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Diplomacy in Action

Update on the BP Claims Compensation Process Resulting from the Gulf of Mexico Oil Spill

Ken Feinberg, White House & BP appointed administrator of the BP Deepwater Horizon Disaster Victim Compensation Fund (Gulf Coast Claims Facility)
Washington, DC
February 28, 2011




Date: 02/28/2011 Location: Washington D.C. Description: Ken Feinberg, White House & BP appointed administrator of the BP Deepwater Horizon Disaster Victim Compensation Fund (Gulf Coast Claims Facility) gives an update on the BP claims compensation process resulting from the Gulf of Mexico oil spill at the Washington Foreign Press Center. - State Dept Image
Video

2:00 P.M. EST

MR. FEINBERG: Thanks. Thank you very much. I’m pleased to be here today. Perhaps before I take questions, let me provide everybody sort of the context of what I am doing.

After the spill last year, the Administration and BP set up, by agreement – private agreement, no act of Congress or anything, by private agreement – BP and the Administration agreed to establish an escrow fund of $20 billion to pay for the cost arising out of the oil spill. That $20 billion also envisioned the creation of the Gulf Coast Claims Facility, the GCCF, to process, evaluate, calculate damage, and pay for any eligible individual – private individual or private business that suffered damage caused by the oil spill.

That’s what that money was set aside for, $20 billion to pay for private, individual, and business claims of eligible claimants documenting their damage. If the claim is proven, the GCCF would pay it. Out of the $20 billion would also come government claims by state or local governments – not the federal government, but state or local governments, lost tax revenue, lost out-of-pocket costs cleaning up beaches, et cetera. Government claims would be paid out of the $20 billion, but would not be subject to the jurisdiction of the GCCF. State and local government cleanup costs would be paid out of the $20 billion. Again, not part of my mandate.

What not – what would not be covered by the $20 billion would be claims of rig workers who lost their job as a result of the federally imposed moratorium on deep water drilling in the Gulf. A separate fund was set up for that of a hundred million dollars. A nonprofit foundation operating out of New Orleans has nothing to do with the Gulf Coast Claims Facility. Other than that explanation, the Gulf Coast Claims Facility last August 23rd began to process private individual and business claims.

It has now been just over six months since the GCCF began to evaluate, process, and pay claims. And in six months, the GCCF has paid about 170,000 people and businesses over $3.5 billion in just six months. I believe that the GCCF is working as intended in getting private individuals and businesses paid. There have been over, approximately, 500,000 claims filed with the GCCF. Roughly half have been paid, the other half have been found to be ineligible.

The claims that have been paid have been well-documented to demonstrate damage. The claims that were denied had woeful, inadequate, or no documentation to speak of documenting damage. There have been roughly about 8,000 suspicious claims bordering on criminal fraud. Those claims are being reviewed by the GCCF internally, and where fraud appears to exist, those claims are forwarded to the Department of Justice for evaluation and possible prosecution. The Department has rendered, I think, probably 15 to 25 indictments so far.

The Gulf Coast Claims Facility will remain in place by agreement until August of 2013. So there is no timeframe imposed by the GCCF in which to file a claim other than the termination date of the GCCF, August 2013. Right now, the GCCF is considering three options for payment for every eligible documented claimant to consider.

Option number one: If the claimant – an individual or a business – decides, having consulted with his or her or its lawyer to file for a final payment, the GCCF will evaluate the claim and offer a final payment for all past, present, and future damage. If the claimant, after consulting with his or her lawyer, decides to opt for the final payment, the claimant receives a lump sum check, cannot return again to the facility, waives the right to litigate, accepts the check, signs a release, and is out of the system.

Option two: Those claimants may not want to opt for an uncertain final payment when they’re not certain about the future of the Gulf, in terms of oil or damage to the Gulf. There are many claimants who may say, after consulting with their lawyer, I don’t want to run the risk of what the future holds in the Gulf; I’m not certain about the future. Instead, I will document my damage for the past quarter of the year, quarterly, and I’ll accept a check from the GCCF as an interim payment every quarter or sooner if you can’t even wait for that quarter, monthly. But you’ve got to document your damage for the past period.

