Kenneth Feinberg: Will he be fairer and faster than BP?

Kenneth Feinberg is President Obama's choice to run the $20 billion escrow fund for claims against BP in the Gulf oil spill disaster. Mr. Feinberg also ran the 9/11 victim compensation fund.

Kenneth Feinberg will administer the $20 billion escrow fund to compensate those with claims against oil giant BP in the Gulf oil spill disaster.

Since its disaster in the Gulf of Mexico, BP has been writing checks – some 26,500 claims have been settled and $62 million paid. The company says it often cuts a check within days of receiving verifying information, such as a tax form.

Can Kenneth Feinberg, appointed by President Obama on Wednesday to run a $20 billion escrow fund, do the job faster – or fairer?

Even if he can’t beat BP, which has set up 31 field offices around the Gulf, some outside experts believe Mr. Feinberg might end up being broader, more comprehensive and perhaps more predictable. As the administrator for the $7 billion September 11th Victim Compensation Fund created by Congress after the 9/11 terrorist attacks, he gained a reputation for both skill and compassion. And dealing with Feinberg is likely to be far faster than going to court to sue BP.

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“It can take years and year for litigation to be resolved, and even then it’s costly for everyone involved,” says Fordham Law Professor Howard Erichson in New York, an expert on class action lawsuits. “People who have been harmed by a mass disaster do not want to rely on the voluntary good will of the defendant when awaiting compensation.”

Speeding up the process

On Wednesday, Obama said he had been meeting with individuals in the Gulf who had expressed their frustration over not getting compensation checks quickly enough. That was one of the major reasons he pressed BP to set up the $20 billion compensation fund, plus another $100 million to pay the salaries of workers who normally would be working on deep water oil rigs.

Obama said he emphasized to the BP executives the importance of remembering those who are less well off, perhaps working on shrimp boats or as restaurant help. He recounted how many were just recovering from Hurricane Katrina.

“This season they were hoping to bounce back,” he said, saying he wanted BP to keep those individuals in mind.

Outside the White House, the chairman of BP, Carl-Henric Svanberg, said they would remember the little guys. And, he said the company would suspend its dividend payment to stockholders in order to help put money in the escrow fund.

In Houston, BP spokesman Robert Wine says he has read media reports of the frustration that Obama talked about. He says the company is sympathetic.

“We have tried to push through the payments as quickly as we can,” he says. “Hopefully, people recognize those efforts.”

BP’s efforts are a contrast to the aftermath of Hurricane Katrina when residents of the Gulf area complained about the slow pace of insurance payouts. Adjusters arrived to look at damage to decide if it was covered by a policy. Sometimes, it took many months for individuals to get paid. In the meantime, they were living in mobile homes or with relatives.

Three options for those filing claims

Feinberg’s appointment will give individuals who have been harmed by the BP disaster three options. According to the company, they can continue to submit claims directly to BP, which is using a company called ESIS to process them. They can file a claim with Feinberg who will be setting up his infrastructure, or they can file a lawsuit against the company.

However, Mr. Erichson says it’s not clear if an individual or group can get a settlement from BP or Feinberg but still sue BP.

“This is a really big question,” he says. “If a shrimper lost a lot of money and needs speedy compensation and gets it, can he still go to court and demand more?”

Plaintiffs’ attorneys will certainly be arguing they can still sue BP. Normally, they take a contingency fee which only gets paid if they win the lawsuit.

“It’s not clear if the fund will supersede the regular legal process,” says Erichson.

Now in charge of the $20 billion Gulf oil spill escrow fund, Mr. Feinberg is an expert on mediation and dispute resolution who also has served as "pay czar" overseeing executive compensation under the Troubled Asset Relief Program (TARP).

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