Potential scams top 7,000 in BP spill compensation


NEW ORLEANS – The $20 billion fund responsible for compensating victims of BP's Gulf of Mexico oil spill has received more than 7,000 potentially fraudulent claims, many of which have been referred to the Justice Department for criminal investigations, the fund's administrator told a Senate panel on Thursday.

Attorney Kenneth Feinberg, who is overseeing the Gulf Coast Claims Facility, said of more than 481,000 claims filed, 7,575 are considered potentially fraudulent. The Justice Department has already indicted eight claimants.

The fund was set up in August to handle thousands of claims for compensation from residents, business owners and fishermen across the Gulf Coast and beyond who can prove they suffered financial losses from BP PLC's April 20 oil well blowout off the coast of Louisiana. The Deepwater Horizon explosion killed 11 rig workers and sent millions of gallons of crude into the Gulf.

Feinberg testified in Washington on Thursday before a subcommittee of the Senate Committee on Homeland Security and Governmental Affairs. Lawmakers criticized Feinberg's operation of the fund and the slow pace of processing claims, questioning his commitment to transparency.

Feinberg's Washington law firm had been receiving $850,000 a month from BP for its work. He is currently negotiating with BP over a new payment structure for his administration of the fund through August 2013.

"As the Gulf continues to recover, I continue to have serious concerns regarding claims determinations made by this organization," said Sen. Richard Shelby, R-Ala., who noted that 38,604 claims in his home state have yet to receive "one penny in funding."

"The Gulf Coast Claims Facility is not acting with the appropriate urgency I thought it would," Shelby said.

Claimants across the Gulf Coast have also criticized Feinberg, complaining that they are being paid too little, too slowly or not at all.

Those who feel they were shortchanged or wrongly denied compensation can appeal to the U.S. Coast Guard. As of Thursday, Feinberg said the Coast Guard had processed 264 out of 507 appeals. In every case they reviewed, the agency has agreed with the decisions by the claims fund and offered no additional relief.

Feinberg has repeatedly promised fairness and transparency. He called the program a success that has already paid out more than $3.3 billion to about 168,000 claimants. He said roughly half of all claims have been denied because of ineligibility or lack of documentation.

Feinberg also told the panel he would soon begin downsizing the fund's staff because some aren't needed after the claims have been entered into the system. But he said it would be done carefully so it doesn't hurt the fund's ability "to process claims efficiently and effectively."

The fund currently employs about 3,600 people directly or by contract. The first round of cuts will lose 150 people from one of the subcontractors, with more to come.