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Probe clears BP claims administrator despite staff misconduct

BP logo is seen at a fuel station of British oil company BP in St. Petersburg, October 18, 2012. REUTERS/Alexander Demianchuk
BP logo is seen at a fuel station of British oil company BP in St. Petersburg, October 18, 2012. REUTERS/Alexander Demianchuk

NEW YORK (Reuters) - An investigation led by former FBI Director Louis Freeh cleared the BP claims administrator of misconduct in handling settlement payouts from the 2010 oil spill in the Gulf of Mexico on Friday, but found some of his staff took kickbacks for referrals.

BP has said the multibillion-dollar settlement is being mishandled by Louisiana lawyer Patrick Juneau and called for an independent inquiry into allegations against a lawyer working for the administrator.

Judge Carl Barbier, who is overseeing the civil case on the spill in New Orleans federal court, named Freeh a "special master" handling the probe in July.

Freeh found there was no evidence that Juneau "engaged in any conflict of interest, or unethical or improper conduct," although he could not say the same of some employees.

"Despite the clear ethical 'tone at the top' and sound written policies established by Mr. Patrick Juneau, many of his key executives and senior attorneys engaged in conduct which the Special Master finds to be improper," Freeh said in the 93-page report.

Freeh found Louisiana lawyer Lionel Sutton, known as "Tiger," received a "referral fee" of around $40,000 to pass a claimant to another lawyer while working for the administrator. The probe also named Christine Reitano, another administration office employee, who worked with Sutton on the deal.

Juneau placed Sutton on administrative leave when the allegations first surfaced and he later resigned.

BP said Freeh's report confirmed its suspicions of fraud and unethical conduct within the claims process and company spokesman Geoff Morrell said "immediate steps need to be taken to prevent it in the future."

But Juneau said the incidents were isolated and that the report found no evidence that the two employees "directly manipulated the valuation of claims."

"We will continue the job of processing claims," said Juneau.

The program was designed to compensate victims of the April 20, 2010 explosion of the Deepwater Horizon drilling rig and rupture of BP's Macondo oil well, a disaster that killed 11 people and resulted in the largest U.S. offshore oil spill.

BP has already incurred about $42.4 billion of charges related to the disaster. It originally expected the payout program to cost $7.8 billion, but has said the bill could be much higher.

The company considers Juneau's payout formula too generous and believes it compensates people who were not harmed.

BP is awaiting a decision by a federal appeals court on its challenge to the payment formula, which U.S. District Judge Carl Barbier in New Orleans had previously rejected. Barbier on July 19 rejected an earlier BP request to suspend payouts pending Freeh's review. The judge also oversees a consolidated civil lawsuit against BP and its contractors over the spill.

The case under Barbier is in re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179. The appeal is "BP Exploration & Production Inc et al. vs. Lake Eugenie Land & Development Inc, et al." in the U.S. Court of Appeals for the Fifth Circuit, No. 13-30329.

(Reporting by Mica Rosenberg and Braden Reddall; Editing by Eric Walsh)

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