Wednesday, June 03, 2015

DHECC - The Shadow of 495 - Guest Post by In-Hale

Deepwater Horizon Claim Center and the Claims Administrator steal a page out of Kenneth Fienberg’s playbook:  Delay, Defend and Deny

The claim processing history repeats itself, lets make outrageous promises to secure control of the fund then turn on the people you're selected to help:

"This settlement, if approved, will compensate hundreds of thousands of victims."

"Unlike GCCF we now have an objective standard set in concrete."

"This process will be clear and transparent."

Evidence now supports that from the beginning the claim center set aside claims that would eventually be impacted by new polices. Construction, Professional Services and Agriculture amazingly submitted at the beginning of the claim process never saw daylight. Now subjected to new sub-classes under policy 495 with new methods and requirements that will reduce or eliminate the claim value. 

As illustrated by this chart claim payments spiked in Nov 2012 just as we hit the deadline to Opt-Out. In Oct 2013 the injunction by the 5th Circuit Court put a stop to all BEL claim payments. The 5th CC gave Patrick Juneau limited instructions to tailor CASH Basis P&L’s so using the captured data from the claims submitted he developed Policy 495. This policy far exceeded the instruction and has had a greater impact on all BEL claims calculations and payments.

That being said now lets address the bigger picture and implications of this policy 495.

Law and accounting firms spent tens of millions calculating claimant’s losses prior to the deadline to evaluate if the claimant should or should not stay in the settlement strictly using the clients P&L’s numbers. The adoption of Policy 495 materially changed this thought process. 

Not only do we need to support the numbers we now need to satisfy an audit of each month at a level that is not kept in the normal course of business. Their records and records keeping were never designed to be maintained to the level of detail, on a monthly basis, which is now being required. Nor can their historical records be remediated in any meaningful or cost effective manner to satisfy this newfound demand for minutiae. 

Naturally if the language of 495 were in the original settlement no one would stay in. Accounting firms processing claims still find it hard to understand or calculate someone’s losses as it goes far beyond standard accounting “GAP” principles. 

The true impact of policy 495

495 has triggered new highs in Incomplete and Causation Denials as of May 30, 2015 these two categories combined equal 22,792 just in the BEL class.

495 has destroyed millions of dollars in work product used to verify proper determinations and offers. 

495 has destroyed work product used to evaluate if the client should have stayed in the settlement by passing the causation models. 

495 has destroyed work product used to defend proper offers in appeals.

495 has delayed, added and destroyed millions in accounting expenses incurred by law and accounting firms proceeding claims.

495 has disenfranchised law firms and claimants from filing claims due to the cost to processing a claim only to be denied for causation or a lack of ability to satisfy the new document request. 

And the BIG ONE...495 now forces us to rely on the court vendor’s. 


Anonymous said...

Two big questions one very obvious and one that we will never know.

So are we the claimants better off today after 3 years since the PSC and BP reach a deal?

As evidence the published claims administrators report confirms the best answer is NO!

And for my last question how many of these class members that read the class notice and relied on the representation of both BP’s counsel and Class Counsel to join the settlement would have Opted Out if they knew of the forthcoming of Policy 495?


Anonymous said...

Barbier got his legacy, but it will forever be "what not to do".

Anonymous said...

The PSC needs to go to Barbier to demand that several critical issues surrounding the scope of policy 495 and whether it should be interpreted in a way that modifies settlement terms unrelated to the provisions that were at the heart of BP's matching appeal.

For instance, does 495 allow reviewers to require claimants to convert their cash basis P&Ls to the accrual method by moving revenues from the month they were recieved to the month in which they were "earned." This sort of request happens all the time now, but the settlement itself and the fifth circuit decisions clearly allow claimants to use either cash OR accrual books. However, reviewers are forcing conversions from cash to accrual anyway by (amazingly) claiming that "we aren't converting cash to accrual but are instead simply correcting matching issues by 'matching' the revenues with the 'period' in which they were earned." WTF? First, their response is essentially "we aren't converting cash to accrual, we are just converting cash to accrual." Second, since when did the fifth circuit's decision, or policy 495 itself have anything to do with "matching revenues with the period in which they were earned?" Unless I've forgotten how to read the English language, I'm pretty sure the fifth circuit, Barbier and the policy 495 itself explicitly and exclusively relate to ensuring that "revenues are matched with their corresponding variable expenses" and that it matters not one bit when the revenues were "earned." Hundreds of appeal panel decisions seem to get this right (there are a few that don't though). So, can someone please clarify what, exactly, is a "matching" adjustment actually is and if an accountant wants to adjust revenues or expenses to correct for a "matching" issue, shouldn't the adjustment they make have to be based at least in part on which months contain variable expenses that "correspond to" the revenues being moved, or vice versa?....Well, at least for any adjustments outside of one of the specialized methods that proscribe exactly how to correct matching issues on claims subject to that method (construction, AVM, professional services, etc). Matching isn't supposed to be about smoothing but that is what it's become. We've even heard of reviewers changing a revenue into an expense to correct an alleged matching issue. How can they fix a problem they think relates to "revenues being mismatched with their corresponding variable expebses" by changing the alleged mismatched (but not erroneous) revenue entry INTO an expense?

