The accounting rules at issue, which are being painstakingly, consistently and fairly applied by the court appointed Claims Administrator, Patrick Juneau, are the same used by almost all businesses – large and small – throughout the developed world.  By BP’s argument,  it seems as if the company advocates the use of some as-of-yet undiscovered new math, devoid of all reason and common sense. Indeed, if BP wished for such novel concepts to be applied in the calculation of settlement claims, the company was certainly well within its rights to negotiate for same before the parties arrived at a settlement. They did not. Now nearly one year later BP is asking the court for a “do over.”

At the heart of the dispute is BP’s desire to force claimants to engage in something it calls “revenue smoothing,” a kind of “creative accounting” that is anything but objective. As any small business owner knows, revenues are not consistent. Sales are better in some months than others. Frequently, a longtime customer who operates on credit may fall behind on payments, only to catch up a few months later. In other words, business operations are anything but “smooth.” BP, the 4th largest company in the world, has made it known that they do not understand this business 101 concept.

Let’s say you own a construction company and you win a contract valued at $200,000 to build a new home. Upon execution of the contract, perhaps in January, the client pays you a $100,000 deposit, with the remaining $100,000 balance due upon completion. Your crew works full time to build the home in February. In March they are hampered by several bad weather days and make little progress.  April is back to full schedule and the home is 75% complete, but an early season hurricane derails work for the entire month of May. Then, because of a scarcity of construction supplies as a result of the hurricane, the project languishes for months with work going in fits and starts. Finally the home is finished in November, at which time you are paid the remaining $100,000.

Looking at your financials, we will see a spike in revenue in January (initial deposit) and again in November (remaining balance). Such a cash flow pattern is the reality of almost every business, save for the very largest.  In fact, booking revenue in this commonsensical manner has a name – “cash accounting,” which is the accounting method used by the vast majority of small businesses. BP now says that they would like you to use much more sophisticated “accrual accounting,” after all, as the 4th largest company in the world, that is what they do. Under accrual accounting principles, you “smooth” those volatile revenues out over the course of several months, even years. To be clear, accrual accounting is perfectly legitimate. It is simply more complex than cash accounting.

The fact is, during the months of talks that the parties engaged in prior to the settlement, BP did not ask for one form of accounting to be required in lieu of another. While they were well within their rights to negotiate a requirement that accrual accounting be used to calculate claim values, they simply did not. The best legal counsel in the world – $1,000 per hour Manhattan lawyers hired by BP – never brought the point up. BP’s hired gun financial experts with MBA’s and actuarial scientists with PhD’s never broached the subject. Out of those negotiations came a 1,200 page, highly detailed settlement document that dots every “i” and crosses every “t”.

Until yesterday, BP stood firmly behind the rules laid out in those 1,200 pages. In fact, at the court hearing to finally approve the agreement back in November, BP’s lead counsel, Rick Godfrey, had this to say, ““[a]fter nine months and one day of robust and sometimes heated negotiations where we met 145 times face-to-face, BP believes that this settlement is unlike any other in the history of the United States, and we believe it to be good for our system of justice. BP has no intention of having justice delayed for those with legitimate claims.”  The difference today is that BP wishes to be the sole arbiter of exactly what is “legitimate.”

So why is BP now so adamant that accrual accounting and “revenue smoothing” be required of claimants?  Simply put, they screwed up in their calculations. There are more legitimate claims being filed and paid by the neutral and court appointed claims administrator than BP’s statisticians had anticipated. By asking for a mulligan to “renegotiate” the settlement to require accrual accounting, they would eliminate 75% of all main street small business claimants, who simply do not engage in such Wall Street “creative accounting.”

With this filing, BP is attempting to invalidate the entire agreement and abolish the claims program, as the practical effect of the application of accrual accounting standards and “smoothing” concepts at this late hour would make claims administration unworkable. While we expect the Judge to issue a strong rebuke to BP’s attempt, at the very least, yesterday’s actions by the company will significantly delay payment of legitimate claims. And payment delayed is payment denied. Shame on BP.

