August 23, 2010 / 6:10 AM / 9 years ago

Compensation czar takes charge of $20 billion BP fund

BILOXI, Mississippi (Reuters) - A $20 billion compensation fund for economic victims of the BP Plc Gulf oil spill opened for business on Monday amid accusations that rules set out by its administrator are unfair.

Kenneth Feinberg, administrator of the BP Deepwater Horizon Disaster Victim Compensation Fund, testifies on Capitol Hill, July 27, 2010. REUTERS/Yuri Gripas

Hundreds of people filed for an emergency payout with the Gulf Coast Claims Facility after its offices opened in the early morning, fund administrator Kenneth Feinberg told a town hall meeting of fishermen and coastal residents in Biloxi, Mississippi.

Feinberg takes over from a BP payments system that disbursed $375 million, but he sought to distance himself from that process and from the U.S. government, promising more generous treatment and a faster disposal of claims.

“I don’t care what BP did. I’m in charge now,” Feinberg told a meeting in Bay St. Louis for people affected by the spill. “I don’t care if BP denied your claim. File it again. I might find you eligible. It’s a new day.”

Compensation is a heated issue after the leak that began in April when a BP rig in the Gulf of Mexico exploded and sank killing 11 workers and unleashing millions of barrels of oil before it was plugged in July.

The decision to submit a claim is voluntary but anyone who provides paperwork in support of a claim would be paid within 48 hours if an individual and within one week if a business, Feinberg said.

Many Gulf coast residents have been frustrated by the slow pace of the claims process and skeptical about whether they will get fair and prompt treatment.

“I don’t trust him,” said Biloxi resident Linda StMartin after attending a town hall meeting. “I think he is a very honorable man but I think he is boxed in by these very narrow proscribed limitations” of the fund.

RIGHT TO SUE

BP set up the fund in June under White House pressure to make reparations for losses sustained in the fishing, tourism, housing and other industries in the Gulf coast states of Texas, Louisiana, Mississippi, Alabama and Florida.

A separate $100 million is set aside for losses sustained due to a federal six-month moratorium on new offshore drilling.

Feinberg was named compensation czar because of his reputation for fairness acquired administering the September 11 fund and determining executive pay for companies bailed out by the government after the financial crisis.

But the spill fund may provide an even tougher challenge, according to insurance experts who said calculating claims for businesses that have lost money is fraught with difficulty.

One point of dispute is the length of time during which people can file a claim before they must waive the right to also sue BP. Another is the rules surrounding claims for a final payout, given that the full extent of losses from the spill remains unknown.

For the next six months, anyone claiming an emergency payment can also sue BP at a future date. But beyond that period, claimants would forfeit the right to file against the company, Feinberg said.

Florida’s Attorney General Bill McCollum issued a statement last week saying the ruling favors BP and weakens provisions advocated by state attorney generals along the coast.

“The current process appears to be even less generous to Floridians than the BP process. Such an outcome is completely unacceptable,” McCollum said in a statement, echoed by one issued by Alabama’s attorney general.

In his defense, Feinberg said the idea for the cut-off point was his rather than BP’s.

“I am beholden to neither the administration nor BP. I am entirely independent,” Feinberg said.

He said no decision had been taken on whether people who claimed after the six-month window would be able to sue other companies such as Transocean and Halliburton who were also involved with the rig.

Editing by Philip Barbara

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