Verret Debates BP Oil Dividend Issue in NY Times
Professor J. W. Verret was one of seven experts participating in a New York Times op-ed debate on the Justice Department's proposal to consider legal action against British Petroleum (BP) for the Gulf of Mexico oil spill by blocking the company's issuance of dividends to its shareholders.
The Department of Justice proposes to take such action in an effort to ensure that BP covers all the costs of the oil spill. The company's second quarter payout is expected to be in the range of $2.6 billion. Over the past year, the company's dividends provided for approximately 12% of total dividends by British companies.
In answer to the question,"Can the U.S. Punish BP's Shareholders?" Verret argues that there are no legal grounds for the Justice Department to seek an injunction prohibiting BP's issuance of a dividend.
"BP has sufficient cushion to pay for its expected clean-up costs even if they are greater than expected," says Verret. "In the absence of a bankruptcy threat, the company has the authority to issue dividends. If the dividend is halted, everyday citizens who hold shares through their pensions will be harmed. But harm stretches even beyond that group."
"The Founding Fathers were mindful of politically motivated prosecutions by the English Crown," Verret explains. "That concern was the primary impetus for the Constitutional protections of the Bill of Rights. The decision under consideration by the Justice Department undermines its integrity and threatens the rule of law."
Can the U.S. Punish BP's Shareholders? The New York Times, June 10, 2010. By J.W. Verret.
"We make judges, lawyers and litigants follow established rules because we don’t trust any one person or institution with too much power. The minute we set those protections aside for one case against a defendant whom we all dislike, we set aside the procedures that protect our rights as well. But this decision should come as no surprise. The Obama administration also casually ignored the rule of law in its management of the financial bailout.
"Even if BP’s dividend decision is a bad idea, it is not the Justice Department’s call to make. The timing of this development, when the BP disaster has brought the president’s poll numbers to an all-time low, indicates that the independence of the Justice Department may be at risk."