Indictment: lawyer's inflated claims list also inflated BP's $2.3M seafood settlement

GULFPORT, Miss. – A Texas lawyer, his brother and a second employee of his law firm are among seven people accused of faking more than 40,000 damage claims after the BP oil spill in 2010, federal prosecutors said Thursday.

Mikal Watts’ inflated numbers prompted BP PLC to agree to pay $2.3 billion to shrimpers, fishermen and others who lost money in the seafood business because of the oil spill, and “fraudulently increased the settlement amount and inflated the amount of compensation” due to legitimate plaintiffs, the 56-page indictment alleged.

Watts also used the numbers to win a seat on the committee of lawyers that negotiated the multibillion-dollar settlement with BP in 2012, making him eligible for “money over and above any money he might make on attorney fees,” the indictment said. Watts resigned from the steering committee during the federal investigation.

BP made similar allegations in a lawsuit filed in 2013 against Watts and his San Antonio law firm. That suit has been on hold pending the criminal investigation.

Watts’ attorney, Robert McDuff, said the indictment “recycles” BP’s claims, but U.S. Attorney Gregory Davis said the federal investigation began in 2011.

A purported deckhand named in one $45,930 claim was actually a dog, and $183,720 in claims were made under the names of four people who died before the Deepwater Horizon drilling rig exploded in flames on April 20, 2010, according to the indictment.

Although they claimed to represent more than 41,000 clients, Watts, his brother David Watts and mass torts co-ordinator Wynter Lee, all of San Antonio, actually filed claims for only 786, and only four were found eligible, the indictment said.

They and Hector Eloy Guerra of Harlingen, Texas, and Thi Houang Nguyen of Grand Bay, Alabama, pleaded not guilty Thursday. Federal public defender John Weber III said after the arraignment that his client, Nguyen’s sister-in-law Thi Houng Le, of Pascagoula, Mississippi, will do so later.

Federal investigators haven’t been able to locate the seventh, Gregory Warren of Lafayette, Louisiana, Assistant U.S. Attorney John Dowdy said outside of court.

Watts paid Warren and Le, owners of K&G Consulting LLC in Pascagoula, Mississippi, more than $10 million through another attorney to get names and identities “to be used as clients” in suits against BP PLC and others, according to the indictment.

It charges each defendant with 95 counts of conspiracy, mail and wire fraud, identity theft and aggravated identity theft. With that many charges, maximum penalties add up to $23.7 million in fines and 709 years in prison.

Anyone found guilty would also forfeit illegal gains, U.S. Magistrate Judge John Gargiulo told those in court Thursday.

According to the indictment, two other Texas attorneys paid Mikal Watts’ law firm nearly $11 million for shares in his “seafood docket” of claims brought by deckhands on commercial fishing boats. The indictment also notes luxury cars bought by Warren.

The attorneys and 41 alleged victims were identified only by numbers. The indictment said the victims were from Louisiana, Mississippi, Florida, Alabama and Texas, but did not say where the attorneys live.

Gargiulo scheduled trial for Dec. 7.

“Obviously, fraud was committed somewhere down the line by others,” but Mikal Watts and his employees are innocent, McDuff said in a statement released after the indictment was unsealed.