A federal judge in New Orleans is considering holding a hearing to receive testimony concerning allegations of corruption within the multibillion-dollar settlement program to compensate victims of the 2010 Gulf of Mexico oil spill.
U.S. District Judge Carl Barbier, who is overseeing the sprawling oil-spill litigation, appeared not to have been convinced by the allegations contained in a report he commissioned last year.
Barbier held a status conference Tuesday to address procedural issues from an earlier court order for four lawyers to respond to the report by former FBI Director Louis Freeh.
Barbier appointed Freeh last year to investigate the settlement program after one of the lawyers, Lionel Sutton III, resigned from the claims center amid allegations that he received money from a law firm in exchange for an earlier referral to the firm.
The settlement, which Barbier preliminarily approved in May 2012, sought to avoid piecemeal litigation by resolving hundreds of thousands of claims for economic damages from what is widely considered the worst environmental disaster in U.S. history.
Freeh’s first report, issued in September 2013, concluded that key executives and senior lawyers on the settlement program’s staff engaged in improper, unethical and possibly criminal behavior, although it resolved the program’s administrator, Lafayette lawyer Patrick Juneau, of participating in wrongdoing.
Sutton and his wife, Christine Reitano, both worked at the claims center. Freeh’s report recommended that the couple, as well as local lawyers Glen Lerner and Jon Andry, be prohibited from representing claimants in the settlement program and that a nearly $8 million claim submitted by the Andry Law Firm be rejected.
Freeh’s report said Lerner and Andry relied on Sutton to expedite a claim filed by their firm for almost $8 million. Sutton was paid more than $40,000 in referral fees from claims he referred to their law firm before joining the settlement program.
The 95-page report said the lawyers leaned on Sutton to “facilitate and expedite” their firm’s claim, though it did not find that Sutton or Reitano manipulated the value of claims during their time at the settlement program.
Reitano, in earlier court filings, has denied wrongdoing and blasted the report’s alleged bias. “Mr. Freeh made no effort at objectivity, and his report was obviously result-driven,” she wrote. “His investigation methods are unexplained and incomplete.”
During Tuesday’s conference, Barbier heard arguments from attorneys representing the four lawyers and offered a glimpse into his evaluation of Freeh’s report.
“There’s no doubt that there were a lot of emails and phone calls and so forth, and some meetings, a couple lunches, whatever, where there were efforts made to move these claims along and get them paid,” the judge said, referencing Sutton’s attempts to speed up claims.
But Barbier also noted that Freeh “in two or three places in his report, points out that despite these efforts, and Mr. Sutton ... did not result in any improper influence on the valuation of the claim.”
While provisions in the settlement program stipulate that claims should be paid on a first-come, first-served basis, that standard isn’t always feasible, Barbier said. “Some claims are more complex than other claims,” he said. “You’re not going to hold up an easier claim just because a more difficult claim gets filed first.”
He added, “That’s just common sense in the real world. Everyone knows that goes on.”
From his view, Barbier said, it appears that Lerner and Andry were “doing everything they could to try to get their cases paid and moved along,” but that while Sutton may have helped facilitate that process, it appears that he took similar steps for others as well. “The evidence is pretty clear that people were constantly calling the claims office lawyers” to check on a claim’s status, he said.
Barbier said the central question is whether Sutton was paid for facilitating the process, or whether he would have done so even if he had received no referral fees. Barbier said he will rule at a later date on holding an evidentiary hearing, but if he does, it should focus not on whether any referral payments were made but rather on the conditions under which they were made, and whether the payments were improper.
Barbier issued a 153-page ruling earlier this month that found that many of BP’s actions that preceded the fire and explosion onboard the Deepwater Horizon drilling rig on April 20, 2010, constituted “an extreme deviation from the standard of care and a conscious disregard of known risks.”
Follow Richard Thompson on Twitter, @rthompsonMSY.