Vitter: Feinberg’s Compensation from BP is Conflict of Interest, Needs Oversight

March 1, 2011

Sends letter to BP and Feinberg calling for arbitrator and asks for time/billing report

(Washington, D.C.) – U.S. Sen. David Vitter sent a letter to President Obama’s oil spill claims czar Ken Feinberg and Lamar McKay, Chairman and President of BP America, Inc., pointing out a conflict of interest with their current claims compensation contract, and has suggested a third party arbitrator to set the compensation.

“I think it is a clear and profound conflict of interest for Ken Feinberg to be regularly negotiating his compensation with BP at the same time as he is deciding BP’s liability to Louisiana claimants and others. This conflict is completely unacceptable,” Vitter wrote. “It would be like a judge not only being paid by one of the parties to a lawsuit before the judge, but having their salary subject to a negotiation between the judge and that party every three months at exactly the same time as the judge hears and decides the case. Would you want to be that other party to the case? That’s the position Louisiana claimants and others are in.”

It is reported that BP pays Feinberg and his firm $850,000 per month for claims administration from funds that BP has set aside internally for claims-related matters. This amount comes up for reconsideration and renegotiation every three months.

Vitter last week sent a letter to Feinberg asking him to fulfill his promises or remit payment.

A copy of Sen. Vitter’s letter from today is below:

February 24, 2011

VIA ELECTRONIC MAIL AND OVERNIGHT DELIVERY

IMMEDIATE ATTENTION REQUESTED

Ken Feinberg

Managing Partner, Feinberg Rozen, LLP

1455 Pennsylvania Avenue, NW

Suite 390

Washington, DC 20004

Lamar Mckay,

Chairman and President BP America, Inc.

501 Westlake Park Court

Houston, TX 77079

Gentlemen:

I write to express my strong objection to Mr. Feinberg’s compensation arrangement with BP and to suggest a better alternative.

As I understand it, BP has agreed to pay Mr. Feinberg and his firm $850,000 per month for claims administration from funds BP has set aside internally for claims-related matters. However, this amount comes up for reconsideration/renegotiation every three months.

First, I think it is a clear and profound conflict of interest for Mr. Feinberg to be regularly negotiating his compensation with BP at the same time as he is deciding BP’s liability to Louisiana claimants and others. This conflict is completely unacceptable.

It would be like a judge not only being paid by one of the parties to a lawsuit before that judge, but having the judge’s salary subject to a negotiation between the judge and that party every three months at exactly the same time as that judge hears and decides the case.

Would you want to be that other party to the case? That’s the position Louisiana claimants and others are in.

Second, an 850,000 per month flat fee seems staggering, particularly in that it’s not tied in any way to any certain number of hours worked by any certain number of people. Given this arrangement, it does not surprise me when inquiries and other matters are not adequately dealt with by the Feinberg firm but instead fall through the cracks.

To correct all this, I have two constructive suggestions.

First, these serious problems including the fundamental conflict of interest would largely be avoided if Mr. Feinberg and BP agreed on a qualified arbitrator and charged her with setting the compensation of the Feinberg firm at the end of each month. Compensation would be based on hours billed for specific, itemized tasks outlined on hourly billing sheets at reasonable hourly rates, with some appropriate overall cap (different rates for different personnel involved–Mr. Feinberg, other attorneys, paralegals, other staff, etc). I ask you to adopt this arrangement and agree on a qualified arbitrator.

Second and as background, I would like to see a time/billing report for personnel at the Feinberg firm and their work on claims matters during January 2011. I would also like to know what each individual’s normal hourly billing rate is to non-BP corporate clients.

I think all of these points and requests are very reasonable. They go to the fundamental question of fairness to Louisiana claimants and others, particularly in light of other calls on BP resources (like Feinberg pay).

I look forward to your responses to these points as soon as you can provide them.

Thank you.

Sincerely,

David Vitter

United States Senator

Cc: President Barack Obama

Admiral Robert J. Papp

Senator Mary Landreiu

Senator Kay Bailey Hutchison

Senator John Cornyn

Senator Thad Cochran

Senator Roger Wicker

Senator Jeff Sessions

Senator Richard Shelby

Senator Bill Nelson

Senator Marco Rubio

Senator Barbara Boxer

Senator James Inhofe

Congressman John Mica

Congressman Nick Rahall, II

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