SCHUMER, WYDEN, BEGICH BLAST BP PLAN TO GIVE BACKDOOR $2.6B PAYMENT TO SHAREHOLDERS THROUGH ESCROW ACCOUNT—SENATORS SAY COMPANY MUST FIRST SET ASIDE BILLIONS TO COVER DAMAGES FROM GULF DISASTER BEFORE MAKING ANY PLANS FOR DIVIDEND
BP Reportedly Considering a Plan to Put Shareholder Dividend in Escrow Account for Later Payout; Decision Has Potential To Drain Funds Needed for Claims Stemming From Gulf Disaster In Letter To BP CEO, Senators Press BP To First Agree To Deposit Adequate Funds To Cover Damages Into Account That Can Be Administered By Independent Handler Senators: No Money Should be Set Aside for Shareholders Until Total Costs of Damage and Claims Are Known and BP Proves It Has the Funds to Meet All Liabiliti
WASHINGTON, DC—U.S. Senators Charles E. Schumer (D-NY), Ron Wyden (D-OR) and Mark Begich (D-AK) today called on oil giant BP to abandon its reported plans to set aside billions for a shareholder dividend until it first commits to setting up an escrow account that would cover the company’s liabilities from the oil spill disaster in Gulf of Mexico.
The board of London-based BP met yesterday to discuss how to deal with the quarterly dividend, estimated at $2.6 billion, that the company is due to pay to shareholders this summer. The planned payment first came under fire from Schumer and Wyden, who wrote to BP CEO Tony Hayward on June 2 urging that the company shelve any payment to shareholders until the cost of the oil spill was fully calculated and sufficient reserves are set aside to meet the costs. In the face of such demands, BP’s board is, according to published reports based on officials close to the company, considering plans to set up an escrow account in order to pay a dividend in the future.
But in a new letter sent today to Hayward, the three senators said that no money should be set aside for a shareholder dividend until the company first establishes a fund to cover damages from the oil crisis. Begich first proposed requiring the setup of such a fund last week. And in a live address to the nation tonight from the White House, President Obama is set to announce plans to compel the company to set up such an account if it does not agree to do so voluntarily.
“In a meeting yesterday, the board of BP reportedly considered a plan to deposit the full amount of the dividend into an escrow account controlled by BP in order to assure company shareholders that the dividend will be paid in the near future. We find this option as unacceptable as the company’s original plan to go ahead with its dividend payment as scheduled. A backdoor payment to shareholders would still drain BP of billions of dollars that may be needed to pay for spill-related damages. This proposal seems like little more than a thinly veined attempt to spare BP a public backlash while proceeding with business as usual,” the senators wrote.
“We are aware of BP’s insistence that it has sufficient resources to both continue paying dividends and do right by the victims of the spill, but since the full magnitude of those costs remains unknown, those impacted by the Gulf crisis cannot afford to accept such promises on blind faith. Until the company demonstrates that adequate funds have been set aside to meet its obligations related to the spill, the company should not be transferring funds from its reserves for any other purpose; this includes the company’s quarterly dividend payment, even if it is in suspended form,” the senators added.
A copy of the senators’ letter appears below.
Dr. Tony Hayward
Group Chief Executive
British Petroleum Plc
International Headquarters
1 St James's Square
London, SW1Y 4PD
United Kingdom
June 15, 2010
Dear Mr. Hayward,
We write to you out of deep concern that BP may again be nearing a decision to put its concern over its short-term stock price ahead of its obligation to those victimized by the ecological disaster in the Gulf of Mexico.
As you know, in our letter to you on June 2, we expressed concern about media reports indicating that BP planned to go forward with a scheduled dividend payment, estimated at around $2.6 billion, even though the total costs of the disaster have yet to be calculated. In the two weeks since, we have been heartened to learn that BP is exploring alternatives to paying out its quarterly dividend in full and on schedule this summer.
But we are troubled by one of the contingency scenarios the company is apparently contemplating. In a meeting yesterday, the board of BP reportedly considered a plan to deposit the full amount of the dividend into an escrow account, controlled by BP, in order to assure company shareholders that the dividend will be paid in the near future. We find this option as unacceptable as the company’s original plan to go ahead with its dividend payment as scheduled. A backdoor payment to shareholders would still drain BP of billions of dollars that may be needed to pay for spill-related damages. This proposal seems like little more than a thinly veiled attempt to spare BP a public backlash while proceeding with business as usual.
We believe BP has an obligation to refrain from setting aside any funds for a dividend payment until the amount of the damages related to the oil spill can be estimated and the company has established an escrow account to cover those costs. President Obama has called for just such an account to be established, but to date, BP has not agreed to the proposal. We are aware of BP’s insistence that it has sufficient resources to both continue paying dividends and do right by the victims of the spill, but since the full magnitude of those costs remains unknown, those impacted by the Gulf crisis cannot afford to accept such promises on blind faith. Until the company demonstrates that adequate funds have been set aside to meet its obligations related to the spill, the company should not be transferring funds from its reserves for any other purpose; this includes the company’s quarterly dividend payment, even if it is in suspended form.
President Obama is expected to announce plans to compel BP to form an escrow account to cover damages if it does not so voluntary. We hope it does not come to this, but we would support such an effort to compel BP’s compliance if necessary. We are certainly not opposed to BP paying dividends after the well is capped, clean-up has been completed, and the victims have been justly compensated. But the families of those who have perished in this disaster, the industries that have been devastated from the ecological damage along the coasts, and the individuals who are sacrificing their health and safety to stem the damage deserve to know that BP will fulfill its obligations to them before its shareholders.
Sincerely,
U.S. Senator Charles E. Schumer
U.S. Senator Ron Wyden
U.S. Senator Mark Begich
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