The process of compensating victims of the BP oil spill is about to be turned over to the Oil Spill Czar, Ken Feinberg. He has extensive experience, but comes off as arrogant and threatening – particularly for scared gulf residents who have had their lives torn apart. It is of great concern that he seems unlikely to show much (if any) sympathy for the psychological and mental health damages that people have experienced and will continue to experience for many years to come. He has stated that such claims would not be considered legitimate. He is also likely to be quite stingy when it comes to paying any claims for lost tourism and other indirect costs of the BP oil spill. All in all it does not appear that this claims process will be able to make the people of the gulf region whole again – as they have been promised. Potential claimants clearly need to get legal advice before accepting what Feinberg has to offer.
Click below to learn about the flawed process.
The oil spill has caused disruption along the US Gulf Coast, affecting fishing and tourism and fouling some beaches and marshes. Individuals and businesses affected by the spill can file a claim for compensation for lost wages or profits, personal injuries or even death, Mr Feinberg has said. BP has repeatedly said it will pay all legitimate claims related to the spill. …
Mr Feinberg has said he will “err on the side of the claimant” in making emergency payments to people in “desperate financial straits”. There will be a difference, he said, between such a payment and “a lump-sum payment that is the total compensation” to a business or individual. “Long-term payments will require sufficient corroboration so we can validate the claim,” he told CNN. Some claims, such as that of a Boston seafood restaurant owner arguing his business has been hurt by the lack of shrimp from the Gulf, might have to be judged on whatever relevant state laws exist, Mr Feinberg said.
Mr Feinberg has said the method for handling claims was still being hammered out, but he promised a more transparent process “so that claimants understand what the status is of their claims”. He has also said people could file claims electronically and would not need to hire a lawyer. He said accepting emergency payments would not mean a claimant giving up the right to litigate, but added that it could take years to resolve a claim that way.
The main precedent is the compensation fund administered by Mr Feinberg for victims of the 9/11 attacks. The fund was created by an act of Congress shortly after the attacks. By the time the fund was wrapped up in 2005, $7bn had been awarded to 97% of the more than 7,000 claims. The average award to relatives of those who died was $2m; and for those injured $390,000.
“Only 94 people decided to litigate rather than enter a voluntary fund,” Mr Feinberg told CNBC. “That’s exactly the kind of precedent that I hope to achieve here.” Claimants had to agree not to sue the airlines involved in the attacks and could not appeal once a compensation offer was accepted.
Gulf Coast groups representing low-income workers say they want to make sure BP’s claims process doesn’t overlook these workers in the rush to compensate fishermen and other high-priority spill victims.
Maids, bartenders, hotel clerks, souvenir vendors and other workers dependent on the tourism industry “have been and will be devastated,” said Jimmie Fry, executive director of Legal Services in Montgomery, Ala. “There is an urgency among our clients not to preserve a business, but oftentimes to buy groceries,” Fry said. “Our clients are the people who are marginalized in the best of times.” Legal service and human rights groups from Louisiana, Alabama, Mississippi and Florida are urging the administration and BP officials to include them in discussions about how to help workers on the spill’s periphery whose needs might otherwise be ignored.
Many of those workers don’t have cash reserves and live in communities where there are few other jobs. “For them, the impact of the oil spill is just as direct,” said Cindy Huddleston, a staff attorney with Florida Legal Services. “No one is saying they’re going to be protected in the BP claims process.”
Advocates for low-income workers also are asking lawyers to offer free legal assistance to workers filing claims with BP, which operated the offshore rig that exploded and sank April 20. And they’re hosting community meetings with BP and others to explain how to navigate the claims process. …
Vietnamese-American fishermen also were struggling to rebound from Hurricane Katrina when the oil spill began. “You have Katrina fatigue and then you have this right on top of it — it’s a double whammy,” said James Bui, who works with Vietnamese communities in Alabama, Louisiana and Mississippi. BP and administration officials need to understand that such communities are slower to ask for help, say Bui and other advocates for low-income Gulf Coast residents.
The director who’ll disperse $20 billion to victims of BP’s oil spill warned Wednesday that companies hurt because tourists have stayed away from the Gulf region may not be eligible for reimbursement.
