By: Katy Reckdahl – This article appeared in the May 4, 2015 edition of The Nation
BP agreed to a $7.8 billion settlement, but still hasn’t paid out most Gulf Coast businesses.
In the summer of 2014, Skyland Seafood quietly shut down. In Mobile, Alabama, where the shop had been located for 17 years, Skyland’s demise caused a small, heartfelt shock wave, said customer Alice Lang, 67, who regularly mourns the store’s closing in conversations with her neighbors. As she prepared her family’s Christmas gumbo, Lang added that she felt uncertain about the seafood she’d just bought. It was a worry she hadn’t had in years, because she trusted Phoung Nguyen, Skyland’s owner. “Phoung Nguyen was my seafood guy. With him, everything was fresh from the water,” she said.
His customers say that six days a week, Nguyen purchased just enough freshly caught seafood to sell that day. When customers bought brown or white shrimp, they waited as he stood behind the counter and took off the heads. When they bought fish, he fileted it on the table in front of them.
But today, Nguyen’s shop is shuttered and silent, a victim of BP’s Deepwater Horizon oil-rig explosion on April 20, 2010. “Everybody knows that BP helped shut him down,” Lang said.
Nguyen and his customers blame BP’s labyrinthine claims-processing system, which still hasn’t paid him for the $440,000 in losses he sustained in 2010, when there was no seafood to sell because of the spill. The figure was determined by comparing that year’s paltry sales with a tally of past sales, and was documented in hundreds of pages submitted by his New Orleans–based lawyer, Joel Waltzer.
Though Skyland Seafood was just one small shop, its closing resounds well beyond Mobile as an example of the small mom-and-pop stores and family-run wholesalers that have struggled to stay in business after more than 3 million barrels of oil began spewing into the Gulf. These operations have made up the heart of the Gulf Coast seafood industry for generations, a lattice of local businesses that crisscross the coast from Florida to Texas. Yet they can’t seem to get compensation from BP for their modest claims.
Those who work with the water here know catastrophe. They have lived all their lives with the threat and aftermath of hurricanes. But even after the most destructive storms, as people struggled to rebuild, their boats have typically returned to the sea, bringing back the steady stream of fish, crabs, and oysters they rely on.
But the sea is uncertain now.
After the explosion, the Macondo Prospect well gushed for three months. By May, the Louisiana crude oil had traveled 98 miles north to Alabama’s shores, in a gooey mess that officials described as tar balls, tar patties, tar mousse, and tar mats, some the size of a school bus. In the water itself, thick plumes of submerged oil with the consistency of beef liver stretched for miles, fishermen said.
Five years later, many of the fish that fed the Gulf’s vast seafood industry have yet to come back. Fishermen tell of trawling the waters all night and not bringing home enough fish to pay for their fuel. “I don’t know when it will be back to normal,” said Nguyen, who worries about his customers, his livelihood, and his long-standing BP claim.
It’s a familiar story to Florida claims lawyer Tom Young, who noted that he was able to resolve cases in two or three months back in mid-2012, when BP’s court-supervised settlement program was new and the money flowed more freely. Today, Young said, his cases require countless documents and take an average of 18 to 30 months. “The folks who were impacted the most will have the hardest time getting paid,” he added.
* * *
That the Gulf Coast’s small-business owners would ultimately be stiffed by BP is counter to the spirit of a 1,033-page settlement, which was negotiated with a committee of plaintiffs’ lawyers and approved in May 2012 by the federal district court in New Orleans. In some ways, the settlement seemed almost revolutionary, especially to those who had watched the painfully protracted, 20-year claims process for the 1989 Exxon Valdez tanker spill off the coast of Alaska. (In Alaska, after a jury awarded the plaintiffs $5 billion in 1994, Exxon spent nearly 20 years appealing the judgment and eventually got it reduced to about a tenth of the original award. By the time the payments from that judgment began in 2009, 6,000 of the original 32,000 plaintiffs were dead.)
In 2012, as the estimated $7.8 billion settlement was put in place, BP executives boasted that most of the people who had applied for damages would now receive “full and fair compensation” without having to wait “through a lengthy trial process.” To that end, the settlement required businesses to demonstrate only that they had suffered losses during the time of the spill; there was no need to prove that the spill had actually caused those losses.