Juneau should also have to explain what he meant when he included bold font in his policy 495 saying that "no claim will be subjected to an individually tailored approach for addressing matching issues" if that language doesn't mean that reviewers won't make individual adjustments to accurate revenue entries that are specific to a single claimant and based on the the specific practices of a single claimant or the specific terms of they're agreements with customers?. How in the world is that not precisely what was described in bold font as a prohibited "individually tailored approach to addressing matching issues" if it's entirely based on the specifics of a single claimant's books and involves an adjustment specific to that claimant alone?

Another recent issue involves reviewers specifically requesting transaction by transaction matching. We were recently asked on a cash basis claim to identify each dolled of revenue that was booked in a month other than the one in which the revenue was "earned" and to then also provide detail on which months the claimant actually earned each such dollar.

Anonymous said...

To the 3rd (last comment) above, the PSC has $600,000,000 reasons to not do a damn thing! They will not ask Barbier for crap! BP got EVERYTHING they wanted out of this deal and the PSC thinks that they are going to come out flush too! I have news for them, the other plaintiff attorneys will tie up that $600,000,000 until the cows come home, and the cows ain't coming home because BP poisoned them too!

Anonymous said...

A little justice has prevailed:

Mark McNamee, former Partner of McGladrey has been asked to leave the firm after a full investigation was conducted regarding a whistle-blower’s claim that Mark McNamee (Partner-In-are not "terminated".

McGladrey was the accounting firm hired to audit the Deepwater Compensation Program as it pertained to the BP Oil spill. Mark McNamee was instrumental in running up a $14 million dollar tab and then refused to deliver the audit report. The maximum estimate for the audit was $1.6 million dollars.

In addition, Jessica Batt - former Manager of McGladrey (worked alongside Mark McNamee) was also asked to leave McGladrey and has since relocated with her husband to London where she is employed by Baker Tilly.

Anonymous said...

After reading several appeal panel rulings we now have another common theme, the abuse of the appeal system by BP. Here’s just a sample that no Pro Se every anticipated or expected when they submitted the claim. Just additional proof on how 495 is truly a game changer.

2015-877 page 61
“Once again, BP argues that the Claims Administrator failed to properly apply Policy 495.”

BP appeals, raising two matching related assignments of error. First, BP argues that an adjustment to Claimant’s COGS/Inventory account for December 2010 artificially inflated the award because it failed to re-allocate the COGS to the months in which they were overstated. As BP sees it, the year-end adjustment should have been evenly allocated throughout the year. Such an adjustment would reduce the compensation by $97,327.00.

BP argues policy 495 was misapplied when a single rent payment in July 2008 was not properly attributed.

BP appeals, once again arguing that the Claims Administrator should have adjusted Claimant’s income before applying the Policy 495 methodology and, in addition, that the Professional Services Methodology (PSM) should have been applied.

This is a classic example of using a cannon to shoot at sparrows. Despite the fact that Claimant’s financial information did not trigger any of the criteria in Policy 495 and were thus deemed to be sufficiently matched, BP asserts that the Program should have taken steps to address claimant’s inventory adjustments.

According to BP, the Settlement Program should have reallocated revenue before applying the AVM framework or should have applied the Professional Services methodology.

BP appeals alleging, as it often does in a general fashion, that the award does not comply with the terms of the Settlement Agreement. Further, and again in general terms, that the Claims Administrator (1) failed to apply the terms of Policy 495, including those concerning matching, and (2) failed to use financial data submitted by Claimant that attributes revenue to the months in which it was earned.


Anonymous said...

Another example using today’s public stats this settlement was not in the best interest of the Plaintiffs.

Individual Economic Loss claims filed 67,765

Unique Claimants paid 5,745 vs. 26,177 Denials

1,578 Eligible with no payment
3,284 Exclusion Denials
99 Causation Denials
1,133 Other Denials
20,083 Incomplete Denials

E. After careful consideration, Plaintiffs, Interim Class Counsel and the PROPOSED ECONOMIC CLASS COUNSEL have concluded that it is in the best interests of Plaintiffs and the Economic Class to compromise and settle certain claims asserted by the Economic Class against BP and other Released Parties in the Deepwater Horizon Economic Litigation in consideration of the terms and benefits of the SETTLEMENT set forth in this Agreement. After arm’s length negotiations with BP’s COUNSEL, Plaintiffs and Proposed Economic Class Counsel have considered, among other things, (1) the complexity, expense, and likely duration of the litigation; (2) the stage of the litigation and amount of discovery completed; (3) the potential for Plaintiffs or BP prevailing on the merits; and (4) the range of possible recovery and certainty of damages; and have determined the Agreement is fair, reasonable, adequate and in the best interests of Plaintiffs and the Economic Class Members.

Kevin said...

How many of you unpaid claimants have seen and read Pretrial Order No. 59 issued on July 15 appointing a fee allocation committee, etc.? It's available on the court's website under the link to the MDL cases and then the link to the MDL-2179 Deepwater Horizon.