|September 10, 2013|
BP's traveling a different road to redemption
|Three years after the worst offshore oil spill in U.S. history, BP's post-disaster demeanor has gone from contrite to combative.|
The oil giant is increasingly sparring with the federal government; Louisiana leaders, like Gov. Bobby Jindal; and the throngs of businesses that still want compensation for the April 2010 explosion and spill that killed 11 people and dumped 4.9 million barrels of oil into the Gulf of Mexico.
BP continues to tend its public image, blanketing the airwaves with upbeat ads about its "commitment to America," and it agreed last year to pay a record $4.5 billion in fines stemming from the spill. But it's also mounting an aggressive legal, advertising and public relations attack on the court-administered process for weighing spill victims' damage claims, alleging that it's become rife with fraud.
The company also sued the Environmental Protection Agency last month, challenging the agency's decision to suspend BP from competing for federal contracts. The agency said in November that it took the action "due to BP's lack of business integrity" in its handling of the spill.
BP's latest actions are a noticeable shift in tone from three years ago, when then-CEO Tony Hayward went on TV to pledge that the company would "make this right" and "honor all legitimate claims." Its latest message, as seen in full-page ads in The New York Times, The Washington Post and The Wall Street Journal: "This isn't the settlement we agreed to."
What happened to BP's road to redemption? One expert in protecting companies' reputations says it has apparently realized that restoring the confidence of its investors and corporate partners will do more for its bottom line than an endless apology tour.
"BP has done what it was required to do," said Jonathan Salem Baskin, a Chicago-based brand management specialist and co-founder of Consensiv, a consulting firm for managing reputations. But he added that "after spending millions in communications saying, 'I'm sorry,' from a reputation standpoint, it's done nothing in terms of their financial performance."
The oil company reported earnings of $2 billion for the second quarter of this year, a lower-than-expected figure blamed on factors including spill-related legal costs. That was down from BP's first-quarter earnings of $16.8 billion but up from a $1.5 billion loss in the second quarter of 2012.
BP maintains it has been trying to make things right after the spill: The company has spent more than $26 billion on that cause, including $14 billion on response and cleanup efforts and more than $11 billion in claims paid to individuals, businesses and governments along the Gulf. It ponied up $1 billion to help restoration projects get off the ground while communities waited for compensation. It also launched its ubiquitous ads featuring smiling coast dwellers, buckets of shrimp and pristine coastlines, proclaiming that the Gulf is back.
Even so, BP saw its business position among the major U.S. oil producers decline, according to a Consensiv analysis that looks at financial indicators such as stock price and the prices companies pay for loans and insurance. ExxonMobil and Chevron are seen as more stable bets for investors looking at the companies' future while BP can't predict when it will be able to stem the tide from settlement payments, Baskin said.
Investors also looked favorably at Exxon's "ruthlessly efficient" handling of a much smaller oil pipeline spill this year in Mayflower, Ark., he said.
"Were they apologizing and firing people for the sake of public opinion? No," Baskin said of Exxon.
BP's latest PR efforts irk some on the Gulf who say the region is still struggling with the aftermath of the months-long spill. Michelle Erenberg, special projects coordinator at the Gulf Restoration Network in New Orleans, called the company's ads "disingenuous at best."
"We on the Gulf have been watching for over three years: BP will use whatever maneuver they can to avoid being held financially responsible," she said. She added, "Frankly, we are sick of BP complaining about being mistreated when its own conduct and negligence put them in this position in the first place."
The ads also provoked a spat with Jindal, who complained last month that the company was "spending more money on television commercials than they have on actually restoring the natural resources they impacted."
BP's U.S. communications chief, Geoff Morrell, fired back to Jindal that "no other company has done more in the wake of an environmental accident, and today, even in the face of this campaign of lies, we remain committed to paying all legitimate claims and helping restore the natural resources that were actually damaged from the oil spill."
But BP has also gone on the attack against what it calls fraudulent damage claims by businesses and individuals that never suffered harm in the spill.
Former FBI Director Louis Freeh is investigating claims that a lawyer in the office of the Court-Supervised Settlement Program received a portion of the settlements for claims he had referred to a law firm before he began working on the program. Freeh recommended Friday that the Justice Department investigate possible criminal misconduct by several lawyers involved in the claims process, although he found no wrongdoing by the settlement program's administrator or any reason to halt payments.
BP also alleges that the program administrator and a federal judge incorrectly interpreted the terms of the company's settlement of private spill claims, allowing businesses to receive millions from false claims. BP is asking an appellate court to overturn the judge's decision and throw out the claims.
"BP stepped up in the wake of the Deepwater Horizon accident and continues to do so," Morrell said. "While we are willing to pay legitimate claims, we did not agree to pay for fictitious losses or for claims that are based on fraud or tainted by corruption."
Meanwhile, BP says its suit challenging EPA's contract suspension is something any company would do under the same circumstances. Under the federal statute that governs debarment, a company can ask for the move to be reconsidered within 30 days after it's notified of the decision or if factual or legal errors come to light.
"We believe that the EPA's action here is inappropriate and unjustified as a matter of law and policy, and we are pursuing our right to seek relief in federal court," Morrell said in a statement, adding that the company "remains open to a reasonable settlement with EPA."
EPA would not comment on BP's case specifically, but agency suspension and debarment hearing officer Laura Fernandez said she has seen debarment decisions reversed in the past.
"This is not a punitive remedy available to the agency," said Fernandez. "This is not about teaching a lesson." The program, she said, is designed to protect Americans from companies with unscrupulous practices that engage in waste, fraud or other misconduct.
BP was much quicker to make an aggressive return to campaign spending after the spill, following a brief interlude in which some politicians --- including House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) --- were sending back any checks they got from the company. It made its first federal campaign donations of the 2012 election cycle in March 2011, nearly a year after the spill, and wound up handing out $469,652 in contributions to candidates, leadership PACs, committees and parties, according to the Center for Responsive Politics.
So far in 2013, the company has contributed $62,500 to federal political committees for Sen. Jim Inhofe (R-Okla.), House Majority Leader Eric Cantor (R-Va.) and Sen. Marco Rubio (R-Fla.), among others. BP gave an additional $24,100 in contributions to local races so far this year as well.