If you're wondering why BP "agreed" to the $20 billion escrow fund, wonder no more....
In the end, one aim of the fundand a prime reason BP agreed to itwill be to minimize lawsuits against the company. To do that, Mr. Feinberg will offer big lump-sum payments to workers and businesses as an enticement to stay out of court.
"At some point, I will have to make an offer'You take this amount in full satisfaction of your claim, but only if you waive your right to future litigation,'" Mr. Feinberg said. "And if I package it right, people will see that it makes no sense to fight it out in court."
Ding ding ding ding.
Now there's the reason for it folks.
There was never a reason for BP to agree to this fund unless they got something in return. Now we know what it was - a means to cap off liability claims against the company, which could otherwise bankrupt them.
If you remember, on the 15th BP's head said he had "no intention" of establishing an escrow account - under oath in Congressional testimony.
So what "changed his mind?"
The fines are easily-dealt with - simply bribe, er, lobby Congress and other administration officials.
But civil liability in front of a jury is a more-difficult thing. Said juries are likely to pound you into dust, especially if (as suspected) it comes out during the trial (complete with discovery rights, of course) that you knew the well was being mismanaged (e.g. perhaps the blowout preventer was broken and they knew it, perhaps they knew that safety steps were being shortcut despite warnings from contractors, etc.)
They might even really come after you with the worst-possible determination - willful or wanton misconduct - and nail you with punitive damages, which bear no relationship to actual economic harm.
Getting rid of that possibility is, of course, a big deal.
Getting the government involved is one way to foreclose such possibilities.
Remember that BP said that their efforts in this regard were not a method to foreclose and limit liability.
Now we find out that was pure and unadulterated BS - from the guy running the fund.
Am I surprised? Hell no.
Yes, you get your money faster, in that you don't have to sue and wait five years or more (plus give 30% to the lawyers.) But are you really better off?
That's an open question.
What's not open to question is that BP will be better off by foreclosing most if not all civil suits against them.
As always the government lies until the decision is taken and you "accept it", then the truth comes out once the deed is done and you, once again, have been bamboozled.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.