But if you want that option, interim payment, you do not give up your rights to come back to the GCCF for future payments, you do not waive your right to litigate. You simply document your damage for the past quarter. The GCCF will review your documentation, and if you’re eligible and you’ve documented your damage, cut you a check, and you can keep coming back while you watch and observe the future of the Gulf. That is option two.

Finally, there is option three: The claimant has already received a payment from the GCCF, even a dollar, whatever it might be. The claimant has already received one check from the GCCF, without any further documentation. The claimant may elect option three, a lump sum $5,000 for an individual or $25,000 for a business. But after consulting with your lawyer, you waive your right to sue, you cannot come back to the GCCF again. But without any further documentation, here is a supplementary check, a second check or a third check in addition to whatever you’ve already received.


Those are the three options. The GCCF takes absolutely no position on which option should be preferred. It all depends on the claimant and how the claimant reviews his, her, its own situation. The statistics are quite interesting. About 90,000 claimants have opted already for a final payment. About 95,000 claimants have already opted for the quick payment – $5,000, $25,000. And about 45,000 claimants have opted for the interim quarterly payments.

The GCCF has beefed up its local claims offices. We have 35 claim offices in the Gulf, in the four states, five states. We have supplemented staff and accountants, experts so that claimants who want the opportunity to meet with a live body in the Gulf employed by the GCCF will be able to do so.

There have been two major criticisms of the GCCF. One, the absence of transparency – we don’t know enough about how the GCCF goes about rendering its decisions. We think that we’ve improved – we’ve addressed that criticism with the claim forms that have been modified over the past few weeks, with the final rules that have been promulgated over the past few weeks governing these three options, and by adding live bodies in these 35 claims offices to deal with individual claimants who have questions. So we think we are meeting that criticism about absence of transparency, absence of knowledge as to how the GCCF renders its decisions.

The other criticism is inconsistency: I was denied, my next-door neighbor got paid; I got $2,000, my next-door neighbor has the very same job as me and got $5,000; I own a restaurant and I got $20,000, my next-door neighbor owns the same type of restaurant and got $40,000. What about inconsistency? I have two answers to that criticism. One, claims may differ based on the documentation that’s provided by the claimant. I mean, there is a big gap between some claimants who file with tax returns and profit and loss statements and checkbooks, check stubs, and then there are claimants who file with next to nothing in the way of documentation. Part of the inconsistency, part of it, can be addressed to the fact that no two claims are exactly alike or are documented alike.


But second, there are approximately 500,000 claims. There is going to be some inconsistency. We will address that inconsistency at the interim and final payment stage, when everybody is afforded an opportunity to reevaluate your claim and how you were treated. If you were denied an emergency payment, that does not mean you cannot file for an interim or a final payment. We will take a fresh look at your claim.

Final point, and I think one that demonstrates the success of what we are trying to accomplish: By federal law, any claimant who is dissatisfied with how we treated the claim in terms of eligibility or in terms of the calculation of damage, lost income, lost wages – any one of those claimants automatically has a right under federal law after 90 days to go to the U.S. Coast Guard liability trust fund and ask the Coast Guard, will you please review the decisions rendered by the GCCF? As of today, the Coast Guard has reviewed about 350 appeals brought by people who were denied eligibility or believe they did not receive adequate compensation. In all 350 cases, every one so far, the United States Coast Guard has agreed with the determinations of the GCCF.

So I think we’re doing something right, over $3.5 billion distributed in just over six months, more to be done, not without criticism, goes with the territory. I think we’re doing the right job. I think we can do better. And I’ll take a about 20 minutes worth of questions if we have some. Thank you.

Yes, ma’am?

