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US judge agrees to $4bn criminal settlement from BP over Gulf spill

01 February 2013

On January 29 a US federal judge accepted BP's agreement to plead guilty to charges of manslaughter and lying to Congress and to pay a record fine related to the April 2010 Macondo well oil spill in the Gulf of Mexico, the worst offshore spill in US history.

The UK-based company agreed in November to the plea, taking legal responsibility for the deaths of all 11 men killed aboard the the semi-submersible Deepwater Horizon, which subsequently sunk after the blowout in April 2010.

BP also pled guilty to one felony count of obstruction of Congress, as well as one misdemeanour under the Clean Water Act and one misdemeanour under the Migratory Bird Treaty Act.

It agreed to pay the US government $4 billion, including $1.256 billion in criminal fines, in instalments over a five-year probation period.

The ruling resolves all federal criminal charges related to the tragedy against BP, but does not address separate civil claims by the US and some states that allege BP violated pollution laws. Those claims could still result in fines exceeding $17 billion.

BP’s plea is a “reasonable disposition” of the charges, US District Judge Sarah Vance said at a court hearing in New Orleans on Tuesday.

Ms Vance noted that the company already has racked up more than $24bn in spill-related expenses and has estimated it will pay a total of $42bn to fully resolve its liability for the disaster in the Gulf of Mexico.

The judge said the $4bn criminal settlement is "just punishment" for BP, even though the company could have paid far more without going broke. In accepting the deal, Vance also cited the risk that a trial could result in a much lower fine for BP, one potentially capped by law at $8.2m.

The criminal settlement calls for BP to pay nearly $1.3bn in fines. The largest previous corporate criminal penalty assessed by the Justice Department was a $1.2bn fine against drug maker Pfizer in 2009.

The plea deal also includes payments of nearly $2.4bn to the National Fish and Wildlife Foundation and $350m to the National Academy of Sciences. The two groups will administer the money to fund Gulf restoration and oil spill prevention projects.

The $4bn in total penalties are 160 times greater than the $25m fine that Exxon paid for the 1989 Valdez spill in Alaska, Vance noted.

In a court filing before the hearing, attorneys for BP and the Justice Department argued that the plea agreement imposes "severe corporate punishment" and will deter BP and other deep-water drilling companies from allowing another disaster to occur.

The Justice Department has reached a separate settlement with rig owner Transocean that resolves the government's civil and criminal claims over the Swiss-based company's role in the disaster.

Transocean agreed to plead guilty to a misdemeanor charge of violating the Clean Water Act and pay $1.4bn in civil and criminal penalties. A February 14 hearing will decide whether to accept that criminal settlement, and another hearing at a later date will decide whether to accept Transocean's civil settlement.

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