* Claims, payout rate may point to charge against profit
* Accountancy professors represented by top lawyer
* Appeal hearing set for July 8
By Andrew Callus
LONDON, May 23 A group of U.S. accountancy
professors is backing BP's fight to rein in compensation
it has to pay for the 2010 Gulf of Mexico oil spill, which is
threatening to add billions of dollars to its growing bill for
The news comes after the payouts administrator, Patrick
Juneau, predicted that over 200,000 claims may be made in total
by businesses and individuals under a settlement BP agreed last
year - a level that could result in a charge against the oil
company's profits as early as next year.
BP has said some of the claims Juneau, a Louisiana
lawyer, is approving are "fictitious" and "absurd".
The 12 academics are represented by Paul Clement, one of the
best-known lawyers in the United States. Clement was solicitor
general under President George W. Bush, and is seen as a
potential candidate to fill a Supreme Court vacancy if a
Republican becomes president in 2017.
The expert group includes Andrew Bailey, former deputy chief
accountant at the U.S. Securities and Exchange Commission, the
national financial markets regulator, now of the University of
In a court document filed on May 10, ahead of BP's one-day
appeal hearing due on July 8, the professors said their
motivation was to ensure that accounting terms and principles
were "properly construed and applied" when relied upon in
They filed the document as a "Brief of Amici Curiae" - which
means "friends of the court". Under U.S. law, these are filed by
parties who have an interest in the outcome of a case, but have
no declared connection to either side.
In April BP lost its battle to convince Carl Barbier, the
judge presiding over a complex set of legal proceedings in a New
Orleans federal court, that the terms of the compensation
settlement it reached in April 2012 are being misinterpreted by
The case will now be heard at the United States Court of
Appeals for the Fifth Circuit.
Much of BP's argument against the way Juneau is making the
payouts hinge on an interpretation of accountancy terms that BP
says is too loose.
One of the key eligibility triggers for a so-called business
economic loss claim is the ability to show a lower revenue,
higher expense, or both, during and/or after the oil spill,
compared with other periods. Proof of a connection with the
spill itself is not necessary in most cases.
A looser definition of revenue and expenses could be more
volatile and less likely to match up large sums going in and out
of the business. BP argues this approach is triggering
eligibility even though, over time, there was no real impact on
The accountancy professors backed that argument in their May
10 document, saying; "identifying revenues and expenses requires
more than a mere consideration of cash receipts and
disbursements. Any judicial decision to the contrary is in
conflict with well-established accounting principles."
BP said in its latest court filing: "The result is that
thousands of claimants that suffered no losses are coming
forward in ever-increasing numbers, seeking and obtaining
outrageous windfalls and making a mockery of what was intended
to be a fair and honest court-supervised settlement process."
In an interview with Reuters last week, Juneau said he
believed the filing was concerned with "general accounting," and
added "it's not in the agreement that you follow general
accounting principles". BP declined to comment on the filing.
BP has a total provision of $42.2 billion in its accounts
set aside for clean-up costs, fines and compensation for the oil
spill in 2012, which killed 11 men and devastated the Gulf of
The extra compensation payouts BP is arguing about may end
up as a relatively small part of the total final bill. Other
developments - such as being found grossly negligent by Barbier
instead of simply negligent as BP argues, could increase its
liability by much more.
However, the nature of the payments - many, small and
individual - mean that unlike other future costs, recovering
them through further litigation would be next to impossible, BP
has argued. That, along with the unpredictability of the final
amount, could leave BP "irreparably harmed," it has said.
CHARGE AGAINST EARNINGS NEXT YEAR?
In April, BP added $500 million to its best guess of
compensation payouts under the settlement, based on what it
knows so far, for a total $8.2 billion of business economic loss
and other compensation claims. It has $1.7 billion left in the
$20 billion pot it has set aside for paying these and other
After that is gone, BP has said it will take future
compensation money straight from its net profit - which could
mean a charge as early as next year if payments continue at the
same rate until then.
The deadline for claims is April 2014, and Juneau told
Reuters last week that he expects total claims will top 200,000,
and that the pace of filings from the five states covered by the
settlement has picked up in recent months.
Of the 165,877 claims filed as of May 15, Juneau's office
has found 40,970 eligible for payment, with a total value
exceeding $3.2 billion.
Some 16 percent have been rejected. At that rate, 200,000
claims with 32,000 rejected and 168,000 paid would cost BP a
total of $13.1 billion - almost $5 billion more than it has
budgeted for and about four months' of earnings.
However, that sum takes no account of the fact that most
claims made so far are of uncertain status, having yet to be
either rejected or made eligible for payment. It also assumes a
steady average payout rate of $78,106 per successful claim.
BP has said the total is impossible to estimate, and
declined to comment on the calculations by Reuters. Juneau's
office did not return calls asking for comment on them.