QUESTION: Hi. Nicole Markwald, German Public Radio. And I know you’ve traveled down to the Gulf Coast, as we probably all have, and we’ve talked to many people and, especially last summer, last fall, heard how desperate they were in parts. What is your impression of talking to those people back then and now, how the process is going?

And my second question would be, you talked about a lot of claims were denied. I’m not talking about those who were probably frauds or really are way out there. I’m talking about those which are kind of borderline cases. Maybe you could elaborate on those a little bit.

MR. FEINBERG: Two good – two excellent questions. First, do not underestimate – I’ve learned over the years with 9/11, with Virginia Tech, the shootings, with Agent Orange, involving Vietnam veterans, and now BP, the oil spill – do not underestimate the understandable emotion, frustration, anger, disappointment. “Mr. Feinberg, through no fault of my own, my financial future is now uncertain. Help me. That’s what you’re here for. Help me.” We are helping people. We may not be helping as many people as swiftly as they would like, but we are there to help distribute this money. And I believe, having gone to the Gulf repeatedly over the past six months, that this frustration and anger is absolutely real, it is justifiable, it is to be expected, and it has to be addressed. And I think that it is important that the GCCF move as swiftly as possible in addressing that legitimate concern and frustration.

I also think that the future of the Gulf, although uncertain, it is reasonable to predict – reasonable, not certain, but reasonable to predict – that there is a gradual recovery underway, and that, hopefully, that recovery will be accelerated. For those who do not believe that my – the predictions of the GCCF concerning gradual recovery by the end of next year – not this year; by the end of next year – is reasonable, if they think it is not reasonable, as I’ve said earlier, they have every right to accept an interim payment, and wait and watch to see what the future holds.

Have I answered your questions?

QUESTION: I wanted to know more, a little bit about the cases were denied, where you found them not to be eligible for a payment.

MR. FEINBERG: In the overwhelming number of cases which were denied, either a) there was insufficient documentation. “Mr. Feinberg, here’s my claim. I lost $30,000 because I couldn’t fish, and I get paid on a handshake. Trust me.” Can’t. I need something. I need something. The overwhelming denials were absence of adequate documentation, even minimal documentation.

The other reasons for the denial might have been an inability of the claimant, far from the Gulf, to demonstrate cause and effect. “Mr. Feinberg, I own a restaurant in Las Vegas. I can’t serve shrimp scampi because I can’t get shrimp from the Gulf. I’ve lost 12 percent of my businesses. Pay me.” I don’t think the law would recognize that claim, I don’t think we would recognize that claim, and I think some of the denials were based on, shall we say, attenuated relationship of the alleged damage to the oil spill. Those are the reasons.

MODERATOR: Before we go to Suzanne, New York Foreign Press Center, we’ll take a question from you, please.

QUESTION: Okay. Yes, Frank van Vilet of De Telegraaf from the Netherlands. I understand that mainly the oyster industry is a sort of trouble zone. I read somewhere that most of the Gulf could recover by 2012 but not the oysters. And I understood from the oyster fishermen that you offered them something extra but they say it’s not enough because that’s a sort of general claim. They say you based their income on the last years, which have been pretty bad because of Gustav and Ike and all the kind of other troubles. And you’re also not paying for putting new oysters bed there.

And if I may, on a lighter note, we also have heard that you have paid compensation for strippers in New Orleans. Is that true? Or table dancers, or whatever you call them.

MR. FEINBERG: As to the latter question, I don’t think we’ve paid those claims. But whether we’ve paid them or not depends on whether they’ve been able to demonstrate a cause and effect relationship caused by the spill. And I can’t comment on any individual claim.

In terms of oysters, oyster and oyster harvesting are different. I acknowledge that, and so does the GCCF. The GCCF, in terms of final payments, came up with an expert methodology that calls for gradual recovery by the end of 2012, but not for oysters, oyster harvesters, or oyster processors. For oysters, a special case. It would be the end of 2014 – four years, not two – before the experts tell us that reasonable to predict oyster harvesting and oyster processing will return to normal.

