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BP Oil Spill Settlement Announced, Robert Kaluza And Donald Vidrine Charged With Manslaughter

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BP, the British oil giant, pleaded guilty on Thursday to 14 felony counts related to the 2010 explosion and subsequent oil spill at the site of its Deepwater Horizon oil rig in the Gulf of Mexico. The plea agreement with federal prosecutors includes 11 charges of manslaughter for the deaths of workers on the Deepwater Horizon rig, and one felony count for obstruction of justice for false statements made to Congress about the amount of oil leaking from the out-of-control well.

The company will pay $4.5 billion to settle the charges, the largest corporate criminal penalty in U.S. history.

Three former BP employees also face separate felony charges related to the spill, the Justice Department announced. Donald Vidrine and Robert Kaluza, BP drilling managers who oversaw operations on the Deepwater Horizon rig, were charged with 22 counts of negligent manslaughter for the deaths of the 11 rig workers. David Rainey, a former BP vice president in charge of exploration in the Gulf of Mexico, was charged with felony obstruction of justice for allegedly lying to Congress and federal law enforcement officials about the amount of oil leaking from the well.

Attorneys for all three men have vowed to fight the charges. Reid H. Weingarten and Brian M. Heberlig, attorneys for Rainey, slammed BP for acquiescing to the government's charges. "We are profoundly disappointed that the Department of Justice is attempting to turn a tragic accident and its tumultuous aftermath into criminal activity," the attorneys said in an emailed statement. "We are even more disappointed that BP has succumbed to the pressure and agreed to this extortionate settlement. Mr. Rainey did not commit the crimes charged in the indictment, period. We intend to vigorously defend him at trial and are confident he will be exonerated of these baseless charges."

BP's plea agreement, which still requires approval by a U.S. federal court, would free the company from further federal criminal charges and penalties, but it does not obviate a full complement of potential civil claims that could reach well into the tens of billions.

The company said it was prepared to do battle to minimize future claims.

"All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region," said Bob Dudley, chief executive, in a statement posted to the company's website. "From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf. We apologize for our role in the accident, and as today's resolution with the U.S. government further reflects, we have accepted responsibility for our actions."

Carl-Henric Svanberg, BP's chairman, added that the resolution was "in the best interest of BP and its shareholders.

"It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims," Svanberg said.

The 4.5 billion settlement figure includes roughly $1.3 billion in criminal fines, which the company would pay out in installments over five years. Another $2.4 billion is to be paid to the National Fish and Wildlife Foundation, also over five years. A $525 million civil penalty satisfies a Securities and Exchange Commission charge that BP had obstructed Congress by supplying inaccurate estimates on the amount of oil flowing from the failed well in the first two weeks after the accident.

Another $350 million is to be paid to the National Academy of Sciences over five years.

Speaking at a press conference in New Orleans on Thursday afternoon, Attorney General Eric Holder said a substantial portion of the funds -- about $2.4 billion -- would be "dedicated to environmental restoration, preservation, and conservation efforts throughout this region -- including barrier-island creation and river diversion projects" in Louisiana.

The criminal fines come atop a $7.8 billion settlement, first proposed last spring, that would satisfy a variety of private injury claims from roughly 100,000 fishermen and other business owners in the Gulf region, who lost substantial amounts of income after BP's oil spill sullied waters and beaches and brought tourism to a halt. Several thousand other claimants have challenged that settlement agreement, however, and a final dispensation is being weighed by a U.S. district judge.

BP has already spent nearly $18 billion in clean-up costs related to the spill -- part of a total $42 billion in pre-tax accounting charges the company has taken, including Thursday's fine. That sum also includes $15 billion that BP has paid so far into a $20 billion trust fund to compensate victims of the spill. The fund had paid $6.7 billion in claims by the end of 2011, according to the oil company.

BP's corporate partners in plumbing the well -- including the rig owner Transocean and the well services company Halliburton could also be facing future claims as liability disputes continue to swirl.

Initial reaction to the Thursday settlement was mixed, with some legal experts describing it as roughly in keeping with expectations for the criminal portion of BP's liability, and others -- including a number of environmental and citizen rights organizations -- expressing outrage over what they said amounted to a slap on the wrist for a company whose third-quarter profits alone exceeded the penalty levied by the Department of Justice.

David M. Uhlmann, director of the Environmental Law and Policy Program at the University of Michigan and former head of the Justice Department's environmental crimes section, called the plea agreement "a fair resolution" of DOJ's criminal investigation, adding that by emphasizing worker deaths and obtaining the largest criminal fines in U.S. history, the agreement was "appropriate given the scope of the tragedy."

