BP Slapped with Massive Fine and Pleads Guilty to 11 Felony Counts
Nov 15th 2012 12:16PM
Updated Nov 15th 2012 6:45PM
BP plc (NYSE: BP) has agreed to pay a total of $4.5 billion dollars and to plead guilty to 11 felony charges in a criminal case brought by the U.S. Department of Justice against the company for the April 2010 explosion of the Deepwater Horizon rig in the Gulf of Mexico that killed 11 workers and dumped more than 5 million barrels of oil into the Gulf's waters. The criminal fines total $1.256 billion, just short of the record $1.3 billion fine paid by Pfizer Inc. (NYSE: PFE) in a 2009 case related to marketing of a pain drug.
The felony counts are being levied as "misconduct or neglect of ships officers" and are related to the loss of life in the well's explosion. BP is also pleading guilty to misdemeanor charge under the Migratory Bird Act and one felony charge of obstruction of justice.
The company said in its press release:
Thirteen of the 14 criminal charges pertain to the accident itself and are based on the negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon. BP acknowledged this misinterpretation more than two years ago when it released its internal investigation report. Today's agreement is consistent with BP's position in the ongoing civil litigation that this was an accident resulting from multiple causes, involving multiple parties, as found by other official investigations.
The remaining criminal charge against BP are related to two statements the company made to a member of Congress in response to flow rate estimates from the leaking well.
BP will pay the $1.256 billion in criminal fines in installments over a five-year period and has agreed to a probation term of five years.
In addition to the criminal fines, BP will pay $2.394 billion to the National Fish & Wildlife Foundation and another $350 million to the National Academy of Sciences, both over five-year periods.
BP will also pay $525 million in civil fines in three annual installments to the SEC and "has consented to the entry of an injunction prohibiting it from violating certain U.S. securities laws and regulations. The SEC claims are based on misleading flow rate reports to the agency in the first two weeks following the explosion.
BP must still deal with civil charges related to the explosion, which could cost the company as much as $21 billion more if negligence is proved. The company said that it would increase its charge against income for the disaster from $38.1 billion to $38.5 billion. BP also said it was prepared "to vigorously defend itself against remaining civil claims."
The Justice department will hold a press conference to discuss the agreement at 2:00 p.m. ET today.
The certainty of the magnitude of the criminal penalties has lifted BP's share price by 0.2% today, to $40.25 in a 52-week range of $36.25 to $48.34.
Filed under: 24/7 Wall St. Wire, Commodities, Law, Oil & Gas, Regulation Tagged: BP, PFE