Kenneth Feinberg, whom President Obama appointed to handle claims, told the House Small Business Committee in Washington that determining whether to pay businesses and individuals that didn’t suffer direct damage is among the most difficult issues he faces. Indirect claims — such as those made by companies that lost revenue because wary tourists stayed home thinking a beach would be damaged — may not be “compensatory,” he said. …
Tourism officials and those who make their living from tourism have complained that the spill is driving away visitors and costing businesses billions of dollars. Rep. Vern Buchanan, R-Fla., said tourists are staying away from beaches near Sarasota even though oil hasn’t washed ashore.
Feinberg acknowledged that businesses or property owners along the Gulf Coast may be harmed by public misperceptions of the spill, and a decision on resolving such claims remains to be made. But they may be left out. “Property value has diminished as a result of the spill,” Feinberg said. “Let’s assume that’s right. That doesn’t mean that every property is entitled to compensation. It’s a thorny issue.”
With the authority to dole out $20 billion to BP oil-spill victims, Kenneth Feinberg has yet to provide exact details about who gets money and who doesn’t. …
Feinberg — who had administered compensation for victims of 9/11 — said he’s streamlining the claims process so residents and businesses can submit claims by e-mail and the Internet rather than relying on fax machines and always-busy phone lines currently administered in BP’s Gulf Coast claims center.
Feinberg, who is taking over the center’s operations from BP, said he will be an independent and fair administrator of people’s claims. He will not administer state and local government claims from the $20 billion fund. Feinberg said he’s trying to “bend over backward to help eligible claimants in Florida and throughout the Gulf.” The key word: Eligible.
When asked about whether Florida businesses could make a claim based on the “the public misperception of tar balls on beaches,” Feinberg testified that it was a “tough” issue. “Clearly, under Florida law, I think it’s fair to say that it’s not compensable. If there’s no physical damage to the beaches and it’s a public perception, I venture to say that it is not compensable,” Feinberg said, noting “that’s in this area where some discretion’s going to have to be exercised.” …
Business owner DeForest “Sandy” Winslow is worried. As a developer and land owner in the Panama City Beach area, he cringed in hearing Feinberg’s testimony. “The statements that he made — and some of those he has made since — scare the hell out of me,” Winslow said. He has submitted repeated claims to the BP-run claims office, only to encounter busy signals, bad fax machines and impossible-to-reach claims adjustors.
When told of Winslow’s problems, Feinberg said: “That’s totally unacceptable.” Once he takes over in the coming days, Feinberg said he’ll automate the claims system to make sure people get their money as quickly as possible. “I don’t want people going to court.” Feinberg said. “I want people coming to the fund. Why should a claimant spend five years in court and then lose under Florida state law and owe money to a lawyer rather than come into the Gulf Coast claims facility, which in part relies on Florida law and is even more lenient than Florida law?”
In the fallout from the BP oil disaster, they’re almost invisible: deck hands and other day laborers who get paid in cash, don’t receive W2 forms, may not file tax returns and have little or no way of proving they are losing income because of the spill. …
Stuart Smith, an attorney handling oil-spill lawsuits, said seeking aid can be intimidating, and some cash workers fear that they’ll face penalties or prosecution for not paying taxes if they come forward.
“Proving that you worked in that capacity is going to be an issue for a lot of these people because they’re not sophisticated businessmen,” Smith said. …
Ken Feinberg, appointed by the White House and BP to administer the aid fund, didn’t hold out a lot of hope for people who take cash to avoid taxes. Feinberg administered a similar fund for victims of the Sept. 11, 2001, terrorist attacks. “I must say under the 9/11 fund, which was all public money, we were not sympathetic to paying claims based on cash-only, no tax returns,” Feinberg said in an interview. …
Meanwhile, the seafood industry has organized a charitable corporation to raise money for those who might fall through the cracks of the claims process. The group doesn’t need the documentation required by BP or government agencies. “We don’t even have an application process,” said Kevin Voisin, the group’s head and an executive with Motivatit Seafood in Houma, La.
Using a database of seafood-related companies in the Gulf region, volunteers are contacting managers and asking which workers need help, either because they have applied for aid that hasn’t arrived yet, lacked the documentation for an application or feared reprisal. “We don’t need W2s. We don’t need 1040s,” Voisin said. “We know the places that are shutting down. We know the communities.”
