Problems plague BP's oil spill compensation fund

[October 05, 2010]  ORANGE BEACH, Ala. (AP) -- In the rush to get compensation from BP after its massive oil spill, the $20 billion fund that the company created has been inundated with questionable documentation, inflated claims and in some cases, outright fraud -- all slowing down the process for legitimate claims, the administrator of the program says.

Claims have been bogged down by the sheer volume of requests for money -- nearly 98,000 -- as livelihoods have crumbled since the April 20 rig explosion that killed 11 workers and spewed more than 200 million gallons of oil. Confusion and frustration have become the only constants for desperate fishermen and business owners.

Sales manager Jeff Silvers was shocked to learn that his building supplies shop just a half mile from the Alabama coast was not considered to be affected by the oil that sullied beaches and marshes, sent tourists packing and kept fishing boats idle at harbors.

Swift Supply, he said, lost a huge chunk of revenue because customers canceled plans to build docks, do home improvements and complete construction on new houses with the uncertainty that followed the explosion and oil gusher.

He applied for compensation from the Gulf Coast Claims Facility, which is doling out BP's money to oil spill victims, but initially got nothing.

"We were told we weren't in the geographic area of the spill," Silvers said.

Just last week, however, he got a check for everything he asked for.

It came as attorney Kenneth Feinberg, who is administering the fund, decided that proximity to affected areas will no longer play a role in compensation approval.

It's the latest in a string of changes to the shifting process that has dragged on for weeks, with promises of generosity and fairness, but delivery of little more than apologies to many.

"I'm very happy, but there's still a lot of businesses that haven't been paid," Silver said.

Just as hope was fading that the troubled program could be fixed, Feinberg appears to be putting it into overdrive, re-evaluating previously denied claims and reaching out to some people who believe they were shortchanged.

In just the last week, denied claims dropped from 528 to 116, as checks were cut and mailed to businesses that were initially told they would get no help.

In an interview last week, Feinberg promised that kinks would be worked out and more generous payments would come.

In addition to those still waiting for money, The Associated Press interviewed dozens of people who say they have received small fractions of the compensation they requested. Beach wedding planner Sheryl Lindsay said she filed a claim for about $240,000 for lost revenue from July through December because of cancellations. She got a check from the BP claims center for $7,700.

Lindsay closed her coastal Alabama office and will soon file for bankruptcy.

"We don't have any business left," Lindsay said.

A final settlement will be offered to Gulf residents in the coming months which they can accept or deny and instead choose to sue BP, but Lindsay says she needs money now.

She recently got word from the facility that her claim would be reviewed for possible additional payments.

To date, the fund has paid out nearly $1 billion to about 50,000 claimants. However, claims officials would not provide AP with the total amount actually requested by those claimants. A Feinberg spokeswoman said the number is "irrelevant," given the volume of claims filed with no proof of losses, inflated requests and fraudulent ones.

Feinberg notes that complaints about small payouts have "not fallen on deaf ears," but that the amount of money being sought has no correlation to the size of the check cut.

"People can put down on a claims form all sorts of numbers," he said.

He referred to a fisherman's claim for $10 million in lost revenues "on what was obviously a legitimate claim of a few thousand dollars."

"We have thousands of claims where there is no documentation, none," Feinberg said.

Of the nearly 98,000 claims filed as of Oct. 2, about 35,000 require additional documentation and remain on hold.

Even the Justice Department weighed in, with a Sept. 17 letter to Feinberg expressing concern over the slow pace of payments.

"The Deepwater Horizon Oil Spill has disrupted the lives of thousands upon thousands of individuals, often cutting off the income on which they depend," the letter read. "Many of these individuals and businesses simply do not have the resources to get by while they await processing."

But even as some are getting a second look and possibly additional checks, others simply stew.

Fishing guide Mike Garey got just $21,000 in response to his request for $70,000 in losses.

"And we have no recourse whatsoever," Garey said.

He is also concerned about accepting any final settlement and giving up his right to sue BP.

"The phones aren't ringing. The e-mails aren't coming in," he said. "Where will we be in a year from now? Nobody knows the answer to that so how can we accept a final payment?"

Feinberg, who previously oversaw claims for 9/11 victims, promises things will get better, but says the entire process will take time to get right. He said potentially fraudulent claims are holding up the process, and are under review before being forwarded to the Justice Department for criminal investigation.

"We have scores of applications for financial aid that appear to be fraudulent," Feinberg said. "Our resources are diverted, and we become skeptical and concerned.

"At the beginning, it's always rough," he added. "Hopefully, by the end of this program, people will feel that the fund treated them fairly."

Feinberg declined to say how much he is being paid by BP, only that it is a flat fee "totally unrelated" to the size of the fund and amounts paid.

[Associated Press; By BRIAN SKOLOFF]

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