Corruption found in BP Gulf of Mexico settlement programme

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BP’s claim that it is being fleeced by unscrupulous US lawyers has been lent credibility by a former FBI director, who has found evidence of corruption in the Gulf of Mexico compensation scheme.

Louis Freeh was appointed by a judge to conduct an independent investigation into the settlement programme, which is paying out compensation for the 2010 disaster on BP’s behalf.

Despite finding “pervasive” improper and unethical conduct by some senior lawyers in the scheme, Mr Freeh said the evidence was not enough to merit halting all payments from the fund - something BP (LSE: BP.L - news) has repeatedly called for.

BP has launched a number of separate appeals on various grounds to try to halt the payments from the fund, which are spiralling billions of dollars above the $7.8bn it estimated when it signed the deal last year.

Costs are now $9.6bn and rising, threatening to push BP’s total bill for the disaster well above $42.4bn.

Mr Freeh found that two attorneys working on the claims programme “may have violated the federal criminal statutes regarding fraud, money laundering, conspiracy or perjury” and recommended US authorities consider pressing charges against them.

He cleared Patrick Juneau, the man in charge of the scheme, of misconduct but found that “many of his key executives and senior attorneys” acted in an improper or unethical way.

Geoff Morrell, BP spokesman, said the report “confirms what BP has suspected for some time: there has been fraud and unethical conduct within the facility itself and among various claimants and their lawyers and immediate steps need to be taken to prevent it in the future”.

He called the evidence “shocking”and said it showed that “neither BP nor the public has had any idea of what’s really going on” in the programme.

Mr Juneau said Mr Freeh’s report validated his team’s work and he played down the alleged misconduct by two former members of his staff as an “isolated situation.”

“We will continue the job of processing claims,” he said. "We welcome the recommendations from the Freeh report and we look forward to working with him to help improve all aspects of the claims process."

The report found that two private attorneys - Glen Lerner and Jon Andry - used Lionel Sutton, a lawyer on Juneau's staff, to speed-up a claim by their firm for nearly $8m (£5.1m). In return, Mr Sutton received more than $40,000 in fees from payments on claims he had referred to their law firm before joining Juneau's staff, the report said.

Mr Freeh recommended turning over his report to the Justice Department and the US Attorney's Office to determine whether Mr Sutton, Mr Lerner, Mr Andry or Mr Sutton's wife Christine Reitano, who also worked as a lawyer on Mr Juneau's staff, violated any federal laws "regarding fraud, money laundering and conspiracy."

He also recommended that the court consider disallowing the $7.9 million payment of The Andry Law Firm claim based on "long-held principles of equity which prohibit a party before the court to benefit and enrich itself after having engaged in dishonest, unethical and improper conduct."

"In this matter, the conduct of The Andry Law Firm is particularly egregious," the report said. "In effect, Mr. Jon Andry's AndryLerner firm was making secret, improper payments to Mr. Sutton at the precise time Mr. Sutton was a senior CAO attorney, working in concert with Mr. Jon Andry to expedite payment of The Andry Law Firm claim."

Michael Walsh, an attorney for Lionel Sutton, said Mr Freeh's allegations about his client's conduct possibly warranting a criminal probe are "absolutely unfounded."

"There was no criminal activity on Mr. Sutton's part," Mr Walsh told the Associated Press. "If Mr Sutton had done anything criminally wrong, he would not have co-operated with Mr. Freeh."

James Cobb, a lawyer for Andry, said his client hasn't done anything wrong and doesn't deserve to be smeared by Freeh.

"It appears to me that Mr. Freeh reached a conclusion first and then worked his way backwards, citing facts which are unsupported in the record," Mr Cobb told AP.

Lawyers for Mr Lerner and Mr Reitano could not be reached for comment.

Mr Sutton resigned from his job at the settlement program in June, while Mrs Reitano was sacked later the same month. She has demanded to be reinstated, and insisted she has done nothing wrong.