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Legal experts agree it's almost a foregone conclusion that the federal investigation of the Gulf of Mexico oil spill will produce criminal charges. After all, mere negligence leading to serious oil pollution constitutes a misdemeanor under the Clean Water Act. Whether BP (BP) or any individual will face felony charges—or even prison time—is a more complicated question. One hint of what a broader indictment might look like comes from an unlikely source: private civil-racketeering lawsuits that have been brought on behalf of property and business owners in Alabama, Florida, and Louisiana.
One of the suits, filed on June 12 in federal district court in Pensacola, Fla., by the plaintiffs' firm, Levin Papantonio Thomas Mitchell Echsner Rafferty & Proctor, not only accuses BP and Chief Executive Officer Tony Hayward of discrete instances of pollution; it also alleges the company engaged in an illegal "enterprise" to mislead regulators over a period of years.
Included in this alleged pattern of wrongdoing was BP's failure to improve its safety practices in response to past incidents, resulting in criminal fines, the suit says. An explosion in 2005 at BP's Texas City (Tex.) refinery, which killed 15 workers, and an oil leak in 2006 from a BP pipeline in Alaska are among the episodes cited in the suit.
Taken together with the Deepwater Horizon disaster, the Florida suit alleges, these events show that BP engaged in a scheme that violated the civil provisions of the Racketeer Influenced & Corrupt Organizations Act. The RICO law was enacted in 1970 to help prosecutors put Mafiosi behind bars. It has been used more broadly against corporations and high-profile individuals, including junk-bond impresario Michael Milken in 1989. It allows prosecution of people who operate or oversee an illegal enterprise, even if they did not commit the main criminal acts in question. The maximum prison term is 20 years for each count.
In the hands of a bold prosecutor, the facts and theory that underpin the Levin Papantonio firm's civil suit could add up to something more: a criminal indictment. "I would be amazed if the U.S. government didn't use this as a road map to some sort of criminal case," says attorney J. Michael Papantonio, an outspoken liberal who appears frequently on cable-TV talk shows. "This is not a case of a mistake. This is an intentional effort to subvert the law."
In his suit, Papantonio asserts that filings BP made from 2000 to 2009 with the Interior Dept.'s Minerals Management Service misrepresented the company's preparations for a potential deepwater disaster and dishonestly minimized risks. One BP document, an "Initial Exploration Plan" submitted to MMS in February 2009, claimed that the company had "the capability to respond, to the maximum extent practicable, to a worst-case discharge or a substantial threat of a discharge," the suit states.
Contrary to such written assertions that BP was capable of remedying a major oil spill, the company and its executives have conceded since the Apr. 20 rig explosion that they weren't prepared, the suit claims. CEO Hayward told the Financial Times in a June 3 article: "What is undoubtedly true is that we did not have the tools you would want in your tool kit." He added that it was "an entirely fair criticism" to say the company had not been ready for a deepwater oil leak.
The Florida suit argues that BP knew all along that its tool kit was deficient and assured the government otherwise. A separate civil racketeering suit filed in Louisiana on June 21 makes similar allegations. The one in Alabama is narrower and targets BP's conduct in responding to damage claims since the spill.
The RICO approach could allow BP's antagonists—in either a civil or criminal context—to argue that cost-cutting steps in 2010 contributed to the blowout that killed 11 workers and led to the environmental crisis. Two days after Papantonio filed his suit, Representatives Henry A. Waxman (D-Calif.) and Bart Stupak (D-Mich.) of the House Energy & Commerce Committee outlined in a 14-page letter to BP five decisions the company made that allegedly sacrificed safety for cost savings.
One example involved a "cement bond log," in which acoustics are used to determine whether the cement around the well had formed a tight bond or whether the cement job was imperfect, in which case gas could leak out. BP had hired the energy services contractor Schlumberger to conduct the cement bond test but sent the Schlumberger (SLB) crew back to shore the morning of the Apr. 20 explosion. The Waxman-Stupak letter suggests that BP canceled the test to save itself $128,000 and an additional 9 to 12 hours for a job that was already way over budget and behind schedule. Gordon Aaker Jr., an engineering consultant hired to advise the House committee, called the failure to test the cement bond "horribly negligent."
BP spokesman Scott Dean declined to comment, saying the company isn't talking about pending litigation.
Andrew Ames, a Justice Dept. spokesman, also declined to comment beyond referring to Attorney General Eric Holder's June 1 statement, in which he said prosecutors would look into potential civil and criminal infractions under a range of environmental and other federal statutes.
U.S. courts have narrowed the potential applicability of RICO in recent years. Winning a criminal racketeering verdict requires meeting a stiffer standard of proof than the one that applies in a civil case. Still, the filing of a criminal racketeering indictment against BP or its employees could have catastrophic effects for the company. Such charges likely would result in further reductions to BP's credit rating and increased chances of a Chapter 11 bankruptcy filing. Financial instability could endanger the $20 billion escrow fund BP has agreed to create to pay claims related to the spill.
For that reason alone, the Obama Administration would think long and hard before going the RICO route. On June 16, President Barack Obama said "BP is a strong and viable company, and it is in all our interests that it remains so."
On the other hand, if oil continues to spew all summer, and the slick spreads around the Florida Keys and up the East Coast, demands for punitive government action could grow.
The bottom line: A civil racketeering suit in Florida could provide a road map for prosecutors looking to bring felony charges against BP.