NEW ORLEANS – An Alabama couple faces the forfeiture of their $2.1 million Deepwater Horizon damage settlement claim after court officials accused them of characterizing loan proceeds as income in an effort to increase their award amount.
Barbara J. Stokes and Scott B. Stokes, of Huntsville, Ala. are the latest to come into the crosshairs of Louis Freeh, special master in the BP oil spill case, and Patrick Juneau, who oversees the settlement fund. Court officials have accused the couple of engineering a complex scheme to drastically increase their 2009 pre-spill income and drop their 2010 income to $5,700 in an effort to show a drastic falloff in post-spill revenue in order to defraud the Deepwater settlement program.
Freeh, a former director of the FBI, was brought in to root out fraud in the Deepwater Horizon claims center in July 2013 and appears to have recently stepped up his efforts. In the past week alone, he has filed three clawback demands from claimants accused of fraud.
The motion appears to be the first clawback filed against a Business Economic Loss (BEL) claimant, which make up the bulk of the settlement class. BP has long complained that BEL claims were not receiving enough scrutiny to determine if they were fraudulent.
Freeh alleges the Stokeses set up a sham corporation in Florida called Vision Design to defraud the Deepwater settlement fund and purposefully withheld the true nature of a series of bank deposits in order to make it look as if the company had netted $819,708 in profits in 2009.
In his report, Freeh said Vision Design's “profits” were mainly attributable to a $773,000 construction loan the Stokeses had secured to build a beach development called Summerplace in the Florida Panhandle. Freeh added that the balance of the $819,000 was made up mostly by depositing checks from another business controlled by the Stokeses into the Vision Design accounts.
Freeh said the couple completed the fraud by creating IRS income tax documents solely for the purpose of filing a Deepwater Horizon claim. As has been the case with several other Deepwater Horizon-related settlements, investigators could not find any evidence that the tax documents had actually been filed with the IRS.
In fact, Freeh said that prior to the claim being filed, the State of Florida had dissolved Vision Design and disallowed it from doing business for failure to file annual reports with the Florida Department of State from 2008 to 2010.
“Stokes and her husband, as the sole members of Vision Design, should be held liable personally for the fraudulent payment made to Vision Design by the [Deepwater settlement fund],” Freeh said in his court brief. “Based on their conduct, Stokes and her husband are not entitled to the legal protection normally available to a legitimate corporate entity.’”
In a separate case cited by Freeh, a federal judge in Alabama ruled the Stokeses used Vision Design as a vehicle for hiding personal assets from plaintiffs involved in a loan default case. According to records filed by Freeh, the couple also defaulted on the Summerplace loan.
The Houston-based law firm Reich & Binstock ended its representation of the Stokeses this week and agreed to return legal fees paid for handling their claim.