But BP soon began to retreat from this key aspect of the settlement. In March 2013, the company challenged the “causation clause,” contending that two-thirds of all business claims for more than $75,000 were based on “flawed data.” As examples, BP lawyers cited cases like the nursing home in Central Louisiana that received $663,834, even though it had shut down a year before the spill. Or the wheat farmer located 200 miles from the Gulf, who decided not to plant a crop in 2010 and received $266,730 for a diminished harvest that year. Or the dental office that received $137,519 for lost revenue during the months it was closed due to water damage unrelated to the spill.
BP asked US District Judge Carl Barbier to put a stop to all “business economic loss” (BEL) payments, a category that includes small businesses like Nguyen’s. In December of that year, Barbier granted BP’s request, and payments were suspended for five months. Within weeks, however, Barbier issued a ruling that the settlement’s approach to causation made sense: “The delays that would result from having to engage in a claim-by-claim analysis of whether each claim is ‘fairly traceable’ to the oil spill…are the very delays that the Settlement, indeed all class settlements, are intended to avoid.”
Still, he allowed the suspension to continue through May 2014, to give BP and its lawyers time to craft a new, 88-page accounting policy that now applies to anyone who uses cash-basis accounting (basically, the type of bookkeeping that just goes with the flow of life—without, for instance, placing related expenses and payments in the same month). Small businesses that were largely run out of a checkbook now had another hoop to jump through. And ever since the payments were reinstated last year, lawyers say, the money has flowed much more slowly.
At this rate, 75 percent of small-business owners—“the Gulf Coast blue-collar, hand-to-mouth, paycheck-to-paycheck guys”—will never get paid, says Brent Coon, a Texas lawyer whose firm represents 10,000 spill clients. According to BP’s own data, fewer than 19 percent of these BEL claims have been paid to date.
When asked about those unpaid claimants at risk of foreclosure or closing their small businesses, BP spokesman Geoff Morrell didn’t respond to particulars, instead sending a more general response about the settlement hammered out a few years ago, which “fulfills BP’s commitment to pay all legitimate claims stemming from the Deepwater Horizon accident.”
Yet BP’s refusal to pay BEL claims often has nothing to do with legitimacy, Coon said; the problem is that these small businesses simply don’t have every piece of paper that BP requires. And unlike the other broad settlements he’s dealt with, in this one BP doesn’t negotiate over gaps in paperwork. Coon compares the situation to a jigsaw puzzle with 99 of its 100 pieces assembled. “I can see the big picture from those 99 pieces,” he said. “But BP won’t give you 99 percent. If you’re missing one piece, you don’t get paid.”
That intransigence seems contrary to the concerned and kindhearted image that BP cultivated early on. Two months after the spill began, while oil was still pouring from the Macondo well, BP ran an apologetic ad featuring then-CEO Tony Hayward. “To those affected and your families, I’m deeply sorry,” said Hayward, who promised to “honor all legitimate claims.” He closed the ad by stating: “We’ll get this done. We will make this right.”
BP, one of the world’s largest companies, had $236 billion in assets in 2009, the year before the spill. And in the months that followed, it appeared that the company was using its colossal holdings to address the crisis quickly. Or, as Coon said, BP bragged “very early and very often” about the claims it paid. Some types of claims were resolved quickly and fairly, he added, rattling them off: claims by vessel owners, sea captains, and deckhands, claims involving coastal beach property. “But with the bulk of the cases, BP has been horrible about paying,” Coon said, emphasizing that the glacially slow process has had a terrible impact on smaller operators, who don’t have lines of credit.
At this point, with the final filing deadline approaching on June 8, Young believes that BP may be deliberately trying to deter more claims. “BP wants the story at church to be: ‘It’s a nightmare; it’s not worth going through; the paperwork is onerous,’” he said. “The idea is to discourage as much as possible.”
* * *
In the immediate aftermath of the spill, BP paid Nguyen $119,000 in emergency money, which came from a $20 billion claims fund negotiated with the White House in June 2010. The money was doled out quickly, with a fairly low bar of proof, to a narrow group of people hurt by the spill. The money paid for oil-cleanup work and for six months of lost wages, profits, or household meals.