"There are questions that could be asked about why the investigation took so long, whether the fine should have been larger, and why BP is being given five years to pay its penalties," Uhlmann added, "which normally occurs only when a defendant does not have sufficient financial resources to make immediate payment."

The company posted earnings of $5.4 billion for the three months ending on Sept. 30 -- $1 billion more than the criminal settlement announced on Thursday.

Rep. Ed Markey, a Massachusetts Democrat and the leading Congressional investigator into the BP oil spill, described the criminal fines as being appropriate for such a massive disaster. "People died, BP lied to Congress, and millions of barrels of oil poured into the Gulf," Markey said in an emailed statement. "This steep cost to BP will provide the Gulf coast some of the funds needed to restore the region, and will hopefully deliver some comfort and closure to the families and businesses affected by the spill."

But BP's legal troubles are far from over -- as are those for the three employees who now face felony indictments for actions taken both before and after BP lost control of the well. Congressional investigations in the aftermath of the spill suggested a pattern of shortcutting and repeated safety violations that ultimately led to the Deepwater Horizon explosion.

Kaluza and Vidrine, the drilling managers, are accused of acting negligently in their handling of important pressure tests, and of failing to alert onshore personnel to problems brewing on the rig, ahead of the critical blowout. Both men had refused to participate in various hearings in the aftermath of the spill, and each could face up to 10 years in prison for each of the 11 deaths that resulted form the Deepwater Horizon explosion.

Bob Habans, an attorney for Vidrine, said his client would fight the charges leveled against him. "Don Vidrine is innocent of these charges and it is a failure of justice to blame this event on him," Habans said.

Shaun Clarke and David Gerger, attorneys representing Kaluza, the other drilling manager, said in an emailed statement: "After nearly three years and tens of millions of dollars in investigation, the government needs a scapegoat. Bob was not an executive or high-level BP official. He was a dedicated rig worker who mourns his fallen co-workers every day.

"No one should take any satisfaction in this indictment of an innocent man," the attorneys added. "This is not justice."

Some advocates felt similarly about the settlement of BP's own criminal liabilities.

Tyson Slocum, who heads up the energy program at Public Citizen, the Washington-based civil rights and consumer protection group, called the criminal settlement with BP an outrage. "If I killed 11 people, I would be taken off the streets," Slocum said. "What's the corporate equivalent of that? A few billion dollars? BP's stock will go up after this, and there will be no justice for the families in the Gulf. It's pathetic."

The company acknowledged in a published statement on Thursday morning that the resolutions proposed are for federal criminal and SEC claims only, and do not cover a variety of potential civil claims. This could include civil penalties under the Clean Water Act, as well as federal and state sanctions under the Natural Resource Damages Act, and assorted private civil claims, securities claims, or state economic loss claims. Estimates of the total amount of penalties that BP will ultimately be forced to pay out have varied wildly, with some reaching as high as $90 billion if the company is sanctioned for every potential violation.

But BP also appeared to throw down the gauntlet as it contemplates facing down the numerous outstanding penalties that could still descend on the company. A substantial fine could be levied, for example, under the Clean Water Act, which allows for fines ranging from $1,100 to $4,300 per barrel -- the higher end if "gross negligence" is determined. BP has been battling with the government over the total number of barrels that were ultimately released as the Macondo well spewed unchecked for the better part of the spring and summer of 2010. If the higher-end spill estimates are ultimately used, and gross negligence is invoked, the company could face as much as $20 billion in fines under the Clean Water Act alone.

"From the outset, we made a commitment to clean up the spill and pay legitimate claims -- and we've been fulfilling that commitment ever since," said Bob Dudley, BP's chief executive, in a statement posted to the company's website. "As we move forward, we are preparing to defend ourselves in court on the remaining claims. We are open to settlements, but only on reasonable terms."

Bethany Kraft, director of Ocean Conservancy's Gulf Restoration Program, suggested the company would have a fight on its hands over pending civil penalties. "BP still needs to answer for their gross negligence and these record criminal penalties are a step forward," Kraft said, "but do not pay for the damage BP has done."

Jackie Savitz, deputy vice president for U.S. campaigns with the environmental group Oceana, echoed that sentiment. "This is just the tip of the iceberg in terms of what BP owes Americans," Savitz said. "There are still tens of billions on the table."

Mark Gongloff contributed to this report.

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