed, that is mind blowing!

    I also wish they would open the vendor pool to more local CPAs. Insurance companies hire independent adjusters to process claims for major disasters, why not this? I would sign an agreement to not file claims on behalf of clients in order to review claims. that would be a huge revenue stream for me as a small CPA practitioner and it would speed up the claim process too. BUT I'm sure that would dip into the large amount of fees BrownGreer, PWC and P&N are getting to review claims.

  6. Gravatar for willyp

    shouldn't the plaintiffs on the PSC ask the Judge what is going on or be more proactive in fighting 495 ? or at least simplifying to the AVM approach class-wide?

  7. Gravatar for willyp

    shouldnt the plaintiffs be asking the questions to judge barbier? seems like the silence is both ways...

  8. Gravatar for Eyeswideopen

    Policy 495 is a fool’s errand!

    We hired two of the best forensic accountants in the country to review a recent notice just received on a claim. It was awarded a determination accepted but was held up due to the injunction. It was recently remanded back to the claim center for Policy 495 review that produced an incomplete notice.

    The 495 laundry list we received will never be satisfied unless we provided every invoice and sales slip used in the creation of the P&L’s for each month going back to 2007.

    The only option is to concede to the professional judgment of the court vendors in this case PWC.

    Our work product submitted is now worthless 495 materially changed the terms and it now appears this claim would have been better severed if we opted out.

    While the settlement was created and promoted as a clear objective standard policy 495 on the other hand is tainted by the settlements captured data.

    Policy 495 is equal to the customers mix test both a fool’s errand.

    I’ll leave you with this Quote from our experts:

    “The proposed smoothing and matching procedures continues and exacerbates what has become an audit and verification death struggle for small businesses to obtain compensation under the agreed upon parameters of the settlement fund. A struggle that most small businesses will never win. Their records and records keeping were never designed to be maintained to the level of detail on a monthly basis, which is being required. Nor can their historical records be remediated in any meaningful or cost effective manner to satisfy this newfound demand for minutiae.”

    “It seems quite likely that the cost of having the Claims Administer and settlement fund conduct this exhaustive auditing process will in fact generate more accounting fees for the funds accounting experts than the ultimate compensation to many claimants.”

  9. Gravatar for Jim

    He who has the gold makes the rules. BP has the gold and they are making the rules and no one can stop them. Follow the money.

  10. Gravatar for Al Ghindal

    BEL Claimants, no one brings up the time value of money arguments. Frivolous appeals continue along with stupid Policy 70 delays. Head over to American Zombie to see true corruption exposed. Everybody wins except claimants. 495 is here to stay, folks.

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