Unlike any previous class action settlement, this compromise does the most good, for the most people, in the shortest amount of time. The parties – from BP, to plaintiffs’ counsel, to Judge Barbier – should be commended for engineering this unique settlement program, one that should be a model for other mass torts in the future. While both sides could have dragged this litigation out for years – even decades (see Exxon Valdez) – cooler heads prevailed, and the people and businesses of the Gulf are the beneficiaries of a justice system that worked as it should.

In general, there are 18 distinct options available to meet this artificial definition of “causation.” The exercise in intensive financial analysis and forensic accounting should only be attempted by those professionals who are educated in law, finance and accounting, as well as have an intimate knowledge of the nuances found in the 1,200 page settlement agreement. We have encountered countless inexperienced attorneys, CPA’s and claims “consultants” and “adjusters” who, while able to plug numbers into a calculator, cannot apply the dynamic concepts of the agreement. The result? Lower claim values for their clients, and in many cases, erroneously concluding that their clients do not have any valid claim.

At our firm, we will perform an initial analysis for causation – for free. In our opinion, if a business does not meet causation, there is no reason to go through the motions of hiring an attorney to file a claim that is hopelessly doomed. Doing so is a waste of time and money – ours and our clients. In order to perform this test, we will need to review profit and loss statements in monthly format for all of 2007 through 2011. The 60 months of P&L’s must be delivered to us in Excel spreadsheet format. We can usually provide an answer within 48 hours.

If your attorney, CPA or other “consultant” is unable to determine whether you meet causation once they are provided with 2007-2011 monthly P&L’s on an Excel spreadsheet – fire them. Contact us. We’ll take a look.

With hundreds of thousands of claimants waiting for recovery across the entire Gulf Coast region, there is a growing number of non-attorney professionals—“claims consultants”, “public adjusters” or CPAs—offering up their services to claimants. But not all representatives are equal and in this particular case “you get what you pay for”, as Whitney Ross, Director of Finance for The Law Office of Thomas L. Young put it. Ross added that claimants who have the potential to receive a significant amount of money if their claim is successful should ask themselves: “would you rather hire a ‘consultant” or individual CPA, or would you rather enlist a consortium of attorneys, investment bankers and accounting firms who have more than 1,200 Gulf Coast clients to date?” .

A recent report from the court-appointed claims administrator should serve as a warning to claimants that hiring non-attorney professionals is a risky move when so much is at stake. In particular, the report expressed serious concern about the numbers of incomplete claims that show up during the review process. Particularly disconcerting is the fact that many of those incomplete claims aren’t just being submitted by claimants without representation. Instead 52%–a majority—of incomplete claims have been submitted by claimants who do have representation. Incomplete documentation seems to be a particular issue for claimants who had already filed a claim with the GCCF and then had it transferred to the Court-Supervised Settlement Program. 48% of incomplete claims fall into this group.

Many of the claim categories defined in the Settlement allow claimants to provide different types of supporting documentation, with some types of documents being stronger than others. When relatively weaker documents are being used, additional supporting information is often required. But the numbers of claimants who fail to provide that additional documentation is shocking. For example, within the Seafood Program, 49.9% of vessel owners, commercial fisherman vessel lessees and boat captains rely on second-tier documentation in their claims, which requires additional supporting data. But 100% of them failed to provide that supporting data, despite the availability of a form that addresses this precise issue.

As these claims processing numbers show, some of the representation that claimants are receiving is downright bad. Ross points out that “For every two claims that are approved one is being rejected, because people who lack expertise in navigating the Deepwater Horizon process are submitting claims.” As attorneys who have been working on this Settlement for months, we expect that we will see many non-attorney processors sued for malpractice as their clients miss out on compensation or receive legal advice from non-attorneys.  According to Ross , “here at The Law Office of Thomas L. Young we have signed up several clients who made the mistake of enlisting the aid of fly-by-night ‘consulting firms’, only to be ignored by these unprofessional organizations. Frankly, the clients got lucky as their previous representation were unable to file a claim that would likely have been rejected.”

