BP's $20bn fund: Who's in charge and who benefits?
Updated on 17 June 2010
BP has bowed to pressure from Barack Obama to set aside $20bn to pay for the Gulf oil spill damages, as the US president drafts in America's "modern-day King Solomon" to head up the fund.
One-time aide to Senator Ted Kennedy, Kenneth Feinberg will run the escrow fund - mediating as the third party between the victims of the Gulf spill and BP.
He is best known for running the 9/11 victims fund - during which he volunteered to hear appeals of the claims awards unpaid. He worked 33 months pro-bono and personally adjudicated the decisions in 1,600 hearings, allocating $7bn, according to Yale professor Jeffrey Sonnenfield.
Feinberg, 64, was appointed 'pay czar' last year by Obama to oversee executive bonuses in the wake of the raft of federal government bailouts that spun out of the financial crisis. He also declined payment for this role.
A specialist in mediating conflicts - he founded his own law firm the Feinberg Group, in 1993.
Feinberg resists his "czar" label, modestly insisting: "My grandmother in Lithuania would be a little shocked. I'm no czar issuing imperial compensation edicts".
Seemingly playing down his power, he has also complained to ABC News that it "makes it sound like I'm going to issue some imperial decree".
Nevertheless, the bailed-out insurance group AIG complained earlier this year that he may have put it at a "competitive disadvantage".
Moreover, The New York Times credits him with settling a "variety of thorny issues", including a class-action suit by Vietnam veterans protesting the use of Agent Orange, and securing $16m for the heirs of Abraham Zapruder for his film of President John F Kennedy's assassination - the highest price ever paid for a historical American artefact in 1999.
"It is hard to find a professional more trusted than Mr Feinberg," Prof Sonnenfield wrote, "which is perhaps why he is clearly the Walter Cronkite of mediation or a modern-day King Solomon as an implicitly trusted voice of fairness and judgement."
The fund
BP has agreed to create a $20bn (£13.5bn) fund for claims, stretching out over the next three and a half years.
The oil giant said it will release $3bn in the third quarter of 2010, followed by a further $2bn in the fourth quarter. From then on, BP has agreed to pump $1.25bn into the fund per quarter. It has already paid out around $1.5bn in clean-up costs.
The group said the fund will aim to "satisfy legitimate claims including natural resource damages and state and local response costs". It will not cover fines and penalties, which will be paid separately.
Payments will be administered by Feinberg's Independent Claims Facility (ICF), with any money left in the pot returned to BP once all the claims have been answered.
However, the fund does not represent a cap on BP's liabilities.
BP has shelved its dividend payout to its shareholders for the rest of this year, stating that the group "believes that it is right and prudent to take a conservative financial position given the current uncertainty over the extent and timing of costs and liabilities relating to the spill".
The company said it would consider paying dividends again next year, as the fourth quarter of 2010 draws to a close.
BP also plans to cut company costs by $10bn over the next 12 months. In a move to reassure shareholders, the group said it still has more than $30bn cash to hand, but this does not account for costs of the clean-up.
The group's chief executive Tony Hayward said: "From the outset we have said that we fully accepted our obligations as a responsible party. This agreement reaffirms our commitment to do the right thing.
"The president made it clear and we agree that our top priority is to contain the spill, clean up the oil and mitigate the damage to the Gulf coast community. We will not rest until the job is done."
