BP Slithers away with Light Penalty for Gulf Explosion and Oil Spill Disaster

Saturday, November 17, 2012
(graphic: despair.com)

BP’s agreement to pay a record amount in fines for the Deepwater Horizon oil disaster does not mean the government threw the book at the corporate oil giant.


In a deal reached with the U.S. Department of Justice, BP will plead guilty to 11 counts of felony manslaughter, one count of felony obstruction of Congress, and several counts of violating federal environmental laws. The company will pay $4.5 billion, the largest fine ever levied against a company in the United States.


But the penalty could have been much greater, according to David Uhlmann, the former chief of the Environmental Crimes Section at the Justice Department, who teaches at the University of Michigan Law School.


“The Justice Department has obtained the largest criminal fines in U.S. history, although it could be argued that the amounts are modest when you consider that BP faced up to $30 billion to 40 billion for the Clean Water Act violations,” Uhlmann told the Corporate Crime Reporter. “It also is curious that the Justice Department agreed that BP could have five years to pay the penalties, since criminal fines are supposed to be paid immediately unless there are ability to pay issues.” In addition, the fine represents only a small portion of BP’s 2011 profits of $27.5 billion.


BP could still wind up paying considerably more for causing the worst oil spill in U.S. history. The company will go to trial in February to challenge claims that it was grossly negligent while operating the oil rig that exploded, killing eleven workers and unleashing 200 million gallons of oil into the Gulf of Mexico. If it is found grossly negligent, BP could pay as much as $21 billion in pollution fines under the Clean Water Act.


In addition to imposing fines, the Justice Department charged three BP employees with criminal offenses. Robert Kaluza and Donald Vidrine are accused of manslaughter as a result of grossly negligent conduct in their supervision of the Deepwater Horizon rig, while executive David Rainey is charged with making false statements to law enforcement officials and obstructing Congress by withholding documents and manipulating data relating to the amount of oil that was flowing into the Gulf.

-Noel Brinkerhoff


To Learn More:

BP a Felon, to Pay $4 Billion (Corporate Crime Reporter)

BP Agrees to Plead Guilty to Crimes in Gulf Oil Spill (by Abrahm Lustgarten, ProPublica)

BP Will Plead Guilty and Pay Over $4 Billion (by Clifford Krauss and John Schwartz, New York Times)

United States v. BP Exploration and Production (U.S. District Court, Eastern Louisiana) (pdf)

More No-Show Witnesses in Oil Rig Explosion Probe (by Noel Brinkerhoff, AllGov)

BP Employee Refuses to Testify; Is Prosecution in the Cards? (by Noel Brinkerhoff, AllGov)


Claudia 9 years ago
Along with pressuring banks to make risky and ourigtht bad loans, the government pressured the credit rating agencies to put AAA on that debt. Fannie Mae (and Freddie Mac) thoroughly confused the housing bond market for 20 years. Fannie Mae had the implicit guarantee of the government and many explicit privileges that connected it to the government, unlike any truly private company. The ratings agencies respected that implicit guarantee, and put AAA on Fannie Mae debt. Then, they put AAA on all similar debt.The ratings agencies could not say that Fannie Mae bonds were AAA because of implicit guarantees (publicly denied by politicians), while properly downrating other, similar debt. The contradiction would have made all of that debt questionable (as it should have been)An implicit guarantee is when powerful politicians are pushing a program and clearly are not going to let it default. They will spend any amount of money to avoid bearing personal responsibility for a failure. This is how it has worked out..=== ===The failure of the ratings agencies has had consequences that are out of proportion. It should not be dismissed as a simple regulatory mistake.I represented bond issuers and designed entire programs based on getting better ratings as well as better tax treatment for non profit issuers. Why did the ratings agencies get the mortgage securities so wrong and not the debt of hospitals, colleges, and universities I represented? Why did purchasers do better buying lower-rated health and university bonds than the higher-rated mortgage bonds? The answer lies in political pressure. My issuers had very little power over the rating agencies. But, the federal government effectively provided the charter for the ratings agency, and the federal government tacitly backed the bonds being rated. Even the most seasoned, hardened analyst working for the ratings agency would have had a hard time stating that those bonds were not worth the paper used to print the offering document=== ===

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