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LOUISIANA RECORD

Thursday, March 28, 2024

Ala. couple accused of filing fraudulent Deepwater Horizon claim can't repay $1.6 million

Oilspill

NEW ORLEANS – An Alabama couple is denying accusations that they defrauded the Deepwater Horizon claims program and insist they cannot repay $1.6 million awarded to them through the program because the money went to pay off a judgment against them. 

In March 2015, Special Master Louis Freeh ordered Barbara J. Stokes and Scott B. Stokes to pay back the money the couple was awarded from a Deepwater Horizon claim after it was discovered that they allegedly transferred loan funds from one business to another in an attempt to make it look like they had suffered financially because of the 2010 Gulf oil spill. Freeh is a former judge and the former director of the FBI.

Freeh found that the Stokes withheld the fact that bank deposits totaling $819,000 into a Vision Design account was from a loan received for a beach development the couple planned to call Summerplace, and not income. Vision Design was discovered to be a fictitious corporation based in Florida. In addition, Freeh found that the couple was intentionally deceitful in their claim, making it seem as though Vision Design’s income had shrunk to $5,700 as a result of the oil spill.

The Stokes allegedly submitted IRS income tax documents they had created to support their fraudulent claim. Altogether, the couple was awarded $2.1 million. As with many other Deepwater Horizon claims, investigators found no evidence that the tax documents provided had ever been filed with the IRS.

Following the fatal 2010 explosion of the Deepwater Horizon oil rig, BP quickly set up claims program to compensate victims affected by the explosion and subsequent oil spill.

“It’s a very unique class settlement,” Brent Coon, managing partner of Brent Coon & Associates recently told the Louisiana Record. “Our firm actually objected to it and took up an appeal on the settlement because it presented a lot of problems."

Coon said he thought the lack of structure with the class, more than anything, was concerning.

“The way it was set up was that for all the different categories of claims based on what kind of business you were in, who you worked for, what your tax ID numbers are and where you live, all of these were factors in determining whether or not you’re eligible for the class," he said. "And if you are eligible, how much compensation you get is going to be based on the documents in the claim, and it wasn’t really clear on how each of them were to be handled."

As a result of the way the compensation system was drafted, the process of determining eligibility relies solely on documents, Coon said.

“They don’t talk to the claimants, there’s no interview process, there’s no discovery process – it’s all pure documentary," he said. "So obviously it invited lots of problems, one of which is how do you interpret the documents? And it creates the possibility for people turning in their claims to change dates and numbers to their advantage. So because there isn’t a lot of scrutiny in that process it creates lots of problems on both sides."

The high number of Deepwater Horizon claims prompted BP to establish a hotline to reward people who came forward to report fraudulent claims. BP also appeared before a New Orleans court in 2013, arguing that the terms of the compensation agreement were leading many to file fraudulent claims.

“Normally what happens in a case is that all the records that support a person’s claim are subpoenaed by court reporters and provided to both sides so everyone has copies of the original documents, and they are provided directly from the keeper -- tax documents come from the IRS, and so on,” Coon explained.

The claims process was flawed from the beginning.

“In this case, it was set up in a way that no original documents were required and that invites some people to say, ‘Well, since they don’t subpoena the original records, I’ll just turn in whatever I want,' " Coon said. "And that’s what really precipitated this expansive abuse. If they had made that requirement, there would be a significantly higher degree of validation. It wasn’t done, which was a significant oversight."

Barbara Stokes vehemently denied the accusations in a letter to the court. Instead, she placed blame on attorney Dennis Reich, of Reich & Binstock, and the accounting firm he hired to help with the claim. Reich already has returned more than $500,000 he received in legal fees for representing the Stokes.

Before the Deepwater Horizon claim, court records show that the Stokes defaulted on the Summerplace loan, and an Alabama judge presiding over the loan default case ruled that the couple hid personal assets from plaintiffs using Vision Design.

The Deepwater Horizon explosion on April 20, 2010 killed 11 people, sent millions of gallons of oil gushing into the Gulf of Mexico for more than 85 days and devastated an untold number of businesses operating along the coast.

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