The swift emergency payment gave Nguyen a certain faith in BP. So he listened to the company’s message to local businesses: BP asked them to stay open, he said, even though most fishing waters were closed by the spill. Despite having almost nothing to sell, Nguyen continued to pay $1,000 in rent for his storefront in a small shopping center, along with insurance and utility bills.
Until the spill, Nguyen’s life had revolved around his store and the rhythms of the daily catch. He’d arrived in the United States as a child in 1984, after fleeing Vietnam in a boat with his uncle, and then joined the growing community of Vietnamese refugees who settled along the water because of similarities with their home country: a humid climate, Catholic churches and a fishing industry. Locals in Alabama estimate that the Vietnamese community makes up half of the larger seafood industry, which includes those who work on the water and those who process and sell the catch afterward: oyster shuckers, crab pickers, and seafood retailers like Nguyen.
Nguyen was still in grade school when he began helping out in another relative’s seafood market, learning how to shuck oysters, debone fish, and test freshness. By the time Nguyen opened Skyland Seafood in the late 1990s, he felt like he knew the business from top to bottom.
Then came the spill. For four years, he kept the lights on, waiting for business to return to what it used to be, when he would ring up $15,000 to $20,000 in sales each month. That seems like a dream now, he said. At first, in the months after the spill, the register receipts were basically zero. Then they went up to a few hundred dollars when he was able to get a few containers of shucked oysters or crab meat—but at “high-sky” prices, he added, nearly double what he used to pay.
According to Nguyen and others in the seafood business in this part of Alabama, few locals catch blue crabs in their traps anymore. Oysters, too, are a relative rarity, and most fish catches are less than they were before the spill. So even when Nguyen was able to get his hands on some inventory, he bought it at high prices and sold it for a much lower profit.
People along the Gulf Coast quibble about the cause of the decline in crabs, fish, and oysters—with some noting, for instance, that the gamefish now protected by federal regulations may be eating crabs. But for Nguyen, the situation is clear: He’s been unable to recover from 2010, when plumes of crude oil extending for miles killed and chased away the only livelihood he’s known.
Last summer, at the age of 41, Nguyen couldn’t hold out any longer. For the first time in 17 years of business, he had run up bills he couldn’t pay, including a year’s worth of back rent to his landlord. So he turned his key in the lock for the last time. “I felt bad, very bad,” he said. “Without my shop, I will lose everything. But I couldn’t afford it no more. I was empty.”
* * *
A few months after the spill, a judicial panel that governs cases crossing state lines assigned the BP trials to Barbier, stating that his court’s location in New Orleans was the geographical and psychological “center of gravity” and that he had a suitably “distinguished career” as a lawyer and a judge. Barbier now oversees a sprawling sea of litigation, including the large plaintiffs’ settlement and a massive civil maritime-law case brought against BP by the US Department of Justice under the Clean Water Act.
BP was able to avoid a separate criminal trial by pleading guilty in 2012 to 14 federal charges. These included one for obstructing a congressional probe into the spill, after a BP executive lied to Congress about the rate of the well’s leak, and 11 manslaughter charges, one for each of the workers killed when the Deepwater Horizon rig exploded. The company will pay $4 billion in criminal penalties over five years.
BP also settled US Securities and Exchange Commission charges that it lied to shareholders by underestimating the spill’s extent in “multiple reports” filed with the SEC. In November 2012, BP agreed to pay the third-largest such penalty ever assessed, $525 million.
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The civil trial, which was brought by the Justice Department on behalf of the federal government and several states, as well as numerous individuals and companies, is massive and consists of three phases. With each phase, the scale of BP’s negligence has become more clear.
The first phase, held in early 2013, determined fault: which businesses involved in the failed Macondo well were to blame for the spill. Barbier made headlines this past September when he issued his findings, putting two-thirds of the blame on two BP subsidiaries. The company’s business partners were hit less hard: Transocean bore 30 percent of the blame and Halliburton 3 percent.
