By TOM FOWLER
BP has agreed to plead guilty to felony charges and pay $4.5
billion in penalties, including $1.26 billion in criminal
fines, stemming from the Deepwater Horizon disaster that killed
11 workers in 2010 and unleashed the worst offshore oil spill
in US history.
Separately, federal prosecutors filed criminal charges
against three current or former employees of BP over the
disaster, including two engineers who were on the drilling rig
when it exploded and a higher-level executive involved in the
energy company's spill response.
BP said Thursday it will plead guilty to 11 felony counts of
"misconduct or neglect of ships officers" relating to the
deaths aboard the drilling rig, and to one felony count of
obstruction of Congress stemming from information it gave about
the rate that oil was leaking from the well.
This resolution is subject to US federal court approval.
The company also will plead guilty to a misdemeanor count
under the Clean Water Act and another misdemeanor under the
Migratory Bird Treaty Act.
BP said it would pay $2.394 billion to the National Fish &
Wildlife Foundation over five years and $350 million to the
National Academy of Sciences over five years.
The penalties BP agreed to pay include $525 million in civil
penalties over three years to settle claims by the Securities
and Exchange Commission over the company's reporting on the
oil-flow rate in the two weeks following the accident on April
"We apologize for our role in the accident, and as today's
resolution with the US government further reflects, we have
accepted responsibility for our actions," said Bob Dudley, BP's
In the most serious
charges against the employees, Don Vidrine, 65, and Robert
Kaluza, 63, who were stationed on the Deepwater Horizon when it
suffered the deadly well blowout, each has been charged with 11
counts of "seaman's manslaughter," 11 counts of involuntary
manslaughter and one violation of the Clean Water Act.
The charges stem from their alleged failure to interpret key
safety tests properly.
The men could face up to 10 years in prison for each
manslaughter count and up to eight years for the Clean Water
Lawyers for Mr. Kaluza said that their client was innocent
of the charges and that the government was making him a
scapegoat. "Bob was not an executive or high-level BP
official," Shaun Clarke and David Gerger said. "He was a
dedicated rig worker who mourns his fallen co-workers every
Mr. Vidrine's lawyer couldn't immediately be reached for
David Rainey, BP's former head of Gulf of Mexico
exploration, has been charged with obstruction of Congress and
making false statements to a law-enforcement officer.
Mr. Rainey, the company's former head of Gulf of Mexico
exploration, participated by phone in a May 4, 2010,
closed-door briefing of members of the House Energy and
Commerce Committee. He reiterated what was then the official
spill estimate of 5,000 bpd.
But internal BP estimates prepared within the first week of the
spill suggested the flow rate could be as high as 14,000
Mr. Rainey could face up to five years in prison for each
charge. His lawyers said he is innocent and will fight the
"We are profoundly disappointed that the Department of
Justice is attempting to turn a tragic accident and its
tumultuous aftermath into criminal activity," lawyers Reid
Weingarten and Brian Heberlig said.
Of the 14 criminal charges against the company, BP said 13
are based on the negligent misinterpretation of a "negative
pressure test" conducted on board the Deepwater Horizon.
The Wall Street Journal reported in August 2010 that
last-minute changes to the key safety test - and the decision
to continue work despite unexpected results - contributed to
The company said it would appoint a monitor to review its
safety and risk-management procedures in the Gulf of Mexico and
recommend improvements. It will also install ethics monitor to
review BP's code of conduct, its implementation and its
BP said it hasn't been notified that it faces any ban from
doing business with the federal government, which is sometimes
the case when companies face felony charges.
The London company previously took a $38.1 billion charge
for what it estimated was the maximum cost it would face
related to the accident, but with Thursday's settlement it will
increase that by $3.85 billion.
BP has raised about $35 billion so far from asset sales and
other actions, including the recent $2.5 billion sale of its
Texas City, Texas, refinery, the scene of a 2005
accident that killed 15.
BP has spent about $14 billion on spill response and cleanup
and paid out more than $9 billion in claims to businesses and
individuals affected by the spill.
The company also has entered into a settlement agreement with
thousands of other businesses and individuals that will cost BP
an estimated $7.8 billion, although that figure could climb. A
federal judge is expected to give final approval to that
settlement in coming weeks.
Although the settlement removes quite a bit of uncertainty
for BP, it isn't by any means the end of its Deepwater Horizon
The company still faces significant civil penalties under
the Clean Water Act - which could range from around $5 billion
to about $20 billion if BP is found guilty of gross negligence,
according to analysts.
BP also faces federal and state claims for damage to natural
resources, as well as claims for wrongful death, personal
injuries and economic losses. Many plaintiffs who sued over
economic damages are covered by an estimated $7.8 billion
settlement pending before a federal judge in New Orleans.
BP stressed that Thursday's agreement is compatible with its
stance that "it was not grossly negligent," and said it would
continue to fight allegations of gross negligence in remaining
Putting the threat of lengthy and costly criminal litigation
behind "is a positive development," said Simmons & Co.
analyst Bill Herbert, adding that the figure was in line with
what most observers expected.
The settlement also paves the way for Halliburton, which
cemented the well drilled by Deepwater Horizon, and Transocean,
which owned the doomed drilling rig, to strike their own
agreements with the government.
In a recent SEC filing, Halliburton said as of Oct. 23, the
Department of Justice hadn't commenced any criminal proceedings
against the company, but the oil-field services provider said
it couldn't predict the outcome of the department's criminal
Transocean said in an October filing it has discussed
settling some federal civil and criminal claims for $1.5
billion, but an agreement hasn't been reached.
A federal task force based in New Orleans has spent the past
29 months investigating the accident. Prosecutors have reviewed
thousands of documents and conducted dozens of interviews,
including bringing individuals before a grand jury.
At stake are billions of dollars that would flow to five
states affected by the spill, which gushed 4.9 million bbl of
crude into the Gulf of Mexico.
The BP criminal settlement is close to the $1.3 billion fine
Pfizer Inc. paid in 2009 for marketing fraud related to a pain
medicine, a record criminal fine.
Dow Jones Newswires