Ex-FBI director to review BP settlement program

7/2/2013

NEW ORLEANS — A federal judge has appointed former FBI Director Louis Freeh to conduct an investigation of alleged misconduct by a lawyer who worked for the court-supervised administrator of BP’s multibillion-dollar settlement along with a team of private attorneys.

U.S. District Judge Carl Barbier issued an order Tuesday naming Freeh a “special master.”

Freeh, a private consultant, recently led a university-sanctioned probe of the Pennsylvania State University sex abuse scandal.

Oil spill claims administrator Patrick Juneau announced last month that his office is investigating allegations that an attorney on his staff received a portion of settlement proceeds for claims he had referred to a law firm before he started working on the settlement program.

BP had called for an independent review of the allegations.

Freeh was a federal judge in New York before serving as FBI director from 1993 to 2001. He founded his consulting firm, Freeh Group International Solutions LLC, in 2007.

In 2011, Penn State’s board of trustees hired Freeh to conduct its internal probe of the university’s handling of allegations that former assistant football coach Jerry Sandusky had been molesting boys for years.

In July 2012, Freeh issued a report that accused the school’s legendary head football coach, Joe Paterno, and other top Penn State officials of engaging in a cover-up to avoid bad publicity. Paterno’s family and other targets of Freeh’s investigation vehemently denied the report’s conclusions.

Barbier’s appointment of Freeh is a victory for BP as it wages an aggressive campaign to challenge what could be billions of dollars in settlement payouts to Gulf Coast businesses with claims arising from the company’s 2010 oil spill in the Gulf of Mexico.

BP argues Barbier and Juneau misinterpreted the settlement and have allowed thousands of businesses to receive hundreds of millions of dollars in settlement payments for fictitious and inflated claims. BP appealed Barbier’s rulings on the issue. A three-judge panel from the 5th U.S. Circuit Court of Appeals in New Orleans is scheduled to hear the case on Monday.

Barbier said in the order that Freeh’s duties would not be confined to allegations involving the attorney, but would be a broader look at the claims settlement program. The order states that Freeh would be charged with “fact-finding as to any other possible ethical violations or other misconduct” within the settlement program. The order does not specify compensation for Freeh and his consulting company.

The class-action settlement isn’t capped, but BP initially estimated it would pay $7.8 billion to resolve tens of thousands of claims by Gulf Coast businesses and residents who claim the spill cost them money. Now the London-based oil giant says it can’t reliably estimate how much the settlement will cost if the 5th Circuit doesn’t overturn Barbier’s rulings.

The allegations against Sutton are outlined in a report that Juneau provided to Barbier during a closed-door meeting in his chambers on June 20.

The report says a “confidential source” who contacted Juneau’s security chief accused Sutton of trying to influence a claim filed by a New Orleans-based law firm. The same firm allegedly paid Sutton a portion of settlement payments for claims he had referred to it before he went to work for Juneau in November 2012.

Sutton denied the allegations when Juneau discussed them with him, according to the report.

The report also indicates that Juneau’s security head, David Welker, notified the FBI’s New Orleans division about the lawyer’s alleged misconduct. Welker until recently was the special agent in charge of the FBI office in New Orleans.