Isikoff, Michael, Hirsh, Michael, Newsweek
Byline: Michael Isikoff and Michael Hirsh
How British oil giant BP used all the political muscle money can buy to fend off regulators and influence investigations into corporate neglect.
Tony Hayward, the CEO of BP, has a couple of major problems on his hands these days. One lies down near the earth's crust; the other exists deep in the muck of Washington politics. It may take many months to cap the 5,000-foot-deep oil gusher in the Gulf of Mexico. In the meantime, Hayward has to cap the damage to BP's reputation, and reduce its liability for what could be the costliest cleanup in corporate history. He was already hard at work last week, making the rounds of key senators from coastal states affected by the spill. Described as exhausted but wearing a "wry smile," Hayward impressed several lawmakers with his earnestness about stopping the leak. He also seemed intent on deflecting questions about responsibility. "He was candid on most of his answers," says Florida Sen. Bill Nelson. But when Hayward was pressed on how much BP will compensate businesses and fishermen harmed by the spill, Nelson says, "he dodged" and became "very lawyerly."
The Obama administration has promised to "keep the boot on the throat" of the giant British company, as White House Press Secretary Robert Gibbs put it. Others will be trying to do the same. In the coming months there will be lawsuits, hearings, and investigations galore on the spill and who's responsible for it, as well as heated debates over President Obama's offshore-drilling plans and new legislation, including a bill raising a $75 million ceiling on BP's liability for compensation to injured parties. But BP will seek to leverage every penny of the $15.9 million it spent on lobbying last year (its most ever) as it seeks to fend off allegations that the company and its contractors failed to abide by safety provisions for deepwater drilling. Most of all, it will try to contain the penalties it has to pay. If the past is any guide, BP will succeed at that. The story of the company's handling of other safety problems illustrates how easily high-powered lawyers and sheer corporate muscle can often overwhelm the best efforts of federal regulators. (A BP spokesman said the company "will honor all legitimate claims" stemming from the oil spill. The spokesman declined to comment on all other questions posed by NEWSWEEK.)
BP was once known as British Petroleum, but the company changed its name in 2000 to project a more environmentally friendly image, saying the initials stood for "Beyond Petroleum." Hayward deserves credit for improving on the legacy of former chairman John Browne, whose efforts in acquisition and cost cutting left serious questions about BP's safety and environmental policies. Part of Hayward's effort, however, was to increase the company's lobbying "exponentially" in Washington and to dilute new laws on the prevention of oil-spill pollution in 2009, says Dave Levinthal of the Center for Responsive Politics. At times BP has enlisted powerful Washington types like Leon Panetta (now CIA director), George Mitchell (now Obama's Middle East envoy), Christine Todd Whitman (the former EPA administrator), and Tom Daschle (the former majority leader) to serve on its various boards of advisers and "independent" panels. In his rounds on Capitol Hill last week, Hayward was escorted by a former aide to Ted Kennedy who now works for the Brunswick Group, a powerhouse public-relations firm recently hired by BP to help it deal with the oil-spill crisis.
The company's most recent effort at damage control--before the spill--occurred after a 2005 explosion at the company's Texas City refinery (the third-largest oil refinery in the country). That was among the most deadly disasters to befall the U.S. oil industry in modern times. The blasts and subsequent fires killed 15 workers, injured 180 others, and sent 43,000 people fleeing to indoor shelters. The Chemical Safety and Hazard Investigation Board later concluded that the explosions were caused by company deficiencies "at all levels of the BP Corporation"--including repeated cost cutting that affected maintenance and safety. …