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Does BP's Oil Spill Fund Czar Really Deserve a 400K Monthly Raise?

The $400,000 per month raise recently awarded to oil spill fund czar Ken Feinberg triggered the kind of angry reaction you'd expect from Gulf coast residents, who have complained bitterly for months that the compensation process has been slow, inept and in many cases unfair. What's so curious is that folks were surprised by this at all.

Feinberg has tried to sell himself as a so-called "independent" third party appointed to administer the BP's $20 billion fund set up to compensate victims of last year's oil spill in the Gulf of Mexico. At his town hall meetings, Feinberg has been quick to remind potential claimants that they don't need a lawyer and he touts his "independent" status. Feinberg's actions, meanwhile, haven't always supported his independent status claims.

While it wasn't a secret that BP -- and not the U.S. government -- agreed to pay for Feinberg's services, many didn't realize how much until last fall when former U.S. Attorney General Michael Mukasey released a report on the compensation, which was $850,000 a month at the time. Mukasey, who was hired by Feinberg to evaluate the compensation package, recently described in a letter obtained by the Associated Press that an increase in Feinberg's pay seemed reasonable considering the increase and complexity of the firm's work load. BP agreed to increase the law firm's monthly compensation to $1.25 million. The pay hike is retroactive to Jan. 15 and runs through the end of 2011.

Feinberg pay by the numbers:

  • Feinberg began administering the fund in mid-June at the $850,000 monthly pay rate. That means by the end of 2010, his firm had been paid more than $5.5 million;
  • At the new $1.25 million rate, Feinberg firm will be paid $15 million for 2011.
Let's pretend for a minute that Feinberg's pay is totally justified because his law firm is overloaded with work. The amount he is paid, while ridiculous considering his poor performance, is only part of the problem. The real issue is who is paying him. It doesn't matter that President Obama had a hand in appointing Feinberg. His firm is paid by BP, meaning he works for the UK oil company. Feinberg can argue that he's independent all day long, but it doesn't make it true. At least one case seems to tell an opposite story. Earlier this year, Feinberg's firm allowed BP to determine on its own a $10 million final settlement with an unnamed Texas company, which the oil giant refuses to identify.

The conundrum here is who, if not BP, should pay for Feinberg's services? It would be unfair for U.S. taxpayers to cover the bill. But under the current scenario, the balance is tipped towards BP favor. We've already seen how Feinberg's work has benefited BP. The law firm determined that it will take two to three years before virtually all Gulf residents and businesses make a full economic recovery. Feinberg will based final settlement payments to oil spill victims on this quick-recovery scenario. That's excellent news for BP, which can be guaranteed its compensation to victims will be far below the $20 billion figure.

Photo from Flickr user jabberwocky381, CC 2.0

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