In his 153-page ruling, Barbier tracked the Macondo well blowout step by step and concluded that the release of oil was the result of “gross negligence” and “willful misconduct” by BP Exploration and Production, one of the subsidiaries. That high level of negligence subjected BP to steeper Environmental Protection Agency civil penalties—up to $4,300 for each barrel spilled.
The second phase of the trial, held in the fall of 2013, laid the groundwork for the penalty phase by calculating how much oil was actually spilled. In his second-phase ruling this past January, Barbier found that the well ultimately discharged 3.19 million barrels of crude oil into the Gulf of Mexico. The trial’s third and final phase, which started in mid-January, will determine how much BP owes in federal Clean Water Act fines. Best estimates suggest that BP and its partner in the Macondo well, Anadarko Petroleum Corporation, could face up to $13.7 billion in fines, a figure calculated by multiplying the amount spilled by the per-barrel fine of $4,300.
A forensic accounting expert, Ira Ratner, testified that BP should be able to pay its Clean Water Act fines without any problem, since its financial position today is even better than it was before the spill. Ratner found that in mid-2014, BP’s assets were $315 billion, an increase from $236 billion in mid-2009. “This presents an incredibly strong picture,” Ratner said.
* * *
Phoung Nguyen’s cousin, Tony Mach, has vivid memories of the day the spill began five years ago. On April 21, 2010, the morning after the Deepwater Horizon drilling rig exploded, Mach heard the news from a professor at the University of South Alabama, where he was a freshman. He ran from class to call his father, Lanh Nguyen, who ran his own market, Saraland Seafood, in nearby Saraland, Alabama. “I called my dad to say, ‘Hey, it’s about to be wiped out,’” Mach recounted.
In many ways, he was right. Today, the core of the coast’s seafood culture depends on whether BP will pay legitimate claims that are urgently overdue. It’s not hard to find people still waiting for BP compensation in Bayou La Batre, Alabama’s leading port, which is dotted with small shops that process and sell oysters, shrimp, crab meat, and fish.
Not far from town, in tiny Coden, Alabama, Ricky Collier Sr., 61, owner of P.J. Seafood, fears that he can’t hang on much longer. Collier’s seafood permit, No. 10, is one of the oldest in the state, dating back to his grandfather Frank, who became the state’s 10th official seafood processor when he opened Collier Seafood roughly 80 years ago. Frank’s son, Jimmy, ran it until his death in 1991. Then Ricky took over, using the shop’s profits to support his mother along with his own young family. Retailers swear by Collier’s cleanly shucked oysters and crab meat, which rarely has much shell in it, they say.
Over the years, the Colliers have weathered economic downturns and hurricanes. “But this BP thing is going to put us out of business,” he said. “Every year, it’s just worse and worse. We don’t do a quarter of the business we used to.” People told him that after the spill, he’d likely have to wait four years for the fish to return. But last year—the fourth—was “the absolute worst,” Collier said. He’s now used every penny from the family’s savings accounts and CDs just to keep the business going. He calls his lawyer periodically to check in, but there’s little change, Collier said; he isn’t even sure how much he’s owed at this point. Collier gave his lawyers at Faegre Baker Daniels permission to release all the details of his BP claim and that of his son, Ricky Collier Jr., a fisherman, to The Nation, but they refused, citing privacy concerns.
Lanh and Phoung Nguyen have received nothing more from BP for their lost business revenue since the up-front emergency money they were given in the early days of the spill. Like Phoung, Lang Nguyen filed his claim, for $142,711, three years ago. The file now includes dozens and dozens of submitted documents, but it is still under review.
Sandy Nguyen (no relation to Phoung or Lanh), who heads up the nonprofit Coastal Communities Consulting in eastern New Orleans, believes that a portion of the blame should be heaped on some BP claim lawyers, who focus on the higher-dollar clients and rarely sit down with small-business owners to create the BP-mandated profit-and-loss statements that match tax filings and receipts. But the most common pitfall she sees is the low literacy rate among fishermen of all ethnicities, who often go to work in the family business after completing sixth grade but insist on do-it-yourself bookkeeping.
Yet Emilda Galegos, Skyland’s bookkeeper, emphasizes that a lack of documentation is not an issue with Phoung Nguyen. Each year for 17 years, she’s done his taxes, and every month she’s filed sales taxes; several years of that work has been submitted to BP. Since the spill, she’s also responded to BP’s ongoing requests for financial documents. “They needed this, they needed that,” Galegos said. “But we’re still waiting.”