Now, to the extent that oystermen feel that four years is inadequate, it ought to be more, they should opt for an interim payment, not accept a final payment tied to four years, wait and see, document their damage, and come back until they feel more comfortable that the final payment is based on a more sound methodology. To the extent that there are oystermen who feel that the damage model doesn’t take into account earlier successful financial years rather than 2010 or 2009, come and talk with us about that. Bring us your evidence, bring us your documentation, bring us the argument you would make that would allow us – perfectly willing to consider an alternative approach to documenting damage. So we’ve already recognized that the oyster industry is different from other Gulf resource industries, it’s different from tourism, it is a unique problem. We will address it, as we already have. And if we haven’t done it accurately for some oystermen who file a claim, by all means they should bring their claim, documented, to our attention, and we’ll take a look.

MODERATOR: How about our colleague from the Guardian? Go ahead, Suzanne.

QUESTION: Thank you. I guess I have two questions. One is that there have been statements from a judge that you’ve been giving inadequate compensation, that the compensation is too low. And I’m wondering if –

MR. FEINBERG: Who said that?

QUESTION: I think Charles Barbier.

MR. FEINBERG: I don’t recall the judge saying that. I recall the judge saying that what I am paying to individual claimants --

QUESTION: But can I –

MR. FEINBERG: I’m sorry, go ahead. But I don’t believe the judge ever said that I was not being sufficiently generous.

QUESTION: All right. Have – are you encountering lower levels of documentation from the claims that you see in the Gulf than you’ve experienced in other instances?

MR. FEINBERG: Yes.

QUESTION: Can you talk a little bit more about that? And then I’ll ask my second one.

MR. FEINBERG: I think that the single biggest problem I confront and the single biggest challenge is how to go about processing claims, where the claim lacks proof, where it lacks substantiation. Now, I don’t need a tax return, I don’t need a formal company profit and loss statement, but I need something that I can rely upon.

Now, for the most part, earlier in the program, we had been getting a fair amount of substantiation; $3.6 billion has gone out the door in just six months and a week. I mean, there’s an awful lot of money being distributed here. The problem that I continually have to address is that I think roughly 80 percent of the claims that we now have in the queue lack proof. Now that is a huge number. We have sent out letters to claimants asking them to clear up these deficiencies, to get us something in addition, and we are having a very difficult time getting this degree of substantiation. I’m not talking about formality here. I’m talking about enough so that we can process the claim and pay it. And that is an ongoing problem. It will continue to be a problem. But I’m hoping that working with the claimants at the local level – more than in Washington – at local claims offices so we can work with the claimants in getting that degree of substantiation.

Now, I don’t think anybody – I may be wrong about this – I haven’t heard much criticism about the generosity of the program or the eligibility requirements, frankly. Judge Barbier pointed out that since I was being paid by BP, as is the entire program – who else is going to pay but BP – that I should go easy on proclaiming that I’m totally independent and I’m totally a free-standing entity, although he did point out in his opinion that the GCCF does act on its own in processing each and every claim. BP has no say in that. BP has accused the GCCF, as you know, in the last month of being too generous in its final payment claims, too generous. You can’t win. BP says I’m too generous and claimant after claimant says I’m not generous enough, so that’s the way it sits right now.

MODERATOR: We need to get to New York and check in with our colleague there. Go ahead New York.

QUESTION: Hi. My name is Matthias Ruch. I’m with the Financial Times Deutschland based in New York. First question, Mr. Feinberg, do you think that the $20 billions will be enough for all? And in case it’s too much, what will happen to the rest of the money after all the claims are over?

