BP Charges Explained

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November 15, 2012

By Joe Palazzolo

BP PLC has agreed to plead guilty to a number of felony and misdemeanor charges stemming from the Deepwater Horizon disaster that killed 11 workers in 2010. All told, the company will pay $4.5 billion in penalties.

Here’s the rap sheet:

— Eleven felony counts of “Misconduct or Neglect of Ships Officers” relating to the deaths aboard the drilling rig

— One felony count of obstruction of Congress stemming from information it gave about the rate that oil was leaking from the well.

— A misdemeanor count under the Clean Water Act

— A misdemeanor count under the Migratory Bird Treaty Act

If you’re confused over some of the details of the plea deal — like, say, that Migratory Bird Treaty Act violation — we’ve put together a quick guide.

How can a company be charged with a felony?

Under federal law, corporations may be criminally liable for the illegal acts of officers and employees (and even agents). Not all illegal acts, mind you — only those that were within the scope of their duties and were intended, at least in part, to benefit the company.

State laws on corporate criminal liability vary. But those based on the Model Penal Code — a sort of cheat sheet for statehouses — act similarly to the federal model. Corporations can be convicted of a crime if it was authorized, or even “recklessly tolerated,” by a company’s board of directors or a manager.

A company can’t be imprisoned, obviously. So a company that pleads guilty to or is convicted of a crime must pay a fine, the size of which is calculated based on a number of factors, including its size and how high within the company the illegal conduct rose.

Has it happened before?

Yes. Several times. In the pharmaceutical industry, criminal charges are old hat. In a huge settlement in 2009, for instance, Pfizer Inc. pleaded guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding the anti-inflammatory drug Bextra. The company paid a total of $2.4 billion in criminal and civil penalties.

What Is “Misconduct or Neglect of Ships Officers”?

A maritime law. Here’s what it says:

When the owner or charterer of any steamboat or vessel is a corporation, any executive officer of such corporation, for the time being actually charged with the control and management of the operation, equipment, or navigation of such steamboat or vessel, who has knowingly and willfully caused or allowed such fraud, neglect, connivance, misconduct, or violation of law, by which the life of any person is destroyed, shall be fined under this title or imprisoned not more than ten years, or both.

BP said the charges are based on the negligent misinterpretation of a “negative pressure test” conducted on board the Deepwater Horizon. The Wall Street Journal reported in August 2010 that last-minute changes to the key safety test — and the decision to continue work despite unexpected results — contributed to the accident.

What is the Migratory Bird Treaty Act and why is BP charged with violating it?

The 1918 law prohibits the killing of certain migratory birds. The oil spill affected shorebirds, waterfowl and other birds that traveled through the area on their annual migration south.

(c) 2012 Dow Jones & Company, Inc.

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