DOJ Accuses BP of Gross Negligence Over Deepwater Horizon Oil Spill

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The United States Department of Justice accused BP plc (NYSE:BP) (LON:BP) of gross negligence or willful misconduct during the disastrous oil spill in the Gulf of Mexico in 2010, according to the report from Financial Times.

The DOJ also said the oil company practiced a culture of corporate recklessness.

BP issued a statement denying the DOJ’s accusations. The company said it will present evidences during the court hearing in January to prove that it did not commit any gross negligence.

The DOJ submitted its argument to the Eastern District Court of Louisiana, negating BP plc (NYSE:BP) (LON:BP)’s earlier filing, and pointed out the oil company’s assertion that it did not commit gross negligence. The gulf region is undergoing a robust recovery, and other issues related to the liability and natural damage were “plainly misleading.”

In its filing, the DOJ provided evidence, such as e-mails and documents that clearly demonstrated how the BP engineers, executives and contractors dealt with the Deepwater Horizon explosion. In their argument, the lawyers for the government pointed out, “The behaviour, words and actions of these BP plc (NYSE:BP) (LON:BP) executives would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall. Yet they were condoned in a corporation engaged in an activity [deepwater drilling] that no less a witness than Tony Hayward [former BP chief executive] himself described as comparable to exploring outer space.”

The justice department also accused Transocean, the owner and operator of the Deepwater Horizon rig, of gross negligence. In its filing, the lawyers for the government argued, “BP did not act alone, by any means, and its gross negligence and willful misconduct are inextricably joined with the acts and omissions of Transocean.”

The Department of Justice filed its memo to the court, in response to the request of the of oil company to approve the $7.8 billion settlement with the victims of the oil spill.  The justice department is not opposing the settlement. The DOJ wants the court to open the possibilities that BP should still be liable for damages related to the oil spill, since the full extent of damages in the gulf was not yet determined.

A report from the Financial Times cited that the Department of Justice wants BP plc (NYSE:BP) (LON:BP) to pay a $15 billion settlement. Many believe that the recent gross negligence accusations of the justice department will increase the amount of compensation to settle the case.

Meanwhile, a report from Nomura Equity Research suggested that a settlement between the BP plc (NYSE:BP) (LON:BP) and the DOJ is unlikely. The research firm opined that the latest move of the government might be politically motivated, due to the upcoming presidential elections. The research firm said that the justice department did not present new evidence to prove that the oil company committed gross negligence, but it countered some of the claims in its August 13 filing that some information was misrepresented; particularly the issue on liability & natural resource damages. The DOJ also asked the court to discuss the issue in a trial, not in a fairness hearing, on November 8.

Nomura Holdings, Inc. (NYSE:NMR) also maintained its opinion that the DOJ wants to settle the case for $25 billion, while BP wants $15 billion, therefore the settlement process will most likely go to court.

The research firm maintains a neutral rating for the company. BP stock is down by 2.71 percent to $40.51 cents during the morning trading on Wednesday.

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