MR. FEINBERG: I’m cautiously optimistic the $20 billion will be enough. BP has made it very clear from the outset that if it is not enough, it will honor all of its additional financial obligations. Under the escrow agreement that was established between the Administration and BP – I had nothing to do with that – my understanding is that if the $20 billion is sufficient and there is money left over, that it is retained by BP. But again, that’s not on my watch. That’s not part of my responsibility. My responsibility is to evaluate, process, and pay eligible documented claims. And so far at least, the $3.5 to $3.6 billion paid out has been honored by BP, as it said it would, and there should be sufficient funds going forward.

MODERATOR: Let’s go up front here, Renzo.

QUESTION: Thanks for doing this. My name is Renzo Ruf. I’m working for some Swiss newspapers. Obviously, you are the head of that facility and you are traveling a lot, you are in the media. How many people are actually working for the facility, and how do you correspond with them? Are you signing off for every decision?

MR. FEINBERG: Am I – of course, I cannot sign off on every decision involving hundreds of thousands of claims. When we took over last August, BP already had in place about 2,500 claims processors and adjustors in the Gulf. We’ve kept that group. We’ve added probably another six or seven hundred. There are probably today about well over 3,000 GCCF employees and subcontractors working in the processing of these claims, all paid for by GCCF – by BP. So that’s the infrastructure.

In Washington, I have about 20 accountants and support staff. We don’t review every claim. Those claims are reviewed and paid in the field. What we do is review claims that are very large. We’ve paid claims as high as $25 million, $37 million. We paid, last Friday, an interim claim of a company in Louisiana, $11 million. We review in Washington high-end claims or claims that have a precedential impact, claims that we better get it right because there may be thousands of similarly situated examples, like the restaurant in Las Vegas, or the recreational fisherman who claims that when the oil came he used to go out and fish every week for recreational enjoyment. Now, he can’t fish; can he recover from the GCCF?

So those are the types of a claims that have a significant impact on other claimants, where it’s important that we address them in Washington. But for the most part, claims are processed locally and through companies that work for me that process the claims electronically.

MODERATOR: Okay, let’s go to Ryan Tracy from Dow Jones. And then, New York, we’ll come to you for a follow-up after his question.

QUESTION: Thanks for doing this, Mr. Feinberg. I wanted to ask about – you mentioned two major criticisms. But another has been, of course, timing and getting things paid quickly. Can you talk about going forward now, particularly with – I understand for an interim payment, it’s going to be ongoing, but particularly for people who want to get not a quick pay but a final payment, how long that will take?

And also, when you were talking earlier you said 80 – something about 80 percent are in the queue that lack proof. Can you just be a little bit more specific about what you meant by that? Thank you.

MR. FEINBERG: Yes. First question that you – the final payment program now under way, we’ve processed in the last two weeks about 14,000 claims for final payment, interim – final payment offers, interim payment requests in the past couple of weeks since the final rules went into effect. I think that will accelerate. By law, we’re required to process any final payment within a maximum of 90 days for lost wages, lost income, or the claimant can immediately go to the Coast Guard for review. So we’re trying to accelerate the pace of final payments.

We delayed the final payments for a while while we tried to – I think successfully – secure opinion from the experts as to what the future of the Gulf looked like. So there was some delay. But any claimant has the right to move within no more than 90 days, and we’re going to try and accelerate that.

QUESTION: When does the 90 day clock start?

MR. FEINBERG: From the time they present the claim. Your second question was –

QUESTION: You said 80 percent in the queue?

MR. FEINBERG: Oh, here’s the problem: 80 percent of those claimants filing for a final payment or an interim payment – that’s about 130,000 claims – have inadequate documentation, no proof, inadequate proof. We can only process claims with some proof. Now, we’re working with the claimant to try and get additional documentation, additional proof. But that is a serious problem in the Gulf.

MODERATOR: Okay, let’s go to our German colleague in New York, please. Go ahead Matthias.

QUESTION: Thanks. My second question was – we talked to some experts at the University of Baton Rouge, biologists and other specialists, and they said that maybe there is no oil left that you can see, but it does not mean that there is nothing left in the ocean, and it needs some long-term coverage to find out what effects this will have after 2014 maybe. So how will you go on and observe these processes?