* * *
Late last year, after failing to win sympathy from Judge Barbier, BP made a futile objection to the settlement to the Supreme Court, arguing that the 2012 agreement allows bogus claims from people who “cannot plausibly allege a causal nexus,” according to the BP lawyers’ brief.
BP piled on with indignant amicus briefs on the matter—from entities like the Federation of German Industries, the Confederation of British Industry, the American Chamber of Commerce in Germany, and BritishAmerican Business—which contended that awards to “uninjured” spill victims “makes the United States a less attractive place in which to invest and conduct business.”
Her Britannic Majesty’s Government of the United Kingdom and Northern Ireland also filed an archly worded brief on the company’s behalf: “Her Majesty’s Government understands that the Louisiana district court ordered petitioners to pay untold millions of dollars to ‘undeserving non-victims’ of the Deepwater Horizon oil spill for losses the spill did not cause…. That holding cuts against the grain of our nations’ shared legal tradition.”
The Supreme Court declined to take up the case. And despite the outraged tone of BP and its defenders, a November 2014 audit by the accounting firm McGladrey found that most of the compensated claims were legitimate.
In a report to Barbier, the settlement agreement’s audit committee described the low error rate as a significant accomplishment. “After testing 1,852 claims totaling $741 million, McGladrey identified monetary errors of only $2.1 million representing .28 percent of the total population,” the committee noted. It also emphasized that 90 percent of the documentation deficiencies found by auditors occurred for two reasons: the claims lacked copies of the leases associated with oyster beds, or they lacked clear creation dates for financial statements.
Young, the Florida lawyer, observed that BP’s increased document requirements “may prevent the odd fraudulent filing, but at what expense? I’ve never been part of something so frustrating.”
New Orleans lawyer Joel Waltzer, who represents Skyland Seafood and Saraland Seafood, fears that Phoung Nguyen is at a breaking point. “He comes to tears in front of me, begging me to do something to get him paid, to help him so that he won’t lose his car, his house, and the things he worked so hard for.” Yet Waltzer can do little to make Nguyen’s case move more swiftly: “We, too, are so frustrated.”
* * *
With the Skyland and Saraland shops closed, the Nguyen family members have seen both men fade. Mach’s father, who is 49, shut down his shop in late 2013. “I am very sad,” he said. “Now I am jobless.”
He recalled the long hours he worked after he arrived here in 1984, speaking only broken English. Mostly he worked on shrimp trawler boats and harvested oysters. As his English improved, he began saving money for Saraland Seafood, which he finally opened in 2007. It was a dream come true, a business built from nothing. Before the spill, he netted about $2,000 a month after paying his bills, he said.
Recently, he tried to get a spot on a boat again, just to make some money. “But most of the boats I know aren’t working, because there’s not as much seafood in the Gulf right now.” Though his three children are trying to help him, he is worried that he’ll soon default on his mortgage.
He’s also depressed. He tells his son that he has “no clue” what to do with himself. Neither Lanh nor Phoung Nguyen finished high school. “They’ve been doing this all their adult lives,” Mach said. “That’s all they do, and they’re specialists at it.”
On every day but Sunday, both men would arrive at the dock in Bayou La Batre around 7 am to buy fresh fish and seafood from trusted fishermen and wholesalers and take it to their shops to sell, Mach said. He recalls going to the dock with his father, watching him inspect the shrimp to make sure it was uniformly colored, without dark edges on the top or tail, which would signal that they had been out of the water too long. He also smelled the crabs to test for freshness and checked the eyes and gills of fish to look for the telltale signs of cloudiness or loss of color.
Phoung Nguyen gave up what he loved and began working in a local shipyard. But the money is not enough to keep up with his bills, he said. Last month, he pawned his pickup truck to pay his house note. In January, he borrowed money from family. But soon, another note will come due. “He’s almost rock bottom,” Mach said. “His daughter tells me that he has a blank stare, and he’s not saying anything except that he’s sorry.”
April 15, 2015 | This article appeared in the May 4, 2015 edition of The Nation.