As of Thursday (July 8), BP has paid more than $158 million to 51,000 claimants; payouts range from $1,000 to $450,000, according to BP statistics. Another 48,500 claims remain unpaid. More than 900 adjusters each day — seven days a week, in 35 claims offices throughout the Gulf Coast region — sift through the tax records, bank statements, check stubs and fishing tickets of the tens of thousands of out-of-work fishermen, oyster shuckers, dock owners and litany of others who claim to be financially harmed. The adjusters decide who should get a check and who shouldn’t. More than 2,000 new claims are added to the system each day, says Darryl Willis, BP’s claims director. Individual payouts take an average of four days to process. Business claims take longer. …
Many questions still linger: Will businesses hurt by the moratorium also be paid? Who will be eligible for compensation? Who decides? “We’re in uncharted waters here,” says Rep. Charlie Melancon, D-La., who represents many of the impacted coastal communities. “The ripple effect out on this thing is beyond what the average person can fathom.”
Since the spill began, Mike Ellis, a charter boat captain from Venice, La., has received two checks of $5,000 each from BP. He also receives $1,800 a day each time he’s called to help BP lay down boom and clean up oil, he says. The money is only a fraction of what he normally gets motoring anglers out to Pass a Loutre and other fishing grounds near Venice, he says. And the long-term repercussions — how long it will eventually take visitors to return to Venice — can’t be measured by the current claims process, he says. “This is going to be longer than two to three years,” Ellis says. “They destroyed us, and now we’re under their thumb.” …
Paying local residents and businesses affected by the spill is more than a generous gesture — it’s good business, says Richard Nagareda, a Vanderbilt University Law School professor who has written about resolving large-scale disputes.
BP almost certainly is going to be held at least partially liable for the spill, Nagareda says. If all those claims go to court, it could tie the company up in litigation for years. Massive legal actions such as these make it difficult to manage a company and give financial markets the jitters, he says. “They have every incentive for (the compensation fund) to be very successful,” Nagareda says of BP. “The more successful the fund is, the less likely they will be subject to litigation.” …
But producing documents to back up a claim sometimes has been challenging in the world of Gulf Coast fishermen, who often get paid in cash and leave few paper trails. Vietnamese fishermen in Biloxi, in particular, have had a hard time filing claims, says Kaitlin Truong, director of Asian Americans for Change, a Mississippi-based advocacy group.
First, claim forms were printed only in English, making it difficult for some Vietnamese claimants to understand them, she says. Also, many of the Vietnamese deckhands in the Biloxi area hop from boat to boat during a season, getting paid in cash and gathering few check stubs, she says. Around 2,000 of the area’s 7,500 Vietnamese residents have been directly impacted by the spill and poorly compensated, she says. …
At the Violet town hall meeting, Feinberg urged local businesses to fill out claims and get involved in the claims process. He cautioned that not everyone and everything will be compensated. “There are some things I can do with $20 billion and there are some things I cannot do,” he said. “I can’t compensate you for five or six or eight generations of family fishing. There’s not enough money in the world to do that.”
BP is becoming increasingly stringent with its demands for documentation from victims filing claims for lost wages and income in the Gulf region. Immediately following the spill, many initial payments were distributed in uniform amounts with minimum documentation based on estimates. Now, BP will make payments based on each claimants’ documented losses. …
Claimants can submit documentation – tax returns, trip tickets or pay stubs – to BP through the mail, by fax or at one of the 35 claims offices located throughout the Gulf. “If individuals have not given us supporting documents, we need them,” said Darryl Willis of BP’s Claims Team, in a company statement released Wednesday. “For many it has been 45 to 60 days, and we would like to ensure that we are paying them for the income they have lost.” There will be no “good faith” payments after July. To be paid in August and beyond, claimants must provide verification of their income with documentation.
“We are going to make a more precise payment which reflects their actual loss,” said McGahan. Checks “will also reflect the seasonality of the fishing industry.” Fishermen earn the bulk of their annual pay in a few peak months that vary depending on the particular seafood being caught. When they submit their paperwork, those variations will be accounted for.
