Audit finds BP disaster fund underpaid $64M for losses

Following BP's 2010 Deepwater Horizon disaster, the company set up a $20 billion fund to compensate Gulf Coast residents and businesses for their losses -- but local leaders complained about unfairness in decisions made by the Gulf Coast Claims Facility (GCCF) on who got paid and how much.

"We see a lot of inequitable treatment of claims," attorney Stephen Teague with the Mississippi Center for Justice, a nonprofit law firm that's been helping claimants, said in an interview for "Troubled Waters," a new report on the disaster's aftermath by Facing South/Institute for Southern Studies. "There are lots of problems that pervade the process."

Some of those problems have been confirmed by an independent audit ordered by the U.S. Department of Justice. An executive summary released yesterday reports that there were significant errors that led to the underpayment or nonpayment of more than $64 million.

"While there's no question that the independent GCCF labored under extremely challenging circumstances to get a huge number of payments processed successfully, the fact that this audit has resulted in tens of millions of dollars being made available to claimants who were wrongfully denied or shortchanged underscores the importance of the audit," said Acting Associate Attorney General Tony West.

As a result, payments in that total amount are being made to about 7,300 individuals and businesses throughout the Gulf region. Some of those will be first-time payments and others will be additional payments. The average amount of the underpayments was about $8,800.

Conducted by BDO Consulting of New York and based on a sample of the 1 million claims processed, the audit also identified more than 2,600 claimants whose claims were erroneously denied but who will not receive payments because their files lack information to quantify their financial losses.

In addition, the audit found claimants who were overpaid, although it did not attempt to identify all of those claimants or quantify the amount. The GCCF is not making an effort to recover the overpayments.

The GCCF paid out over $6 billion to more than 220,000 claimants before it closed as a result of the settlement between BP and the private plaintiffs. The claims process is now being handled by the courts.

The audit came about after Attorney General Eric Holder visited the Gulf last summer and heard concerns about the GCCF. He ordered the independent evaluation in December. The full audit will be released later this spring.

For a copy of the executive summary, click here.

(Photo of a home in St. Bernard Parish, La. by Sue Sturgis/Institute for Southern Studies)