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BP Business Economic Loss Claim Appeal 2017-676:SP Correctly Addressed Officer Compensation and Properly Treated Payroll Costs

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The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms

Claimant is a general commercial contractor in Huntsville, Alabama (Zone D). The Settlement Program awarded Claimant $ 1,731,580.37 pre-RTP ($2,173,197.46 post-RTP with accounting support).
BP appeals, asserting the Settlement Program committed two errors: (1) the failure to address or investigate a discrepancy between Claimant’s P and Ls and tax returns for officer compensation; and (2) the failure to properly treat payroll-related costs. BP requested this claim be remanded to the Settlement Program to determine Claimant’s actual health benefit costs for its officer/owners; or, alternatively, offered a Final Proposal of $0.
As to the first issue, BP argued that officer compensation recorded on Claimant’s P and Ls is higher than the amounts reported on Claimant’s tax returns, and the Settlement Program never asked about this discrepancy. Claimant responded that the Program did not fail to address the book-to-tax differences. The reviewer examined the differences, and, in his/her professional judgment and discretion, concluded that any variances would not have a material impact on the claim. Upon review of the record, the Panel agrees there was no indication of an abuse of the Program’s discretion.
As to the second issue, BP argues the Settlement Program erred in its treatment of payroll related costs, citing that only health benefits were attributed, and they varied significantly throughout the Benchmark and Compensation Periods. BP goes on to submit that the Settlement Program attributed these health benefit costs to officer/owners and to regular employees’ benefits on a pro rata basis which it claims was an error. BP believes the Settlement Program should have obtained the actual health benefit costs for officer/owners rather than estimating the amount. Further, BP argues that Claimant’s officer/owner structure did not vary significantly across the Benchmark and Compensation Periods, yet the Settlement Program’s attribution of health care costs did fluctuate widely. BP argues that, rather than applying the pro rata methodology used in this claim, the Settlement Program should have determined a consistent annual cost for health benefit costs for officer/owners and applied that annual estimate across the Benchmark and Compensation Periods.
Claimant argues to the contrary that it broke out the owner/officer portions of the payroll accounts, and the Program reviewer similarly broke out the 2008-2011 owner/officer portions of “Health Insurance” by removing the source values from the P and Ls and creating 2 adjustments that allocated the cost of “Health Insurance” between employees and owner/officers.
The Program did, indeed, examine the health benefits issue, and made adjustments that the reviewer deemed appropriate using professional judgment, including the allocation of the owner/officer portion of the health benefit costs. In conclusion, this Panel finds the Program thoroughly reviewed the claim and provided a
transparent calculation of the award which, under the baseball rules of this appeal, should be affirmed. Accordingly, the Panel selects the Claimant’s Final Proposal in the amount of $1,731,580.37 pre-RTP and denies the appeal of BP.

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