BP fined, charged in oil spill that showed ‘profit over prudence’
LOS ANGELES — Laying the blame for the deaths of 11 rig workers in the Deepwater Horizon explosion and Gulf of Mexico oil spill on BP, federal prosecutors announced Thursday that two BP supervisors have been charged with manslaughter and the company will pay a $4 billion criminal fine, the largest in U.S. history.
“Those deaths were in fact unnecessary,” U.S. Attorney General Eric Holder said in New Orleans, adding that the federal investigation continued into the 2010 Deepwater disaster and the nation’s biggest offshore oil spill. “Our work is far from over.”
The charges, contained in a criminal settlement with BP and an indictment handed down by a federal grand jury, paint a picture of a corporation that placed “profit over prudence,” said Assistant Attorney General Lanny Breuer.
Not only did the BP supervisors on board the rig the night of the explosion fail to take steps necessary to prevent the blowout when they realized they were losing control of the deep sea well, company executive David I. Rainey later lied to Congress about the size and severity of the spill, prosecutors said.
“As part of its plea agreement, BP has admitted that, through Rainey, it withheld documents and provided false and misleading information in response to the U.S. House of Representatives’ request for flow-rate information,” the Department of Justice said in a news release.
The explosion on the night April 20, 2010, unleashed a gush of oil from broken equipment on the seabed that continued for 87 days off the Louisiana coast. More than 200 million gallons of oil were spilled, shutting down commercial fisheries, destroying the summer beach season along part of the coast and fouling coastal wetlands.
Still to be settled are federal civil claims for the spill’s environmental damage that could cost BP billions of dollars more. Justice officials said negotiations with the company had so far failed to produce an agreement that could avert a civil trial scheduled for February.
Also, a federal judge in New Orleans has not yet approved an estimated $7.8 billion settlement with more than 120,000 plaintiffs in a civil suit by fishermen, beachside property owners and business owners, among others.
As part of BP’s settlement of criminal charges, prosecutors said BP had agreed to plead guilty to felony manslaughter, environmental crimes and obstruction of Congress, and would pay the record $4 billion in criminal fines and penalties.
About $2.4 billion of that will go environmental restoration in the gulf. The company will pay an additional $525 million civil penalty to the Securities and Exchange Commission for misrepresenting the size of the spill in SEC filings.
Robert M. Kaluza, 62, of Henderson, Nev., and Donald J. Vidrine, 65, of Lafayette, La. — the highest-ranking BP supervisors onboard that night — were charged with 11 felony counts of seaman’s manslaughter, 11 felony counts of involuntary manslaughter and one violation of the Clean Water Act in a federal indictment unsealed Thursday. Rainey, 58, of Houston, a former BP executive who helped oversee the spill response, was charged with obstruction of Congress and making false statements to law enforcement officials.
Lawyers for Kaluza blasted the government case. “After nearly three years and tens of millions of dollars in investigation, the government needs a scapegoat,” attorneys Shaun Clarke and David Gerger said in a statement. “Bob was not an executive or high-level BP official. He was a dedicated rig worker who mourns his fallen co-workers every day.”
At the height of the spill, then-BP President Tony Hayward was forced to step down, in part for commenting that “I’d like my life back” during the frenetic cleanup period when oil was washing ashore in Louisiana and many livelihoods were in ruins.
In a statement, Bob Dudley, BP’s Group Chief Executive, said the company deeply regretted the loss of life. “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.”
Chris Jones, older brother of Gordon Jones, who died in the fiery explosion, was not satisfied with BP’s mea culpa.
“The fact that BP is finally admitting that it is responsible is not shocking; the amount of money it is paying in fines is not shocking,” said Jones, a litigation attorney in Baton Rouge, La. “What is shocking is that it has been three years since this happened and not once has a representative of BP said to us ‘I’m sorry for your loss.’ It’s par for the course.”
“BP is simply going to sign a check for billions of dollars, then continue to do business in U.S. waters and make money for its shareholders,” he said. “But Gordon wasn’t able to live a day after April, 2010.”
