BDO Consulting, a Division of BDO USA, LLP INDEPENDENT EVALUATION OF THE GULF COAST CLAIMS FACILITY REPORT OF FINDINGS & OBSERVATIONS TO THE U.S. DEPARTMENT OF JUSTICE June 5, 2012 INDEPENDENT EVALUATION OF THE GULF COAST CLAIMS FACILITY REPORT OF FINDINGS & OBSERVATIONS Table of Contents I. INTRODUCTION ........................................................................................................................................ 1 II. AREAS OF FOCUS & APPROACH ................................................................................................................ 2 A. GENESIS OF THE INDEPENDENT EVALUATION ...................................................................................................... 2 B. AREAS OF FOCUS........................................................................................................................................... 3 C. THE BDO INDEPENDENT EVALUATION TEAM ...................................................................................................... 6 D. APPROACH TO THE INDEPENDENT EVALUATION ................................................................................................... 7 III. GCCF FORMATION & OPERATIONS ......................................................................................................... 11 A. BP RESPONSE TO THE SPILL & ORIGINS OF THE GCCF ........................................................................................ 11 B. ENTITIES ENGAGED TO ASSIST OR ADVISE THE GCCF.......................................................................................... 14 Figure 1: Overview of the GCCF ...................................................................................................................... 15 C. GCCF PHASE I ............................................................................................................................................ 28 D. GCCF PHASE II ........................................................................................................................................... 34 1. Types of Claims Available During Phase II ....................................................................................... 34 2. Development of Methodology for Interim Payment and Final Payment Claims ............................ 36 a. Role of ARPC ............................................................................................................................................ 36 b. Causation ................................................................................................................................................. 38 3. Implementation of the Final Rules and Claims Evaluation Methodology ....................................... 39 a. Claimant Eligibility ................................................................................................................................... 39 b. Loss Calculation ....................................................................................................................................... 41 c. Interest Calculation ................................................................................................................................. 43 d. Communication of Claim Status and Resolution to Claimants ................................................................ 45 e. Claim Reconsideration Methods ............................................................................................................. 46 f. Diversity of Claimants .............................................................................................................................. 47 g. Modifications to the GCCF Methodologies ............................................................................................. 48 i. Examples of Methodology Modifications ................................................................................................ 49 (a) Treatment of Individuals and Businesses in the Casino Industry and Other Businesses with Gaming Operations ....................................................................................................................................... 49 (b) Inclusion of Prior Year Income for Similar Lines of Work Only ........................................................ 51 (c) Use of Annualized January through April 2010 Earnings in Loss Calculations ................................. 51 (d) Use of Claimant Verified Amount Rule During Phase I .................................................................... 51 (e) Use of Special Determination Letter During Phase II ...................................................................... 52 (f) Letters to Claimants Previously Denied During Phase II .................................................................. 53 h. GCCF Quality Control Processes .............................................................................................................. 54 i. Centralization of Claims Process ............................................................................................................. 54 j. Feinberg Rozen Oversight and Discretion ............................................................................................... 55 E. THE CURRENT STATUS OF THE GCCF .............................................................................................................. 56 Prepared at the Request of The U.S. Department of Justice i June 5, 2012 IV. FINDINGS & OBSERVATIONS .................................................................................................................. 58 A. FINDINGS & OBSERVATIONS REGARDING CLAIMS PROCESSING ............................................................................ 58 1. Claims Paid, Denied or In-Process ................................................................................................... 58 a. Claims Paid .............................................................................................................................................. 59 Figure 2: BP/GCCF Payment History Chart ..................................................................................................... 60 Figure 3: Claims Paid by Location ................................................................................................................... 61 b. Claims Denied .......................................................................................................................................... 62 c. Claims In-Process ..................................................................................................................................... 64 Figure 4: GCCF Staffing Levels ........................................................................................................................ 65 2. Claims with Identified Errors Corrected by the GCCF ..................................................................... 66 Figure 5: Summary of First-time or Additional Payments and/or Offers for Payment ................................... 69 B. OBSERVATIONS RELATING TO CERTAIN CONCERNS OF CLAIMANTS, PUBLIC OFFICIALS AND OTHER STAKEHOLDERS......... 70 1. WHY THERE SEEMED TO BE INCONSISTENT OUTCOMES AMONG CLAIMANTS THAT MAY APPEAR TO HAVE BEEN SIMILARLY SITUATED ............................................................................................................................. 72 2. WHETHER THE GCCF GAVE APPROPRIATE CONSIDERATION TO DOCUMENTATION SUBMITTED BY CLAIMANTS ....... 77 3. WHETHER COMMUNICATIONS WITH CLAIMANTS WERE EFFECTIVE ............................................................... 78 4. OTHER CONCERNS ............................................................................................................................... 84 5. FINDINGS AND OBSERVATIONS REGARDING CONCERNS ............................................................................... 85 C. CONSIDERATIONS FOR FUTURE CLAIMS PROCESSING FACILITIES ............................................................................ 85 1. GCCF’S SUGGESTIONS FOR FUTURE CLAIMS FACILITIES ............................................................................... 85 2. FURTHER SUGGESTIONS FOR FUTURE CLAIMS FACILITIES .............................................................................. 87 V. CONCLUSION .......................................................................................................................................... 88 APPENDIX ............................................................................................................................................................ A1 Prepared at the Request of The U.S. Department of Justice ii June 5, 2012 INDEPENDENT EVALUATION OF THE GULF COAST CLAIMS FACILITY REPORT OF FINDINGS & OBSERVATIONS I. INTRODUCTION At the request of the U.S. Department of Justice (the ―DOJ‖), BDO Consulting, a division of BDO USA, LLP (―BDO‖), conducted an independent evaluation of the Gulf Coast Claims Facility (the ―GCCF‖). The GCCF was established to receive and process claims by individuals and businesses for costs and damages as a result of the oil discharges from the April 20, 2010 Deepwater Horizon incident (―the Spill‖). On December 21, 2011, the DOJ publicly announced the selection of BDO to perform the independent evaluation and mandated that our work be fully independent,1 be overseen and directed by the DOJ, and meet the highest professional standards. (See Exhibit A.) In conducting our independent evaluation, we were at all times mindful of the unprecedented