Crystal Seafood ordered to pay back over $1 million in BP oil spill settlement case

By Dawn Geske | May 24, 2017

NEW ORLEANS — A shrimp company and its owners have been ordered to pay back over $1 million that was awarded to them through the Deepwater Horizon Economic Claims Center (DHECC) as part of the BP settlement for the oil spill in the Gulf of Mexico that claimed 11 lives.

Taking their case to the U.S. Fifth Circuit Court of Appeals, Crystal Seafood Company Inc. has been denied a request to appeal the decision of a lower court that ruled that it is liable for the over $1million it was awarded in 2013 through the DHECC. The court also found that owners Victor and Christopher Tran are also liable for the money.

Crystal Seafood received a clawback order through the special master of the DHECC and the claims administrator that filed the motion in 2015. The special master of the DHECC was specifically set up by the district court to investigate fraudulent activity and claims as part the BP settlement.

The alleged validity of Crystal Seafood being a failed business at the time of the oil spill and in line with the settlement agreement terms came into question. The special master has alleged that Crystal Seafood committed fraud by swearing to its operational status at the time of the oil spill. 

According to court documents, Crystal Seafood processed the last of its shrimp approximately one year before the oil spill occurred in April or May 2009. The same decision also said Crystal Seafood sold the last of its frozen inventory of shrimp approximately three months before the oil spill occurred in August 2010.

In addition, the court records document that Crystal Seafood stopped taking a depreciation expense of its processing equipment the month of the oil spill in May 2010. Its tax returns cited that the company had disposed of all assets by Dec. 31, 2010.

The district court that first heard the case, as submitted by the DHECC, held that Crystal Seafood was a failed business at the time of the oil spill in 2010 based on this undisputed information. 

Crystal Seafood held that the court erred in its ruling, taking the case to the appeals court. The company argued that there was an error in its tax returns as it continues to own equipment that was listed as disposed of on its tax returns. The new information that Crystal Seafood claims came after it hired a new attorney to fight the clawback order. 

After review of the argument made by Crystal Seafood, the appeals court sided with the district court, finding the evidence that Crystal Seafood submitted as circumstantial, and that its owners were savvy enough to know or should have known that they had a failed business at the time they submitted their claims for the BP settlement award.

While the Trans were liable to pay back the settlement award, they did not file an appeal on their behalf, only that of Crystal Seafood. The appeals order did make mention that the court had erred in holding the Trans responsible for the payback settlement, but the appeals court ruled that “Crystal lacks standing to champion the rights of the Trans.”

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