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Feinberg Can’t Do Public Job, Take Secret Pay

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Tue, Nov 23, 2010 at 9:56 pm

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Feinberg Can’t Do Public Job, Take Secret Pay

The deadline for submitting claims to the $20 billion BP oil spill compensation fund is midnight Tuesday. The wrangling over payouts will go on, perhaps for years. Yet the administrator of the fund, Kenneth Feinberg, stubbornly refuses to say how much he’s being paid by the oil company, eroding the trust of frustrated claimants and the public.

If BP had funneled the $20 billion through government, which hired Feinberg to administer it, his pay would have been public from day one. BP was allowed to skip the government intermediary, but BP didn’t hire Feinberg–President Obama appointed him, straight out of a real public job as White House overseer of executive pay at bailed-out companies.

Obama said as Feinberg took the job: “I’m confident he will assure that claims are administered as quickly, as fairly and as transparently as possible.”

What’s weird is that Feinberg’s law firm and BP were then allowed to bargain Feinberg’s and the firm’s compensation in private. It’s no shock that the “quickly” part of the payouts failed miserably, the “fairly” is questioned by business owners who have shut down while waiting months for help, and as a result Feinberg’s secrecy about his pay is under fire. After all, delay saves BP millions of dollars in accrued interest, and keeping claimants out of court altogether may save the oil company billions.

Feinberg also showed a completely deaf ear about his private actions when he agreed this month to give a keynote speech to a U.S. Chamber of Commerce subsidiary dedicated to preventing ordinary Americans from holding corporations accountable in court.  When Feinberg delivered the speech, he rather gently said that ending lawsuits against all corporate wrongdoing was a bit too broad. But what he said didn’t really matter: It was his presence honoring the Chamber group, the Institute for Legal Reform, that validated its ferociously anti-consumer and pro-corporate crusade.

As with the Chamber speech, Feinberg can’t see a conflict in his pay from BP.

Even in July, right after Feinberg was appointed, some legal scholars questioned this public-duty for private-pay model.

Prof. Byron G. Stier of Southwestern Law school, who represented tobacco companies and could hardly be seen as having an anti-corporate view, said this:

[E]ven federal judges have their compensation set publicly and in a manner that could not be said to incentivize them to favor one litigant over another.  We would never approve of a judge being paid confidentially by only one litigant — and we shouldn’t here either, especially when the claims structure could be seen as quasi-public … Ultimately, removing the issue of Feinberg’s fees from any controversy would aid Feinberg in making the BP fund a success.

Since then, Feinberg’s firm has released its overall compensation, coming to about $1,000 an hour for every lawyer who touched the case. But Feinberg is still mum about how and how much he’s personally making.

In a Reuters follow-up story Tuesday, Feinberg told the news service he is operating under “no official legal statute or court-imposed authority.” He is, he said, “a private party asked by both sides to design and implement the Gulf Coast Claims Facility on behalf of both sides.”

The phrase “asked by both sides” puts the White House in a disturbingly equal position with BP. But what was even more disturbing was Feinberg’s statement to Reuters that his three-year compensation deal with BP was verbal, not written. Doesn’t that mean it can be changed at any time to shift the pay incentives in BP’s favor? To see that BP ends up with some of the $20 billion back in its pocket?

The longer Feinberg lets his non-disclosure fester, the more it stinks like oil kill on a hot beach.  President Obama appointed Feinberg and should demand a written public contract for everything about BP’s payment to the Feinberg Rozen firm and its members. Otherwise, the BP fund is just another example of poorly considered outsourcing.

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