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BP Business Economic Loss Claim Appeal 2017-768: SP Properly Adjusted Financials and Correctly Applied BEL, Not Construction, Methodology

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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


BP appeals a BEL award of $1,679,250.00 pre-RTP to a commercial contractor in Hattiesburg, Mississippi (Zone D). The program accountant made a number of adjustments before submitting the financials to matching criteria. After none of the criteria was triggered, the claim proceeded under the general BEL methodology. On appeal, BP complains that the accounting vendor should nevertheless have applied the Construction Methodology. BP also argues that the accountant should have applied percentage of completion adjustments. Finding no error, we affirm.
The essence of BP’s contention is that Claimant’s P&Ls contained significant indicia that the financial data may not be sufficiently matched. BP points to a negative variable profit percentage in two months as well as swings in variable margin percentage that came close to triggering criteria 6. BP sees error in the program accountant’s determination that the financials were sufficiently matched and required no further adjustments. BP seeks remand accompanied by a Final Proposal of $0.
Claimant argues that the accounting vendor engaged in a proper exercise of his professional judgment, bolstered by the failure of the P&Ls to trigger any of the Policy 495 criteria. Thus, by definition, the financials were deemed to be sufficiently matched according to the Claimant. Claimant also suggests that BP is merely substituting its professional judgment for that of the accounting vendor and cites appeal panel decisions upholding the exercise of the accountant’s professional judgment.
Following de novo review, we find no basis for second guessing the program accountant’s approach in this case. The fact that the P&Ls triggered no matching criteria is a sufficient basis, in itself, to justify the accountant in deeming the financials sufficiently matched. In addition, the Calculation Notes reflect that the program accountant made 10 adjustments for revenue variances, bonuses, life insurance, payroll taxes and benefits. The majority of these adjustments served to further smooth the revenue and variable expenses.
Policy 495, by its terms, provides that claims that do not trigger one of the 7 criteria are presumed to be sufficiently matched. If there are other significant indicia that the financials are not sufficiently matched, the accounting vendors are afforded the exercise of professional judgment to make further adjustments in order to achieve sufficient matching. Contrary to BP’s argument, the professional accounting staff did more than merely accept the absence of triggered criteria to be sufficient, as demonstrated by the adjustments noted above. Under the dictates of Policy 495, no reasonable accountant, in the exercise of professional judgment, was required to do more.
BP also argues that the program accountant should have applied percentage of completion adjustments to account for variances between Claimant’s tax returns and P&Ls. BP contends that the lack of such adjustments artificially inflated the award. Again, the Calculation Notes demonstrate that the accountant was aware of these variances and made appropriate inquiry:
The Claimant provided a tax to book reconciliation for fiscal years XXXXX.
The DWH Accountant noted from the provided reconciliation, that the tax to
book gross receipt variances for fiscal years 2007-2012, were due to adjustments
to revenues for uncompleted contracts for tax purposes. The DWH accountant
determined the tax to book gross receipt variance for tax return year 2011 to be
insignificant as any adjustment to reflect revenue per the tax return would not affect
causation. The DWH Accountant noted from the provided tax to book gross
receipt and net income reconciliation for fiscal years 2007-2012 that the tax to book
net income variances for fiscal years 2011 and 2012 were due primarily to the sale of
an asset recorded on the tax returns and not on the P&Ls. As this has no impact on the
compensation calculation, the DWH Accountant deemed no further outreach necessary.
We agree with the accountant that these variances are de minimis because they do not affect the causation calculation. This assignment of error is likewise without merit. For the foregoing reasons, we find that the Settlement Program’s accounting vendor properly vetted and correctly applied Policy 495 in this claim. No error or misapplication of the Claims Administrator’s policy has been demonstrated. Accordingly, BP’s appeal is denied and the Claimant’s Final Proposal is selected.

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