BP’s $4.5 billion plea includes manslaughter

Related stories: After BP spill, information trickled as oil gushed; In BP settlement, felonies matter more than fines; Read the SEC filing against BP

BP’s felony plea agreement to settle manslaughter, obstruction and securities charges for $4.5 billion, and an indictment that could send three employees to prison for decades, combined for a one-two punch by the government that puts an exclamation point on fallout from the deadly 2010 Gulf of Mexico rig blast and oil spill.

A criminal complaint filed Thursday by the Justice Department singled out BP well-site leaders Donald Vidrine and Robert Kaluza for the failure of a pressure test on BP’s blown-out Macondo well, saying the “negligent conduct of defendant BP” through the actions of the two men “proximately caused the death of” 11 rig workers.

A former BP executive, David Rainey, also was charged. He is accused of providing government officials estimates of how much oil was spilling that were much lower than what the company actually knew at the time.

A former BP engineer previously was charged with obstruction, accused of deleting text messages about the spill flow rate.

In the nation’s worst-ever oil spill, BP’s well blew out a mile beneath the sea off Louisiana on April 20, 2010, spewing nearly 4.9 million barrels of crude, according to government estimates that BP has disputed. The workers were killed when the Deepwater Horizon exploded and sank 50 miles off shore.

Not over yet

The Justice Department said its criminal probe isn’t over, but it’s unclear whether it might reach other BP executives, including former CEO Tony Hayward – who infamously declared at the height of the disaster, “I’d like my life back.”

And BP’s partners on the project – Deep­water Horizon rig owner Transocean and cement contractor Halliburton – aren’t off the hook. They also could face criminal and civil fines. The Justice Department clearly has been interested in dealing with BP first, but talks with the other companies could pick up in the coming months.

Under a deal with federal prosecutors, BP agreed as a company to plead guilty to 11 felony counts of seaman’s manslaughter – misconduct or neglect by ships’ officers leading to death on the high seas – relating to the rig workers’ deaths.

It also will plead guilty to one misdemeanor count under the Clean Water Act; one misdemeanor count under the Migratory Bird Treaty Act; and one felony count of obstruction of Congress.

If a federal court approves the plea bargain, the penalties will be the largest ever in a federal criminal case.

BP agreed to serve five years’ probation and take additional actions to enhance the safety of drilling operations in the Gulf, under the eyes of two monitors who are to be appointed. Probation for BP essentially means it could face further sanctions if it commits any crimes while under supervision.

BP also agreed to pay $525 million to settle Securities and Exchange Commission violations stemming from the disaster.

The SEC charged that in three filings with the commission, BP understated the range of possible rates at which oil was flowing into the Gulf – information that could inform investors’ decisions about buying or selling BP stock.

BP chief Bob Dudley said BP has accepted responsibility for its actions.

But it still faces the prospect of billions of dollars more in civil fines based on the amount of oil that spilled, and its public image could suffer further damage from additional disclosures or charges. A trial set for February would address the civil allegations if BP and the government can’t reach a settlement before then.

The flow rate and total amount spilled – which underpin much of the disaster and its aftermath – are central to calculation of fines under the Clean Water Act. The government’s estimate would translate to a fine of up to $21 billion if BP were found to be grossly negligent. While BP has disputed the government figure, it has not disclosed its own.

A key failure

Thirteen of the 14 criminal charges to which BP will plead guilty stem from the negligent misinterpretation of a procedure called a negative pressure test conducted on board the rig. That failure has been a key finding in several government investigations of the disaster.

The purpose of the negative pressure test was to lower the pressure inside the well in a controlled manner to ensure that the casing and cement that separate the well from the oil and gas formation could hold without any leaks.

Prosecutors say Kaluza and Vidrine observed clear indications that the Macondo was not secure and that oil and gas were flowing into the well, but failed to alert managers on shore at that time to the problem.

Vidrine attorney Robert Habans criticized the indictment of his client

“It is a failure of justice to blame this event on him,” Habans said.

Kaluza attorney Shaun Clarke said he was stunned by the manslaughter charges.

“The government is trying to sell the fiction that the deaths of 11 men and the worst environmental disaster in our nation’s history was caused because two guys working on a rig misinterpreted a test,” Clarke said.

The remaining criminal count against BP alleges that in communications with congressional staffers for weeks after the disaster, BP intentionally underestimated how much oil was flowing.

Rainey, a former BP vice president in charge of exploration in the Gulf of Mexico, is charged with obstruction of Congress and making false statements to law enforcement officials for allegedly understating the amount of oil that was flowing from the well. A lawyer for Rainey couldn’t be reached for comment.

Relief for coast

U.S. Attorney General Eric Holder said the settlement ensures that “more than half of the proceeds directly benefit the Gulf Coast region so that residents can continue to recover and rebuild.” Approximately $1.2 billion is dedicated to land acquisition efforts along Alabama, Florida, Mississippi and Texas. Another $1.2 billion is dedicated to coastal rehabilitation off Louisiana.

The total penalty was the largest in U.S. history. The previous largest was the $1.2 billion Pfizer agreed to pay in 2009 for fraudulent marketing of drugs.

Prior to Thursday’s deal, BP already had spent or committed tens of billions of dollars on cleanup costs and compensating victims. It also is seeking court approval of a class-action settlement under which it estimates it will pay $7.8 billion to Gulf Coast residents who suffered health or economic damages from the oil spill.

BP will be arraigned Nov. 27 in federal court in New Orleans. Kaluza, 62, of Henderson, Nev.; Vidrine, 65, of Lafayette, La.; and Rainey, 58, of Houston, will appear the following day.

For the victims’ families, who have complained at times of being forgotten by the public as so much attention was paid to the oil spill, Thursday’s developments brought at least some comfort.

“Finally, maybe my husband and the others are getting a little bit of justice,” said Courtney Kemp-Robertson, who was married to rig worker Roy Wyatt Kemp at the time he was killed. She remarried earlier this year.

Jennifer A. Dlouhy contributed from Washington. Zain Shauk, Emily Pickrell, Jeannie Kever, Simone Sebastian and Loren Steffy contributed from Houston.

You can read the SEC filing against BP here.

Criminal Complaint against BP