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BP, Justice Department Close to Settlement in Deepwater Horizon Case; BP to Plead Guilty of Criminal Misconduct

Fire boat response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon April 21, 2010. (U.S. Coast Guard photo)

Well, I think we’ve figured out how an elite corporation can receive criminal charges in 21st-century America. All you have to do is spill 205.8 million gallons of oil into a US waterway. Then, you’re just going to have to cop a criminal misconduct plea, as long as the Justice Department gives you immunity from future suits and wraps up all your negligence in one case.

BP Plc is expected to pay a record U.S. criminal penalty and plead guilty to criminal misconduct in the 2010 Deepwater Horizon disaster through a plea deal reached with the Department of Justice that may be announced as soon as Thursday, according to sources familiar with discussions.

Three sources, who spoke to Reuters on condition of anonymity, said BP would plead guilty in exchange for a waiver of future prosecution on the charges.

BP confirmed it was in “advanced discussions” with the Department of Justice (DoJ) and the Securities & Exchange Commission (SEC).

The talks were about “proposed resolutions of all U.S. federal government criminal and SEC claims against BP in connection with the Deepwater Horizon incident,” it said in a statement on Thursday, but added that no final agreements had been reached.

Now, the government could still pursue federal civil claims, but clearly this would take up the bulk of BP’s remaining liability. States and private individuals would still have recourse to sue BP, but it has dealt with a large uncapped class action suit that will pay out an estimated $7.8 billion to over 100,000 individuals and businesses. The fact that BP would agree to plead criminal misconduct here could make a difference in new cases, but not the class action.

When we last left these talks in October, reports expected the settlement to come in at between $18 and $21 billion. BP sought a settlement closer to $11 billion in July. So we can judge the final announcement against those figures. It won’t take much to become the “largest criminal penalty in US history”: that record goes to Pfizer for paying $1.3 billion for marketing fraud in 2009.

The Justice Department was willing to seek a judgment of “gross negligence,” and that would have tripled any Clean Water Act fines at trial. The fines, based on the total amount spilled, would then have reached between $21-$25 billion. The government sought this total for the settlement in July, when BP made an opening bid of $11 billion. So the final total should end up somewhere in the middle. But DoJ could still pursue civil charges on top of this.

80% of the money that the government does receive from BP will go to reconstruction efforts in the affected Gulf Coast states, per the recently passed RESTORE Act.

The Justice Department has also accused Transocean, the owner of the Deepwater Horizon well, with gross negligence in the spill. The two sides are in talks on a $1.5 billion settlement on civil and criminal claims. That alone would be the “largest criminal penalty in US history,” so people probably shouldn’t throw that statistic around when talking about this case.

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David Dayen

David Dayen