Alabama Gov. Riley Alleges Extortion by BP Claims Fund

President Barack Obama should intervene to stop the $20 billion BP oil spill compensation fund from depriving claimants of their rights, Alabama Governor Bob Riley said Monday, calling the way the fund was operating “extortion.”

The fund, set up by BP Plc for victims of the worst- ever U.S. offshore oil spill that hit the Gulf Coast region earlier this year, encourages claimants to file early for final settlements to get the most generous terms, according to its administrator, Kenneth Feinberg.

But Riley said that in practice, claimants are being asked to sign away their rights to sue BP for damages.

“We’ve gotten to the point today where someone said, ‘Well, this is not extortion.’ Of course it is!” Riley said in comments to MSNBC-TV. “Now they’re not paying any of these claims unless you sign the final release.”

The Alabama governor said some small business people who are owed tens of thousands of dollars have received no payments since June and have gone out of business as a result.

The April 20 blowout of BP’s Macondo well while it was being drilled in the Gulf of Mexico off Louisiana, killed 11 rig workers and spewed more than 4 million barrels of oil, closing fisheries and stunting tourism from Louisiana to Florida.

BP set up the fund in June in response to public outcry and political pressure from the White House, but there has been a slew of complaints by affected states and individuals about the way it is being administered.

Feinberg last month warned that Gulf Coast inhabitants and businesses who decline to settle and refuse to give BP and its contractors a release from future risk of lawsuits might end up getting less money.

“There is no guarantee that, in the future, a lump sum final payment will be as generous as it will be currently,” Feinberg said last month.

Riley argued that one reason economic victims of the spill felt under pressure to sign a final settlement was because they did not know what the future held.

“It is insane. And it’s time for the president or the VP (vice president) or someone to step in and say ‘Enough!’

“The biggest thing that they need to do right now is walk in and reassess the process,” he said.

After the emergency claims filing period ended last month, Feinberg outlined a final settlement process that gives claimants two options. They can accept a lump sum final payment in exchange for releasing BP and its contractors from future liability. Or they can continue to receive interim payments in hopes of a bigger final payment in the future.

(Reporting by David Morgan, writing by Matthew Bigg, Editing by Pascal Fletcher and Maureen Bavdek)