Submitting a claim to the Settlement program is one thing. But submitting a claim that has a strong chance of success, that approaches the claim from every conceivable angle and that maximizes a claimants’ opportunity for recovery is something else entirely. It requires a deep understanding of the Settlement and the legal issues involved. With as much at stake as there is for BP Settlement claimants, strong, professional representation throughout the claims process is a must.

This affects potential claimants who simply do not wish to participate in the BP Settlement program at all, and it also affects claimants who had claims pending in the Gulf Coast Claims Facility at the time the Settlement was reached in March of this year. Class members who opt out of the BP Settlement will not be bound by its terms and will be free to pursue their own legal action. Opting out means that the class member cannot submit claims under any portion of the settlement.

Class members who wish to exclude themselves from the Settlement must submit a written request stating “I wish to be excluded from the Economic Class.” This request must include your printed name, address and phone number and must be signed by the individual or entity seeking exclusion. The request must be postmarked no later than November 1^st and mailed to:

Deepwater Horizon Court-Supervised Settlement Program
Exclusions Department
P.O. Box 222
Hammond, LA 70404-0222

Compensation for real property sales is generally limited to parcels that are designated as “residential parcels” in the county in which they are located. The property must also be located within the “Real Property Sales Compensation Zone”, as defined in the Settlement. (Check the interactive map to see if your property is included!)

Individuals who wish to submit a claim must have owned the property as of April 20, 2010 and have executed a contract for the sale of that property that was either (1) executed on or after April 21, 2010 and the sale closed before December 31, 2010; or (2) executed before April 21, 2010, but the sales price was reduced as a result of the Deepwater Horizon Spill, and the sale closed before December 31, 2010.

If the property is included within the Settlement, there is then a detailed calculation method set forth in the Settlement to arrive at a compensation amount.

At the end of July, the Claims Administration Office released information about how area organizations can apply to participate in the Promotional Fund. First, eligible applicants include public, quasi-public, non-profit or other entities or organizations that are located within the Gulf States. Those applicants can then submit materials to be considered for funding. Interested organizations must send in: (1) a description of the activities or project proposed; (2) a budget for the proposed activities; and (3) information about the financial stability of the applicant. All applications must be received no later than October 5, 2012 to be considered for funding.

Recovery in the Gulf Coast region is going to depend heavily on making sure that the tourism and seafood industries can rebound from the significant losses they suffered in 2010. That means restoring public confidence and trust in what the Gulf Coast has to offer. This Promotional Fund can serve as an important means of support in making that happen.

While final approval of the Settlement is still pending before the Court, the number of claimants electing to participate in it continues to climb. As of the last reporting offered by the Settlement Program, nearly 50,000 individuals and businesses have submitted registration information with the Settlement Program. Those claimants have already submitted 38,000 complete claims, with another nearly 13,000 in progress.

In addition to the payments that are beginning to be processed and issued, the Program also continues to send “Outcome Notices” to claimants who have completed their claim submission. These notices inform claimants (and their representatives) if their claim has been accepted, denied, or if additional information is necessary for processing.

First, on the side of benefiting from the Settlement, in order to receive compensation, eligible class members must take the affirmative step of submitting claim information. Unlike some class action settlements where every member of the class may automatically receive a set compensation amount, BP claimants must actively participate in the Settlement Program by submitting a claim form and supporting documentation.

Second, to be exempt from the terms of the Settlement also requires affirmative action on the part of eligible class members. This is called “opting out” of the Settlement and doing so means that a potential claimant will not receive compensation under the terms of the Settlement, but will be free to pursue their own legal action against BP.
In the end, the “do nothing” approach means that an eligible class member will be bound by the terms of the Settlement but will not actually see any compensation.

While final approval of the Settlement is still pending before the Court, the number of claimants electing to participate in it continues to climb. As of the last reporting offered by the Settlement Program, nearly 50,000 individuals and businesses have submitted registration information with the Settlement Program. Those claimants have already submitted 38,000 complete claims, with another nearly 13,000 in progress.

In addition to the payments that are beginning to be processed and issued, the Program also continues to send “Outcome Notices” to claimants who have completed their claim submission. These notices inform claimants (and their representatives) if their claim has been accepted, denied, or if additional information is necessary for processing.