So now we have an answer to the talk of a settlement in the BP oil disaster case. The company will pay a total of $4.5 billion in fines and payments, as well as admit to criminal charges. But the fines and payments do not include civil violations of either the Clean Water Act or the Oil Pollution Act, which carry additional fines of up to $21 billion.
Here’s how the settlement breaks down:
In addition to the 11 felonies related to the men killed in the accident, the company agreed to plead guilty to one misdemeanor violation of the Clean Water Act and one misdemeanor violation of the Migratory Bird Treaty Act [...]
The company agreed to plead guilty to one felony count of obstruction of Congress over its statements on that issue. It also agreed to pay a civil penalty of $525 million to the Securities and Exchange Commission, spread over three years, to resolve the agency’s claims that the company made misleading filings to investors about the flow rate.
As part of its resolution of criminal claims with the Department of Justice, BP will pay about $4 billion, spread over five years. That amount includes $1.256 billion in criminal fines, $2.394 billion to the National Fish & Wildlife Foundation and $350 million to the National Academy of Sciences.
So the criminal fine is actually NOT the largest criminal fine in US history, coming just short of Pfizer’s $1.3 billion payment in 2009 for marketing fraud. And it’s spread over five years for seemingly no reason whatsoever; it’s not like BP can’t come up with the cash.
The guilty pleas are unusual here, based on past practice of allowing companies to pay fines and “neither admit nor deny” wrongdoing. But in addition to admitting to criminal violations, apparently two BP workers will face criminal manslaughter charges related to the incident. There’s no word yet exactly who will be indicted, though it appears like engineers and not executives will be held responsible. The well design has been blamed for the disaster, but it was an outgrowth of a culture that demanded more drilling and lower costs to increase profits. A separate engineer has already been indicted for obstruction of justice for destroying evidence.
Attorney General Eric Holder is speaking at a news conference in New Orleans at this hour about the charges.
BP’s shares were unchanged today. As one of the most profitable oil companies in the world, they can handle a $4.5 billion fine, and apparently there’s no fear of reputational risk from this. BP has reserves of $42 billion dedicated to the Gulf oil spill. They’ve already committed an estimated $7.8 billion for class action claims from individuals and businesses, and the $21 billion for Clean Water Act violations lurks in the distance. BP claims to have already spent $15 billion in the aftermath of the spill.
The other civil fines matter for a variety of reasons. First, even though they may be higher, fines under the Oil Pollution Act would be tax-deductible for BP in ways that Clean Water Act fines would not, in all likelihood. Also, the government committed to delivering 80% of all Clean Water Act fines to the Gulf Coast under the RESTORE Act, but did not make the same promise on Oil Pollution Act fines.
There’s a ways to go here, so it’s hard to assess the Justice Department’s conduct in this case at this point. But there definitely are some unsettling warning signs.
UPDATE: In addition to the two rig workers charged with manslaughter, an executive at the company has been indicted:
In addition, David Rainey, BP’s former vice president of exploration for the Gulf of Mexico, was charged with obstruction of Congress and making false statements. Prosecutors said he withheld information that more oil was gushing from the well than he let on.
An actual indictment of a high-ranking executive! Quite a day.