Large scale industrial accidents, such as the 2010 Gulf oil spill, and prolonged extreme corporate malfeasance, exemplified by the 2008 Bernard Madoff stock scandal, inflict widespread damage that may require complex social and legal mechanisms to repair. In such instances, the conflicting parties or the government may appoint a settlement administrator, giving the administrator the authority to make impartial legal and financial decisions that will settle the competing claims of all parties.
Exxon Valdez Settlement Administrator
In 1989, the Exxon Valdez ran aground in Alaska's Prince William Sound, spilling at least 11 million gallons of oil and severely damaging the environment. The court held Exxon primarily responsible and awarded $287 million in actual damages and $5 billion in punitive damages, later reduced to $2.5 billion. Exxon also spent about $2 billion cleaning up the spill. Because of the complexity and number of claims, the judge established the Exxon Qualified Settlement Fund to distribute the award and appointed plaintiff's attorney Lynn Lincoln Sarko as the fund's administrator.
In the years following the spill, Sarko oversaw an effort by about 10,000 workers that necessitated innovative treatment methods to clean up over a thousand miles of shoreline, save wildlife and restore wildlife habitat. His administration handled, and in many instances is still handling, the conflicting claims of state and territorial administrations, public corporations, Alaskan tribal councils and individual citizens. As of May, 2011, disputes continue over both the overall amount of the award and its distribution to the various parties.
Enron began in 1985 as a wholesaler of natural gas. In 1996,when energy markets underwent deregulation, Enron quickly became a commodities trading firm, selling energy futures. As it expanded, it entered other industries and began similarly complex futures trading in these businesses as well. Its gross doubled or tripled every couple of years until it outgrew its capacity to fund its own expansion. It began leveraging debt until the indebtedness grew troublesome to its business partners. At that point, with the help of its accountants, it moved nearly a billion dollars worth of debt "off book," hidden from the government and its own stockholders. In 2001, Enron collapsed, destroying $60 billion of equity and the Arthur Anderson Company, Enron’s accountants, leaving behind an incriminating trail of illegal maneuvers by its executives as the need to fake Enron's solvency grew more acute.
Enron Settlement Administrator
Following a series of criminal and civil suits, the presiding judge appointed Gilardi and Company to administer the various Enron settlements. The injured parties ranged from CalPers, a large pension fund, through the University of California, waste management companies in New England, the retirement funds of various companies that Enron absorbed as it grew, and thousands of private investors. The diversity of the claimants and the very different underpinnings of their claims made settlement particularly difficult. After partial settlements with some claimants in 2004 through 2006, many claims remained. More checks went out in 2009, with former employees still waiting for disposition of retirement and severance claims. The administrator disbursed another $100 million to creditors in 2011. Like the Exxon Valdez settlement, the Enron settlement may take decades.