BP fund underpays oil spill victims: Mississippi

BILOXI, Miss. (Reuters)—U.S. courts must compel the administrator of BP P.L.C.'s $20 billion oil spill fund to meet his legal obligations and stop short-changing victims of the Gulf of Mexico disaster, Mississippi said on Tuesday.

Until now, "sweeping deficiencies and violations of law" characterize the Gulf Coast Claims Facility (GCCF) fund run by independent administrator Kenneth Feinberg, state Attorney General Jim Hood said in a memorandum to a federal court in Louisiana.

"Court intervention and action is needed to compel BP to cure its failure to provide a claims process that fulfills the requirements of the Oil Pollution Act of 1990, state law and prior public commitments of BP," the memorandum said.

Last week Mr. Hood asked the court to allow the state to take over the payment process.

The filing used the fund's own statistics to argue that it had paid out only a "paltry" amount to claimants following the biggest oil spill disaster in U.S. history, which began when a BP rig exploded and sank in April 2010.

Millions of gallons of oil poured into the Gulf between April and July, damaging the fragile wetlands of Louisiana, washing ashore in Mississippi, Alabama and Florida and hurting coastal industries including fishing and tourism.

In the wake of the spill, many angry Gulf coast residents have argued that the fund favors BP's interests over their own and that the company is attempting to wriggle out of its commitment to "make this right" for spill victims.

The fund has paid out $1.4 billion to individual claimants and $1.9 billion to business claimants, the memo said.

"Although the number of claims paid and the aggregate amount paid out by the GCCF seem large at first blush, the fact is that the number of victims is large, the amount of damages suffered is far greater than what has been paid and the number of claims not paid is staggering," the filing said.

In particular, the memo lamented figures showing that only 56% of businesses claiming an emergency payment received any money and said a lack of transparency made it impossible to know whether those paid were paid adequately.

That same absence of transparency made it impossible to assess the validity of the fund's statement that more than half of those denied payment, who amount to a full two thirds of all claimants, failed to supply any supporting documentation, the memorandum said.

Tuesday's case 2:10-md-02179-CJB-SS was filed in the Eastern District of Louisiana, site of the consolidated litigation over the spill.

The memorandum referred to "Oil Spill by the Oil Rig 'Deepwater Horizon' in the Gulf of Mexico on April 20, 2010".