British BP can easily absorb the $4.5 billion settlement, analysts said.
In the third quarter alone, BP raked in sales of more than $93 billion and had a net profit of more than $5.2 billion. That shows that “BP has made the most remarkable comeback from the most costly industrial accident in history,” Fadel Gheit, senior energy analyst at Oppenheimer and Co., said in a note to investors.
In addition, BP has raised $35 billion from asset sales, including a $2.5 billion proposal to sell its Carson, Calif., refinery and other assets.
BP’s recent business performance has been so strong that some critics said the fine isn’t punishment enough.
“This settlement is pathetic,” said Tyson Slocum, director of the energy program at Public Citizen, a consumer advocacy group. “The point of the criminal justice system is twofold: to punish and to deter. This does neither. It is a weak-tea punishment that provides zero deterrence to BP or other companies.”
What remains unclear is how the settlement will affect BP’s business in the U.S., particularly in the Gulf of Mexico, where BP remains active. The company has seven rigs drilling in the Gulf and has plans to add an eighth and possibly a ninth next year.
BP appeared to acknowledge the uncertainty in a statement: “Under U.S. law, companies convicted of certain criminal acts can be debarred from contracting with the federal government. BP has not been advised of the intention of any federal agency to suspend or debar the company in connection with this plea agreement. BP will continue to work cooperatively with the debarment authority.”
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The size of the spill was vehemently disputed early in the disaster. Environmentalists accused BP of greatly underestimating the rush of oil into the gulf and the federal government also came under fire for releasing low flow estimates that were revised upward several times during the months-long spill.
The spill volume was just not a matter of gauging environmental harm, it also had financial implications: The more oil released into the gulf environment, the greater the civil penalties BP faced under federal environmental law.
“BP lied to me,” Rep. Edward J. Markey, D-Mass., said Thursday at a Capitol Hill news conference. “And they lied to all Americans.”
“They were deliberately low balling the number because their liability is directly tied to the number of barrels of oil that flow into the ocean,” he said. “They deserve this record-breaking penalty.”
Sen. Bill Nelson, D-Fla., said in a written statement that he was pleased that the Justice Department “brought the hammer down on BP. … Now that this is worked out, it’s time to move on to the civil side of things and get Gulf Coast residents every cent they deserve.”
Congress held a spate of high-profile hearings after the spill. Rainey, BP’s vice president of exploration in the gulf, met with congressional investigators at a May 2010 closed-door briefing held by Markey, then chairman of a House subcommittee on energy and the environment.
“Rainey allegedly cherry-picked pages from documents, withheld other documents altogether and lied to Congress and others to make this spill appear less catastrophic than it was,” Breuer, the assistant attorney general, said.
David Uhlmann, former head of the Environmental Crimes Section at the Justice Department, characterized the fine, although unprecedented, as being “on the low end of the acceptable range.”
” When you look at a $4.5 billion alongside the tens of billion of dollars of harm that was caused by the Gulf oil spill and the tragic loss of life on the Deepwater Horizon, it’s hard to escape the conclusion that today’s settlement is a relatively modest financial penalty for BP,” Uhlmann said.
Uhlmann, a professor at the University of Michigan Law School, said he found the manslaughter charges against the BP rig supervisors “troubling” and predicted the case could face a stiff challenge in court.
“The question in my mind is whether a criminal charge would have been better reserved for those at least a few rungs higher up the ladder, not a team leader on a drill rig 70 miles in the Gulf of Mexico,” Uhlmann said. “They were not the ones responsible for BP’s terrible corporate culture for compliance and safety issues.”
Many conservation groups also called the unprecedented fine insufficient.
“We feel that this is a slap on the wrist, an insult to people of the Gulf, rig workers and others who are trying to rebuild their lives,” said Jill Mastrototaro, the Gulf Coast Director for the Sierra Club. “Here on the ground, we still have lingering health concerns, oil is still washing up on shore, there is still a sheen at the well site.”
(Staff writers Julie Cart, John M. Glionna, Rong-Gong Lin II, Michael Muskal, Louis Sahagun and Richard Simon contributed to this report.)