The $20 billion that BP has set aside to pay for losses caused by the Gulf of Mexico oil spill will start making payments in early August. …
BP currently has 35 offices in the Gulf Coast area accepting claims. The oil company will turn the entire operation over to Feinberg and not be involved in any of the claims against the $20 billion fund, except to supply more money if it’s needed, Feinberg said. The offices will be open for three years, and claims can be filed at any time, he said. Once filed, they must be paid within 90 days, Feinberg said. …
Feinberg said anyone who has a claim and can document it should apply. BP has committed to paying up to six months’ lost wages. They are also offering to reach lump-sum settlements for other, potentially larger claims, such as commercial fishermen convinced their business won’t recover for years. Those claims will be mediated by Feinberg. If that lump sum payment is accepted, the recipient must sign an agreement not to sue BP.
Anyone who doesn’t accept a settlement can still claim the six month’s loses without losing their right to seek more in a lawsuit, Feinberg said. “I believe that any claimant in Louisiana who is eligible is making a mistake, a big mistake, not to come into this program,” he said.
Fishermen in Mississippi say they are angry that under the terms of BP’s $20 billion oil spill fund, money they earn doing clean-up will be subtracted from their claim against the company. The fishermen reacted after Kenneth Feinberg, the federal official in charge of administering the compensation fund, announced the decision at a town hall meeting in Biloxi on Friday.
Some walked out of the meeting in protest, arguing it was pointless to work under the Vessels of Opportunity program, set up by BP to help clean up the damage from the deepwater leak that started in April. “I am furious about this,” said Tuget Nguyen, who works with family members as a fisherman in Pass Christian, Mississippi.
“If he takes away the money we are making from BP when we get our claims, then nobody is going to work for BP to clean up this oil and we will not rent our boats to BP either. It is not fair,” Nguyen said. Thousands of fishermen in Louisiana, Mississippi, Alabama and Florida, out of work because federal authorities have closed much of the Gulf to fishing, are working for the Vessels of Opportunity program, skimming oil from the water and protecting coastlines.
Vessels of Opportunity “workers can file a claim, but we will subtract the amount they are paid from BP from their claim. That is how it has to work. Of course you can file a claim. You must file a claim, but you cannot get paid twice,” Feinberg told the meeting.
Fishermen can earn between $1,000 and $3,000 a day renting their boats under the program and individuals can earn upward of $1,400 a day. Charter boat captains can make even more. The figures represent less than what could be earned at the peak of a shrimping season, curtailed because of the spill, but more than fishermen who have claimed against BP for economic losses have been paid.
Ken Feinberg is just the sort of dictator America needs right now. The fast-talking lawyer with the Boston accent has had some of the best titles in government, or anywhere else: 9/11 special master, pay czar and now the 20 Billion Dollar Man, in charge of doling out BP’s money to Gulf Coast residents. …
Feinberg, who said under questioning that his work as the 9/11 special master was “a gift to the country,” referred to himself in the second person as he described exchanges with hypothetical supplicants.
“Mr. Feinberg, I own a restaurant in the North End of Boston. I have the best shrimp scampi in the city. I can’t get gulf shrimp. Where’s my money?”
“Highly unlikely,” Feinberg answered Feinberg.
“Mr. Feinberg, I own a motel on the beach. There’s oil there, and I’ve lost customers.”
“Pay them. Pay the claim,” Feinberg ordered.
“I own a golf course 50 miles from the gulf. I’m down 30 percent. People aren’t coming to play golf.”
“Dubious,” Feinberg ruled. …
His brash style is both refreshing (he gets things done far more efficiently than government bureaucrats ever could) and unsettling (he’s neither confirmed by Congress nor accountable to President Obama). As with the independent commission to solve the debt crisis, Feinberg represents another handoff of authority to the unelected by a government that can’t solve big problems. …
Yet there is something almost extragovernmental about what Feinberg does, and the special master admits that his activities are special. “Every once in a while there is a public policy dilemma that requires public policymakers to think out of the box,” he said Monday, describing his function as a “creative alternative to conventional thinking.” And conventional governing. …
At the moment, Feinberg is giving Gulf Coast residents a hard sell to keep them out of court. To those who would rather sue, he says: “You’re crazy to do so. I’ll be much more generous than any court would be.” Marketing phrases tumble from his lips: “You’re under no obligation. Come in and immediately receive a check. If you decide after that to litigate, you still keep the check.”
