BP To Pay $4.5 Billion, Plead Guilty To Criminal Charges For Oil Spill

BP To Pay $4.5 Billion, Plead Guilty To Criminal Charges For Oil Spill

NEW ORLEANS - (Mealey's) BP PLC announced on Nov. 15 that it would plead guilty to a dozen felony charges brought by the federal government and pay $4.5 billion in penalties over its involvement in the explosion of the Deepwater Horizon oil rig and ensuing oil spill in the Gulf of Mexico.

The company said it would plead guilty to 11 felony counts of misconduct and one felony count of obstruction of Congress as well as one misdemeanor count under the Clean Water Act and one misdemeanor count under the Migratory Bird Treaty Act.

Of the $4.5 billion penalty, the company said $525 million will be used to settle claims brought by the U.S. Securities and Exchange Commission, which alleges that within the first 14 days of the incident in 2010, BP "materially misrepresented and understated the estimated range of flow rate of oil leaking from the well in three public filings furnished to the Commission" in violation of Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and SEC Rules 10b-5, 12b-20 and 13a-16.

Flow Rate Estimate

"BP also omitted material information from these three public filings regarding its own internal data, estimates, and calculations indicating that the flow rate estimate contained in these filings was unjustifiably low.  BP made these material misrepresentations and omissions in, inter alia, its Reports on Form 6-K furnished to the Commission on April 29 and 30 and May 4, 2010," the SEC says in its complaint, filed in the U.S. District Court for the Eastern District of Louisiana (Securities and Exchange Commission v. BP p.l.c., No. 12-2774, E.D. La.).

BP explained that the amount will be paid incrementally over the course of five years, while the SEC stated that the $525 million settlement is the third-largest in agency history.

As part of the SEC settlement, BP will be enjoined from violating Sections 10(b) and 13(a) and Rules 10b-5, 12b-20 and 13a-16.

Claims Remain

The $4.5 billion penalty will not resolve any of the federal government's claims under the Clean Water Act, federal and state law claims on natural resource damages and civil claims pending in the multidistrict litigation in the U.S. District Court for the Eastern District of Louisiana, BP explained.  The company said that it is prepared to vigorously defend itself against the remaining civil claims.

In February, the company announced that it had agreed to spend $7.8 billion to resolve economic loss and medical monitoring claims stemming from the oil spill.  Final approval of the settlement is currently pending before Judge Carl Barbier, who presided over a fairness hearing Nov. 8.

The present agreement is subject to final approval.

The SEC is represented by Daniel M. Hawke, Elaine C. Greenberg, Colleen K. Lynch, G. Jeffrey Boujoukos, Michael J. Rinaldi, Brian P. Thomas, Matthew S. Raalf, Kelly L. Gibson and Michael F. McGraw of the SEC in Philadelphia.

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