Oil spill fund administrator blames fraud, inflated claims for delays in getting victims cash

Leader on BP claims blames fraud for slow payouts

ORANGE BEACH, Ala. — BP’s $20 billion fund to compensate victims of the Gulf oil spill has been inundated with inflated or unsupported claims and in some cases, outright fraud — all slowing down the process of getting money to people who need and deserve it, the administrator of the program says.

Kenneth Feinberg said more than a third of the roughly 104,000 applicants need to do more to back up their claims, and thousands of claims have no documentation at all. He added that the amount sought in some cases bears no resemblance to actual losses, such as a fisherman’s claim for $10 million “on what was obviously a legitimate claim of a few thousand dollars.”

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

At the same time, hundreds of claims that were initially denied have been accepted as Feinberg adjusts rules for compensation, such as whether people need to be physically close to the spill to get paid.

“At the beginning, it’s always rough,” said Feinberg, an attorney who previously oversaw claims for 9/11 victims. “Hopefully, by the end of this program, people will feel that the fund treated them fairly.”

Many claimants are still waiting for checks from the Gulf Coast Claims Facility, which is doling out BP’s money to oil spill victims. The Associated Press interviewed dozens who say they have received small fractions of the compensation they requested. Claims have been bogged down by the sheer volume of requests for money as livelihoods have crumbled since the April 20 rig explosion that killed 11 workers and spewed more than 200 million gallons of oil over about three months.

“We don’t have any business left,” said Sheryl Lindsay, a beach wedding planner who filed a claim for about $240,000 for lost revenue from July through December because of cancellations. The check she received from the BP claims center was for just $7,700.

Lindsay said she recently learned that her claim will be reviewed for possible additional payments, but she needs money now. She closed her coastal Alabama office and said she will soon file for bankruptcy.

Such complaints have “not fallen on deaf ears,” Feinberg said. In an interview last week, he promised that kinks would be worked out and more generous payments would come, but that it is taking time to sort the legitimate claims from the overstated and the fraudulent.

“We have scores of applications for financial aid that appear to be fraudulent,” and are being reviewed for possible forwarding to the Justice Department for criminal investigation, Feinberg said. Some of the suspect claims have obvious discrepancies, while others appear to be multiple filings for the same loss, he said.

“Our resources are diverted, and we become skeptical and concerned,” he added. “Fraud always slows the process down.”

To date, the fund has paid out nearly $1 billion to about 50,000 claimants. 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 problems.

In the past week, the number of denied claims actually fell, from 528 to 118, as checks were cut and mailed to businesses that were initially told they would get no help.

Sales manager Jeff Silvers had been 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. But after he applied for compensation, he initially was told “we weren’t in the geographic area of the spill.”

Just last week, however, Silvers got a check for everything he asked for. He would not say how much he received. Feinberg has decided that proximity to affected areas will no longer play a role in compensation approval.

“I’m very happy,” Silvers said, “but there’s still a lot of businesses that haven’t been paid.”

Even the Justice Department has raised concern about 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 department said in a Sept. 17 letter to Feinberg. “Many of these individuals and businesses simply do not have the resources to get by while they await processing.”

Feinberg, however, said many of the claims are simply too flawed to pay out. “We have thousands of claims where there is no documentation, none,” he said.

Of the more than 104,000 claims filed as of Monday, more than 39,000 require additional documentation and remain on hold. Thousands of others remain under review.

President Barack Obama tapped Feinberg to oversee the BP claims fund, which the oil giant created under government pressure to ensure that it paid those hurt by the spill. 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.

A final settlement will be offered in the coming months, but to accept the money, applicants will have to give up the right to sue BP. The money being doled out now is considered only emergency help, but will be factored into the final payment offer.

Fishing guide Mike Garey, who got just $21,000 in response to his request for $70,000 in losses, isn’t sure what he’ll do.

“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?”