Ken Feinberg said today he hasn’t been able to start writing claims checks because BP PLC has not yet deposited any money into the $20 billion escrow fund it promised to create. …
Feinberg said he is leaning toward giving partial payments to companies and people who are indirectly impacted by the spill — an outlet store in Foley hurt by the decline in beach traffic, for example. He also said he would do something for real estate owners to cover a decrease in property value. …
Once Feinberg takes over, he will give emergency payments worth six months of lost wages or business income to those with valid claims. Those emergency payments will stop 90 days after the spill is permanently stopped, he said. Then, anytime over the next three years, a claimant can ask for a lump sum payment that will cover a lifetime’s worth of damage from the spill.
To accept the lump sum, the claimants will have to give up their rights to sue BP. Claimants do not give up lawsuit rights when accepting the emergency payments, he said. Anyone who doesn’t believe that his lump sum offer is sufficient for the damage caused by the spill can snub it and sue BP for the amount they believe they deserve, Feinberg said, although he said his program will be far more generous than any court.
Shrimpers, fishermen, oyster harvesters and seafood processors all shared common stories at the meeting — they lost their livelihoods when the oil spill started more than three months ago. They’ve gotten promises from BP, they said, but not checks. Feinberg told several people that he would have approved payments for them already based on what they told him. “I promise I will try to do right by the people of Alabama,” he said. “But conduct, not talk, will determine the success of this program.”
Feinberg said he would base questions of eligibility on three factors — proximity to the oil, dependence on natural resources such as fish or the beach, and how closely the industry is tied to the effects of the spill. Fishermen, shrimpers and seafood processors are all easy calls, he said — eligible. A beach condo owner will be compensated for any lost rent. A seafood restaurant in Daphne that’s losing business because people are afraid of finding oil in their shrimp po’boys will also be paid, he said.
But as the connection becomes more indirect, it gets trickier. Feinberg told the pastor of a Bayou La Batre church that he wasn’t sure whether he would approve a claim for reduced donations. He said he wasn’t sure whether a store in the Tanger Outlet Center would be eligible, either.
Some of the economic consequences of the Gulf of Mexico oil spill may take years to identify, and BP’s compensation fund should be flexible enough to account for long-term losses, a panel of experts from Alaska’s Exxon Valdez tanker spill told a Senate committee Tuesday. Some of those damages are difficult to quantify, said Brian O’Neill, a Minnesota attorney who spent two decades shepherding through the court system the lawsuit fishermen and business owners filed against Exxon after its 1989 oil spill in Prince William Sound.
The collapse of the herring fishery, for example, couldn’t be fully anticipated until nearly a decade after 11 million gallons of oil spilled into the sound, he told the Senate Judiciary Committee. And it’s difficult, too, to measure the long-term mental health effects of waiting for two decades for the litigation against the oil giant to be resolved, O’Neill said.
Even while BP works to permanently cap its runaway oil well in the Gulf of Mexico, there are many lessons they can learn from the 1989 oil spill in Alaska, said Sen. Amy Klobuchar, D-Minn., who led Tuesday’s meeting of the Senate Judiciary Committee. Exxon, she warned, “used every legal trick in the book” to prolong the litigation against the company and postpone paying punitive damages. “While BP’s executives sound outraged and contrite now, who’s to say that won’t change in two to three years?” Klobuchar said. “In the immediate aftermath of Exxon Valdez, Exxon’s top executives were publically repentant. But once they were behind the courtroom doors, they sang a very different tune.”
O’Neill told the committee that the compensation structure — such as the fund established by BP last month after negotiations with the White House — needs to address people’s immediate needs. However, it also must account for damages that may not be clear right away, such as if a fishery never recovers. It might be optimistic for the administrator of the $20 billion BP compensation fund, Kenneth Feinberg, to expect to have all claims paid in just a few years, O’Neill said. “The inability to know the impacts of the spill are inherent in oil spills,” O’Neill said. “In three or four years, you’re still not going to know what the impact of the spill is.”