MR. FEINBERG: First, we examined – in establishing a reasonable recovery through 2012, we examined all of the available literature, reached out to experts, including Professor Tunnell in Texas, to try and secure the best evidence we could about reasonable recovery. I want to emphasize I have never said, nor would the GCCF ever state, that recovery by the end of next year, 2012, is certain.

It is reasonable for those claimants in Baton Rouge or anywhere else who feel that the recovery period of the GCCF is too optimistic, don’t accept a final payment. Talk with your lawyer and take an interim payment instead and wait and see. BP has publicly said – publicly – that the GCCF is being much too generous in assuming a recovery period by the end of 2012. That recovery period is now underway and should be over as early as the end of this year. So I’ve done what I think – the GCCF has done what appears to be a reasonable prediction. Nobody has to be bound by it.

MODERATOR: Okay, and we’ll take one last question. Suzanne, did you have a follow-up?

QUESTION: I just wanted to go back over the numbers. So you’re saying 80 percent of the hundred and –

MR. FEINBERG: Roughly 130,000.

QUESTION: -- lack sufficient documentation. So can – how many more claims do you then expect to be able to pay out on?

MR. FEINBERG: Well, we certainly want to pay out the 20 percent that have had adequate documentation, and they’re going out as fast as we can. I’m assuming that with our help and the help of claimant lawyers and accountants, a fair number of claimants will come up with adequate documentation. For example, we’re in February of – we’re beginning March 1 of 2011. We have very little documentation from claimants who want an interim payment or a final payment from November and December of 2010. That may be because business claims and maybe some individual claimants are just now gathering together their damage documentation for the last two months of 2010. Let’s see. Let’s work with those claimants. Hopefully, we’ll be able to greatly increase that percentage so we can pay those claims.

QUESTION: That – I mean, as the numbers now stand, it suggests that there’d be a significant – you’ve paid out 3.5, 3.6. That’s a significant portion of the $20 billion then that will not end up getting paid out.

MR. FEINBERG: We shall see. We’re around till 2013. People and businesses have plenty of time to get their documentation together, to consult with their lawyers and their accountants. We shall see. There are some claims in the queue that are very substantial. We have one claim for something like 94 million. There are a few other claims – double digit millions. It is much – it is premature to finalize any aggregate amount of money over the next couple of years that we’ll spend in paying the eligible claims. We shall see.

QUESTION: My name is Ingeborg Eliassen. I’m with Norwegian Press, Stavanger Aftenblad. It’s on transparency. I just spoke this morning with a guy who – in Orange Beach, Alabama who says that the local people dealing with this have nothing to offer but condolences or I’m really sorry for you, and they’re sending everything to Ohio. So I’m just – I don’t get this to correspond with what you’re saying, that things are handled on the ground and that people have some insight in what’s going on, because this guy apparently feels this is a big monster, and everything disappears, and there is denial, and he don’t know what to do.

MR. FEINBERG: I totally disagree. We’ve paid hundreds of millions of dollars in Alabama in the past six months. We now have in Alabama, or any other state, local people and local accountants right there to meet with that individual critic that you just referenced to go over his or her claim, to find out what’s – what the documented claim is worth, and to give that claimant a sense that decisions are not being made in Ohio or in Washington, but are being made right there with hands-on interaction with that claimant.

So that claimant may have had a very disappointing previous experience with the GCCF. I think if that claimant now goes into one of those Alabama claims offices, he will see a much different system designed to treat him or her with much more hands-on local treatment. So we’ll have to see if I’m right about that, but I’m fairly certain I am. Thank you all very much.

MODERATOR: Ken, thank you very much for coming today.

MR. FEINBERG: Thank you.

MODERATOR: We appreciate it. And that concludes our briefing this afternoon. Thanks, everyone.

 

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