BP (BP) is at it once again, back in court asking to halt or delay payments for its 2010 oil spill settlement for business economic losses. Only this time, its tactic is more bizarre than ever. On September 6, former FBI Director Louis Freeh released a report that two members of the staff of claims administration Patrick Juneau engaged in improper conduct and possibly fraud. Based on this report, BP argues it's unfair to continue allowing the Juneau's team to pay out claims in light of the report.
One major problem for BP, according to Juneau: "The Freeh Report specifically recommended we continue to process and pay claims." Juneau has since argued that the report itself confirms the misconduct was merely an isolated incident, rather than anything widespread that merits a problem. The isolated incident involved only two individuals that has since been rectified.
How could BP think it has a snowball's chance in hell of winning this battle when its own "star witness" (former director Louis Freeh) doesn't even agree with BP's conclusion and specifically recommends the claims continue to process and get paid? This is clearly a battle that BP has no realistic chance of winning. I guess anything is possible in the court system, but the Vegas odds on a BP victory can't be good. BP's own star witness, who it is using in its fight to have payments shut down, is actually himself against having payments shut down. This really has me scratching my head more than usual when watching BP's strange legal tactics (that always seem to fail), so I have to wonder why BP continues to pursue these tactics, and lose each time.
There are only 4 theories I can think of:
1. BP and its lawyers are smarter than we think, and this entire drama has been a calculated move while knowing full well it won't win in court. It is merely an expansion of its anti-marketing strategy to keep businesses from filing lawsuits by spreading confusion, fear, and a sense that it is immoral to join a settlement against the "victimized" BP.
2. BP and/or its lawyers are just outright incompetent. It appears universally agreed upon by the plaintiffs, BP, the courts, and just about every spectator on the sidelines that BP made a bad deal. This is the simplest possible explanation that goes a long way to explain why. If its legal team was so incompetent to not see the obvious consequences of an uncapped settlement that compensates almost anybody within a $1 trillion GDP zone who had a dip in sales in 2010 (when the economy was imploding anyway), then it should come as no surprise that the same incompetence is shining once again as it attempts to fight battles it can't win.
3. BP itself is a victim of its own legal team who is self-serving and dragging things out, making things as complicated as possible, fighting battles it can't win, etc. This could be a calculated move on the attorneys' part to keep themselves employed and very highly paid. I can't imagine lawyers for one of the biggest oil companies in the world aren't being paid phenomenally well. Could it be that BP executives are more focused on the oil business and don't really have a clue what's going on legally, while their lawyers continue to milk BP's coffers by filing silly motions, injunctions, and delay tactics, knowing that the longer this drags out the more they get paid, win or lose? It may seem like a bit of a stretch, but at this point little would surprise me. If BP were to just bite the bullet there may be a lot of highly paid lawyers out of a job.
4. Maybe the whole thing is just a strategic stunt in a vain attempt to gain sympathy or play innocent as it faces its biggest trial and obstacle yet. The timing is interesting. BP begins this week battling to reduce its fines by contending only 2.4 million barrels spilled vs. the 4.2 million the justice department estimates. The Clean Water Act calls for a fine based on each barrel spilled. BP has a credibility problem with its estimates in the early days of the spill proved to be drastically lower than reality.
Whatever the reasons, investors should stay laser-focused on the developments as BP continues to fight a multi-front war. There's no doubt that the drama will continue and at least some of BP's fortunes will be drastically affected one way or the other. I believe one of the battles in its war, the attempt to stop payments, is a battle BP can't possibly win. The only question is why it is fighting it and what it means.