Shortly after an explosion on British Petroleum's Deepwater Horizon oil rig killed 11 people and spilled an estimated 210 million gallons of oil off the coast of Louisiana, the company sprung into action to protect what matters -- its public image. BP spent more than $93 million on newspaper and TV ads in the weeks immediately following the disaster, and they've since spent hundreds of millions of dollars on several rounds of media campaigns to convince the public that they care. When all is said and done, BP will likely be on the hook for tens of billions of costs related to the spill. So why the PR campaign? Their actions behind the scenes give us a hint.
Two years after the spill, BP entered a comprehensive, multibillion-dollar settlement to compensate those affected by the disaster. Negotiated for more than 18 months, the 1,100-page document provides a system of internal controls, appeals, and remedies through which victims can seek compensation. In an unprecedented move, BP is now objecting to its own settlement.
The company is claiming that it is being subjected to so-called fraudulent claims, which by all accounts seem perfectly consistent with the terms of the settlement that BP itself agreed to. BP's lawyers spent months pouring over every word of the settlement language, eventually agreeing to a "transparent, objective" standard for determining the amount claimants would be owed. Those same lawyers recently appeared before the 5th Circuit Court of Appeals and before U.S. District Judge Carl Barbier of New Orleans to argue that the claims administrator, using the very standard that BP agreed to, had misconstrued the language of the settlement and approved payouts to undeserving claimants. In short, after a favorable outcome that saw the company forfeiting just three months worth of earnings as a penalty for the largest oil spill in history, BP is trying to move the goalposts and deny compensation to legitimate claimants.
Why would BP risk another high-profile court battle to fight its own settlement? One reason is that the $20 billion fund that BP set up to cover costs related to the spill has almost run out. BP reports that the entire fund is likely to be fully used up by the third quarter, which seems like BP's problem, not a problem with the settlement. BP should pay what it agreed to pay to the people hurt by their spill. Furthermore, as attorneys for the Plaintiff Steering Committee have pointed out, BP is contractually bound under the terms of the settlement to "defend it against objections, appeal or collateral attack."
Instead, BP has launched a PR campaign against their own settlement.
Now, you would think that this type of backpedaling on the part of a massive corporation would not be tolerated. Unfortunately, as I've highlighted a number of times, the American justice system is having an increasingly hard time prosecuting corporate abuse. From the undue influence of the U.S. Chamber of Commerce, which under the Roberts court has won 69 percent of the Supreme Court cases in which it submitted an amicus brief, to Wall Street bankers who sparked the Great Recession yet have avoided any and all jail time, it's clear that the scales of our justice system aren't exactly evenly weighted. There's a big corporate thumb on the scale, tilting everything their way.
And we can't forget the most apropos example of corporate favoritism to this case: In 2008, the Supreme Court sided with Exxon in reducing their total penalties from the Exxon Valdez spill to just over $500 million -- one-tenth of the original jury award and about four days' worth of Exxon's profits.
BP must honor the claims that it agreed to pay. As Joe Rice, a prominent member of the Plaintiffs' Steering Committee for the Deepwater Horizon oil spill case, states, "It is time for BP to face the fact that it entered an agreement and it got what it wanted. It is time for BP to stop trying to take away the benefits it agreed to give the people of the Gulf Coast."
With $11.6 billion in profits in 2012, BP should have the money to pay what they agreed to pay. But if they're looking for more funds, maybe they should check their advertising budget.