Texas Business Report: BP to Shell Out $4.5B to the Feds
The energy giant agreed to pay the Department of Justice and the SEC the hefty sum to settle the criminal cases associated with the Deepwater Horizon oil spill.
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The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Tex
After years of legal proceedings, BP agreed Thursday to pay the Department of Justice and the Securities and Exchange Commission $4.5 billion to settle criminal cases associated with its role in the Deepwater Horizon oil spill. According to StateImpact Texas, “BP also agreed to plead guilty to 11 felony counts related to the 11 workers killed in the disaster, two misdemeanors, and one additional felony count for obstruction of Congress.”
In the next five years, $2.3 billion of the company’s money will go to the National Fish and Wildlife Foundation, $350 million will go to the National Academy of Sciences, and the DOJ and SEC will oversee the remainder, StateImpact reports.
The Bottom Line: While this week’s settlement resolves the criminal complaints against BP, the energy giant must still deal with civil claims from private citizens and states along the Gulf coast. In a statement, the company said, “BP will continue to vigorously defend itself against all remaining civil claims and to contest allegations of gross negligence in those cases.”
The Hostess with the Least-est
Twinkies may be able to withstand nuclear warfare, but it appears they are no match for a striking bakers union. Irving-based Hostess Brands, which has been fighting to stay financially afloat for more than a year, said on Friday that it will immediately and permanently shut down all operations, CNN Money reports. The decision comes after the company’s bakers went on strike over recent contract changes.
According to CNN, “the closing will result in Hostess’ nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide, as well as 570 outlet stores.”
The Bottom Line: Although stores will receive no more deliveries of the sugar-packed confection, there remains hope that Twinkies may someday return. Pending approval from a federal bankruptcy court, Hostess plans to auction off its assets to the highest bidder, who could ultimately decide whether to resume production on some of the company’s products. According to CNN, Hostess has notified vendors that it expects “great interest in our brands.”
Health Hath No Perry
Even with a four-week extension of the deadline for states to choose whether to implement their own health insurance exchanges, Governor Rick Perry says he’ll have the same answer a month from now that he does today: “No.” According to the Texas Tribune, that decision would mean “the federal government will have to roll out a program for Texas instead” by 2014, as stipulated in the Affordable Care Act, also known as Obamacare.
The online insurance exchanges would serve as a single marketplace for consumers to compare health coverage options side by side, as well as a starting point for requesting assistance with payments. So far seventeen states have agreed to establish their own systems.
The Bottom Line: Perry, like many Republicans, objects to the exchange program because it “will dictate the rules states must follow,” a spokeswoman told the Tribune, adding that “Texas will not be a subcontractor to Obamacare.” Undeterred, Democratic state representative Garnet Coleman met with Obama staffers in Washington this week in support of the program. Weighing in on Perry’s decision to opt out, Coleman said, “Guess what? One monkey don’t stop no show.”
Winner of the Week: Formula One Opportunists
As Austin’s inaugural Formula One race revs up this weekend, several local enterprises are in line to cash in on the expected $200 million bump in the Texas economy. The Austin Convention and Visitors Bureau estimates “the average spending per F1 visitor to be 30 to 50 percent higher than Austin’s typical guest,” according to the Austin American-Statesman.
Helicopter charter companies are perhaps the outfits generating the most buzz, charging more than $500 per person for a ten-minute round-trip flight to the track and about $1,500 per person for weekend packages, the Texas Tribune reports. Hotels are also reaping the benefits of having roughly 200,000 people in town to attend F1 events this weekend, thanks to vast room rate increases and an occupancy rate of more than 95 percent.
Losers of the Week: Dell Inside Traders
Round Rock-based Dell is again caught up in a federal insider-trading case against two Wall Street executives accused of using illegal tips to trade the company’s shares in 2008. In testimony that began this week, former analysts told jurors they “got illicit tips on Dell and Nvidia Corp. from friends who worked at the technology companies” and then passed the information to their bosses at Diamondback Capital Management LLC and Level Global Investors LP, Businessweek reports. Prosecutors claim the portfolio managers then used the tips to net more than $57 million in ill-gotten earnings.
A former Dell employee is cooperating with the government in the case after pleading guilty to charges that he received inside financial information from an executive at the company’s Texas headquarters and sent it to his analyst friends.