Ponzi schemes didn’t die in prison with Bernie Madoff.
Private plaintiffs’ attorneys, trial lawyers but not the typical billboard kind, represent seven parish governments suing more than 200 oil and gas companies in 43 coastal lawsuits. They seek damages from the companies for, principally, oil and gas exploration over a half-century — all the business having been conducted according to state and federal regulations.
Most of the lawsuits were filed in 2013. The state Department of Natural Resources, which issues drilling permits, hasn’t written one violation for any of the major oil companies in any of these lawsuits. The companies were not cited by the regulators because they didn't do anything wrong.
Those silver-tongued trial lawyers talked two legislators into filing Senate Bill 233 and House Bill 569. The substantially similar bills implement the proposed Freeport McMoRan (one of the 200 defendants) settlement framework for 12 coastal parishes.
The duplicate bills divert funding from the state’s coastal master plan by creating another layer of bureaucracy: the Coastal Zone Recovery Authority (CZRA), clearly intended to be confused with CPRA (Coastal Protection and Restoration Authority), which can perform all of the functions of CZRA without the additional overhead, expenses and diversion of money away from fixing the coast.
The Freeport settlement offer for $100 million was announced in September 2019 during the heat of the governor’s race. Gov. John Bel Edwards‘ largest donors wanted to make it look like he had a breakthrough in the coastal lawsuits. The terms of the memorandum of understanding (settlement offer) wasn’t released to the public until March 2021.
The “deal” would generate three annual cash payments totaling $23.5 million ($15 million, $4.25 million, and $4.25 million), not the $100 million announced. The “deal” establishes an environmental credit cap-and-trade style system that will generate environmental credits (Ponzi scheme) the sale of which will be used to offset Freeport’s remaining $76.5 million obligations.
The brand new CZRA with unknown board members and an unknown executive director would get sweeping authority from the Legislature and governor to establish guidelines, rules, and regulations for the environmental credit bank program and assign the value to the snake oil (environmental credits).
The sale of environmental credits is supposed to generate the remaining $76.5 million of Freeport’s $100 million offer to settle. If selling the environmental credits is successful, Freeport might recoup all or most of its $23.5 million cash outlay.
Like a Ponzi scheme, the state is supposed to be paid from money not yet — and maybe never — earned from the credits.
Also interesting in the legislation that Sen. Rick Ward, R-Port Allen, and Rep. Tim Kerner, R-Lafitte, put their names on is that only 60% of the funds (remember it’s $23.5 million cash, not $100 million unless you’re buying into the Ponzi) is deposited into an account established for the coastal master plan's protection projects. The legislation never explains how the other 40% will be spent or diverted.
Immediately I thought of lawyers' fees, but no. Freeport pays no lawyers' fees. Supposedly, the next suckers who settle get to pick up Freeport’s share of the trial lawyers’ fees set by the judge hearing the lawsuits.
If it’s a state judge whose election campaign was financially supported by the trial lawyers, life will be sweet. If it’s a lifetime-appointed federal judge, you’ll see trial lawyers doing a novena for a Clinton or Obama pick to hear their case.
Aside from achieving its political objective in the governor’s race, which Edwards won, the settlement’s legal objective is quite premature. We don’t even know which judge(s) are hearing the cases with Freeport as a defendant.
Ward and Kerner did all of this in 13 pages.
Edwards and legislators have to decide if they are going to create new authorities, new schemes, and new diversions of funds every time money comes along to fix our coast. Why? Because the Freeport deal is only a drop in the bucket.
If you find anything good in this Ponzi scheme, please let me know because I haven’t — and I’ve been looking at legislation since 1978. Besides, if we legalize Ponzi on the Gulf, what’s next?
Email Garey Forster at Garey.Forster@gmail.com.