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Feinberg: Indirect Oil Claims Will Be Tougher to Resolve

July 27, 2010 at 12:00 AM EST
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Kenneth Feinberg, who was chosen to administer the $20 billion fund established by BP to settle near-term oil disaster claims, faces both skepticism from Gulf Coast residents and a daunting task in deciding which direct and indirect claims to approve. Tom Bearden reports from Alabama.
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JIM LEHRER: And on BP and its compensation claims, much of BP’s financial loss today was from current and future claims. And the head of the Gulf compensation — of the Gulf compensation fund insisted to Congress today that he will remain independent when handling those claims, even though BP will pay his salary.

But the toughest questions about claims are awaiting him along the Gulf Coast.

NewsHour Correspondent Tom Bearden reports from Bayou La Batre, Alabama.

TOM BEARDEN: Kenneth Feinberg kept telling the people who came to this public meeting Saturday that he is their lawyer.

KENNETH FEINBERG, independent administrator, Gulf Spill Independent Claims Fund: I’m here primarily to what you want to tell me about this oil spill and your claim.

TOM BEARDEN: He’s been having similar sessions all along the Gulf Coast. This one was in Bayou La Batre, Alabama, a town of about 3,000 that calls itself the seafood capital of the state.

Feinberg has the awesome responsibility of eventually deciding who will be able to tap the $20 billion fund set up to pay for losses from the massive oil spill in the Gulf of Mexico and how much they will be paid.

KENNETH FEINBERG: If $20 billion is not enough, they agreed that BP would continue to honor all financial obligations above $20 billion.

TOM BEARDEN: BP and the Obama administration agreed to allow Feinberg to run the compensation program with complete independence.

KENNETH FEINBERG: I’m not going back home and talking with the administration as — as their lawyer or talking to BP. They agreed that, when Ken Feinberg sets this program up, he decides the claims.

TOM BEARDEN: BP’s claims offices along the coast have distributed about $201 million so far. Feinberg will take over all of that in a couple of weeks.

In the meantime, he says he wants to learn all he can about what people on the coast are facing. He said, after the takeover, people would be able to get six months worth of emergency payments immediately, instead of the monthly checks BP has been issuing. Some nodded in agreement as he spoke. Others were stone-faced. Several expressed extreme frustration with the claims process thus far.

WALTON KRAVER, businessman: My name is Walton Kraver.

TOM BEARDEN: Walton Craver runs several seafood processing companies in Bayou La Batre.

WALTON KRAVER: We’re running out of money quick, OK? And we have already closed one business, OK?

KENNETH FEINBERG: I want to know where that claim sits right now, because you can’t wait. Every day that goes by waiting for this transition, you’re telling me you’re hemorrhaging money here. I will check on that claim, even though I’m not up and running yet, and try and accelerate the payment of that claim.

TOM BEARDEN: Feinberg says compensation for businesses directly related to the oil spill, like a fishing fleet, should be fairly straightforward. The challenge will be deciding who’s eligible for payments for businesses not directly related to the spill.

KENNETH FEINBERG: It’s one thing to compensate a shrimper who can’t shrimp in the Gulf because the shrimping is unavailable, that the government has closed off the shrimp grounds, or a oyster harvester, or a fisherman. It’s another thing if a restaurant in Boston says, I can’t get shrimp from the Gulf and I’m losing revenue because I can’t serve a favorite dish. Pay me.

Now, how you define what is eligible and ineligible is a formidable challenge. And that’s what I’m trying to do in my own mind right now.

LILLIE KRAVER, Kravers Seafood Restaurant: Beautiful Gulf shrimp.

TOM BEARDEN: But what about a restaurant like Kravers Seafood across Mobile Bay in Daphne owned by Walton’s son Charles and run by his wife Lillie? It’s been open about three years.

Lillie says business began to take off last January, but, since the spill, revenue is down 40 percent.

LILLIE KRAVER: Obviously, I’m not the shrimper out there, you know, that — making his living off the water. But, like I said, I’m 99 percent Gulf seafood. So, if I don’t have Gulf seafood to serve, then it’s going to put me out of business. We employ people. These people here have become like family to us. And I don’t want to shut this place down.

CHARLES KRAVER, Kravers Seafood Restaurant: We have got a lot of money invested in it, too, a lot of money.

LILLIE KRAVER: Yes.

CHARLES KRAVER: A lot of…

LILLIE KRAVER: Personal money.

CHARLES KRAVER: A lot of personal money in it, too, yes, yes.

LILLIE KRAVER: So, it’s our future.

TOM BEARDEN: The Kravers hope they will be able to hold on until their claim can be decided.

There’s no doubt they Delane and Bruce Seaman have a direct claim. The stainless steel workstations where nearly 40 employees used to noisily shuck oysters are empty, and the brothers don’t think they will ever be occupied again. Their question was whether they would be pay for future losses.

DELANE SEAMAN, business owner: We have been in business 25 years. We have had our nose to the grindstone to gain these customers that we have, these large distributors. They’re gone. We’re not getting that customer base back. We’re done. We’re done.

KENNETH FEINBERG: You don’t anticipate ever reopening then?

DELANE SEAMAN: No, sir.

KENNETH FEINBERG: You have a total loss.

DELANE SEAMAN: With no customers, no business.

KENNETH FEINBERG: You have a total loss. Emergency payments for the total loss that occurred right now — you know, you had to padlock, but you still have some — some costs associated with the padlocking of the doors. That will be in a matter of weeks, you ought to get that payment. And then a total loss for the — for the loss of your business permanently, absolutely, that’s a valid claim.

TOM BEARDEN: Despite Feinberg’s encouraging words, the Seamans remain unconvinced.

BRUCE SEAMAN, business owner: Mr. Feinberg may be a good man, but he’s a lawyer. You know, we have had a lot of — well, not a lot, but some dealings with lawyers. And, you know, who knows. I don’t — one man can only do so much.

DELANE SEAMAN: You know, you see all these P.R. campaigns. That’s just like Mr. Feinberg. I respect him, appreciate him coming, but, really, that’s P.R., really? I mean, that’s why he came here today is P.R., really.

TOM BEARDEN: Feinberg told us, their skepticism is understandable.

KENNETH FEINBERG: Talk is cheap in doing this. They’re absolutely right. It’s all well and good to give people a comfort level that you will respect their claim, that they make a credible argument that they will be paid. Until the check is in the mail, I must say, everybody has a right to be skeptical and question the legitimacy of this, and will it work? And that is fair, and I understand that.

TOM BEARDEN: With the fishing fleet still in port, and no new seafood flowing through the system, Bayou La Batre and all the other towns along the coast wait for Feinberg to make decisions that may ultimately spell financial life or death for thousands of businesses and hundreds of thousands of people.