Wednesday, August 11, 2010

Is the "regime of transparency" getting outflanked for $20 billion?

On June 16, 2010, BP PLC and the United States Government announced plans to establish what amounts to a $20 billion slush fund, ostensibly aimed at compensating residents and business interests along the Gulf coast for economic and financial damage caused by the Deepwater Horizon oil spill. The White House also appointed Pay Czar Kenneth Feinberg as the fund's administrator, and he immediately took his dog and pony show on the road.

Almost from the beginning, the government has been either confused or silent on the fund's status. In fact, Feinberg told a CNN interviewer that the fund would cover claims arising from the government's deepwater drilling moratorium, only to reverse himself and change the story the very next day.

On August 9, BP announced that it made an "early" $3 billion "deposit" into the fund to show that it's committed to fulfilling its obligation. Waiting nearly two months for the first installment doesn't seem like either the government or BP understands the definition of the term "early," but let's play along.

The real problem here, gentle readers, is that none of the details of the negotiations between the government and BP have seen the light of day. We have seen no contract. We have seen no memorandum of understanding between the two parties. We have not seen even the first set of criteria for establishing claims legitimacy. All we've had is the Kenneth Feinberg Carnival Road Show, with the charismatic and seemingly trustworthy administrator reassuring residents, businesses and local government leaders that it's all gonna be Ok. At least one state attorney general--Troy King of Alabama--smells a rat.

Since the executive branch has no power to compel a private entity to fork over the bucks to fund the kitty, it stands to reason that BP will have great power in establishing the rules by which claims legitimacy deteminations are made. If this is the case, then BP is likely outmaneuvering the boy-king. They let him fist-bump his buddies over shaking down the company for $20 extra-large, but then they use his constitutional inability to compel payment to restrict the boundaries of claims legitimacy. The $20 billion slush fund just becomes a BP-controlled $20 billion savings account.  This idea appeals to me in a way--the government doesn't have a stellar track record in preventing fraud when it comes to claims-paying.  The Dept. of Justice is still prosecuting fraud cases from the Katrina relief, five years after the storm.  While BP might come across as stingy, they're much less likely to pay frivolous or fraudulent claims because it's like, their money.

But again, we don't know anything, because "the most transparent administration in history" has released absolutely nothing.

I frankly believe BP is playing Obama like a cheap Texas fiddle. Bob Dudley cut his governmental relations teeth by doing business with Vladimir Putin and the Russian Mafia Federation. He beat them so badly that he made the company billions, increased its petroleum reserves and was forced to flee Moscow for his safety once Putin's thugs realized the level to which they'd been played.  Outflanking this bunch of amateurs in the White House is child's play.

By the way, look at BP's stock performance since mid-June.

Gimme some feedback in the comments.

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