In the summer of 2010, several months after an explosion and fire on an oil rig off the coast of Louisiana killed 11 crew members, Attorney General Eric Holder Jr. publicly declared, “We will not forget the price that those workers paid.”
Holder dispatched a team of top DOJ lawyers to New Orleans to begin looking at the potential for civil and criminal claims rooted in the explosion of the Deepwater Horizon rig and ensuing oil spill—an environmental disaster that would soon become the worst in the nation’s history. The daily video images of the well, gushing oil, captivated the nation for weeks.
The government, Holder said that summer, would prosecute anyone “to the fullest extent of the law” if the investigations revealed criminal liability. For emphasis, he repeated the line.
On November 15, Holder returned to New Orleans to announce a record criminal punishment—$4 billion in fines and penalties brought against London-based BP PLC for misconduct. The criminal fine itself was $1.25 billion, one of the largest ever brought against a corporation. BP said the penalty will be paid in installments over five years. BP also said today the company will pay the U.S. Securities and Exchange Commission $525 million stemming from the rig’s explosion, the oil spill and the company’s response.
DOJ filed a 14-count information charging BP with 11 counts of felony manslaughter, one count of obstruction of Congress and violations of the Clean Water and Migratory Bird Treaty acts.
In remarks today, Holder said the criminal case, filed in U.S. District Court for the Eastern District of Louisiana, marked the latest step “to hold accountable those who bore responsibility for this tragedy.”
More than half of the funds will go toward environmental restoration and conservation along the gulf coast. DOJ officials said $350 million was earmarked for the National Academy of Sciences.
But the case doesn’t mark an end: DOJ is still pursuing civil claims against BP, and that case is set for trial early next year.
BP, represented by a team of lawyers that included Kirkland & Ellis partner Mark Filip in Chicago and F. Joseph Warin of Gibson, Dunn & Crutcher in Washington, is pleading guilty to all the charges. The company admitted responsibility in the deaths of the 11 crew members on the oil rig that day in April 2010.
“All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region,” Bob Dudley, BP’s Group chief executive said in a prepared statement. “From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf.
Prosecutors also unsealed charging documents against BP’s two highest-ranking supervisors, Robert Kaluza and Donald Vidrine, who were onboard the oil rig. The indictment charges the officials with manslaughter and other crimes based on alleged negligence concerning safety tests before the Deepwater Horizon exploded.
Additionally, a third former executive, David Rainey, who was in charge of exploration in the Gulf of Mexico, was charged with lying to Congress. Prosecutors contend Rainey also made false statements to investigators about the amount of oil that was actually spilling into the gulf. Rainey’s arraignment is scheduled for November 28.
“The explosion of the rig was a disaster that resulted from BP’s culture of privileging profit over prudence; and we allege that BP’s most senior decisionmakers onboard the Deepwater Horizon negligently caused the explosion,” Assistant Attorney General Lanny Breuer, the head of the DOJ Criminal Division, said in a statement. Breuer added, later: “Make no mistake: While the company is guilty, individuals committed these crimes.”
In the SEC action, commission lawyers, including Daniel Hawke, said BP misrepresented and omitted material information in public filings about the rate at which oil was flowing into the gulf. The recovered funds will be used to compensate harmed investors for losses.
Today’s criminal resolution doesn’t include the oil rig owner and operator TransOcean and cement contractor Halliburton. Breuer and Holder said investigations remain ongoing.
In August, Justice Department lawyers said in a court filing in a civil case against BP that the company “did not act alone, by any means, and its gross negligence and willful misconduct are inextricably joined with the acts and omissions of Transocean.”
DOJ officials said today the government wasn’t able to reach a resolution of Clean Water Act civil claims with BP. Penalties can range from $1,100 to $4,300 per barrel of oil discharged, creating the potential for billions of dollars in liability. The company said in a statement today it will “vigorously” fight remaining civil claims. Lawyers for BP on the civil side, including a team from Covington & Burling, contend there was no gross negligence.
“We have been in negotiations with BP,” Holder told reporters today. “We have not reached a number that I consider satisfactory.” The attorney general didn’t specify what penalty would satisfy the government. The government, Holder said, remains “as determined as ever to hold those responsible accountable.”
A federal trial judge in Louisiana earlier this year gave tentative approval to a $7.8 billion settlement over private civil claims stemming from the oil spill.
In addition to the criminal fines, BP agreed to retain a process safety monitor to “review, evaluate and provide recommendations for the improvement” of the company’s process safety and risk management procedures. The resolution of the criminal case also requires BP to hire an ethics monitor. That person, according to the plea deal terms, will provide recommendations for improving BP’s corporate code of conduct.
Contact Mike Scarcella at email@example.com.