Feinberg's 9/11 formula gives clues to how he'll craft GM payouts

NEW YORK (Bloomberg) -- Ken Feinberg gained prominence compensating victims after the Sept. 11 terrorist attacks and the BP Plc oil spill, developing methods that show he's likely to be a tough negotiator in deciding how much money people get for injuries they had in defective General Motors cars.

The automaker, which has recalled 2.59 million cars to fix ignition switches, formally named Feinberg on Thursday to run a program to compensate accident victims.

At least 13 people died in accidents related to the fault, GM has said. GM hasn't said how much it plans to set aside to pay all accident victims and Feinberg said he'll discuss preliminary compensation ideas with the company and lawyers over the next few weeks.

His record in handling previous compensation cases, which also included the Boston Marathon bombing and shootings at Virginia Tech in 2007 and a movie theater in Aurora, Colorado, in 2012, demonstrated his core principles.

"This is trying to take a limited pot of money, distribute it as soon as you can, as quickly as you can to eligible people in sore need," Feinberg told the Associated Press when he took the Aurora case.

He declined to be interviewed for this article, saying he had to report to GM first.

Feinberg, who cited U.S. District Judge Jack Weinstein as his mentor, has said the key to a good compensation program is to invite people in and listen to their woes, establish the facts and be creative and pushy in getting a deal.

He said he favors handing out payments by categorizing victims rather than dealing with individual cases or paying a fixed sum.

Unrealistic deadline

In the BP case, Feinberg dealt with classes of claims ranging from families of those killed when an oil rig exploded in the Gulf of Mexico to shrimp fishermen who lost business.

He said his mistake was failing to realize how much time people needed to provide documentation to collect damages and he gave them an unrealistic deadline.

"That set me back on my heels," he told Charlie Rose in a June 2012 television interview.

Feinberg was accused by the Justice Department of trying to save BP money when the U.K. oil company paid his law firm as much as $1.3 million a month to run its compensation fund.

The Macondo well blowout killed 11 people, shut down fisheries and despoiled beaches and resorts.

Feinberg's role at GM may be more akin to his record at BP than to the one he played with 9/11 victims, said lawyer Joe Rice, who was a lead negotiator on two settlements with BP, including one of the largest U.S. class action accords ever.

Lowest price

"Hiring Feinberg makes it appear that they're trying to be the best possible corporate citizen," Rice said of GM. "History says that he's there to give GM a full and proper release from lawsuits at the lowest possible price."

Kevin Kelly, a spokesman for GM, declined to comment on Rice's statement.

U.S. Senator Richard Blumenthal has urged GM CEO Mary Barra to set up a compensation fund of as much as $8 billion for drivers of faulty Cobalts and Ions.

Barclays analyst Brian Johnson estimated in March that GM might set aside $3 billion.

Working for GM, Feinberg will face different demands, from victims seeking the cost of lifetime care to families seeking compensation for loss of income from a wage earner who was killed. People who accept payments generally must give up the right to sue for further damages.

Imperfect solutions

"One size rarely fits all," Feinberg, founder of Washington-based Feinberg Rozen, said in a July 5, 2004, op-ed published in the Los Angeles Times, reflecting on the distribution of $7 billion to 9/11 victims. "Perhaps the best solution -- however imperfect -- would have been a series of tiered payments."

He used such a system for victims of the Boston Marathon bombing, paying people based on the severity of injuries and time spent in hospital, with victims spending one or two nights receiving $125,000 to those who spent more than 32 nights getting $948,000, according to a city website.

Those who were double amputees or had permanent brain damage were paid $2.2 million. Feinberg outlined his methods in his 2006 book "What is a Life Worth": provide consistency and transparency, and narrow the gap between high-end and low-end awards.

He expanded on his thoughts about compensation programs in the 2012 book "Who Gets What."

$35 million fine

GM agreed last month to pay a record $35 million fine as part of the U.S. Transportation Department's probe into how the company handled the recall, which is the subject of investigations by Congress and the Justice Department.

Feinberg said he'll accept claims beginning Aug. 1 arising from accidents related to the defective ignition switches before and after GM's 2009 bankruptcy.

Feinberg, hired by GM on April 1 to advise on how it might help customers, said he will spend the next few weeks exploring terms and conditions for a compensation program.

"I have already drafted some preliminary compensation ideas and plan to share them in confidence over the next few weeks with lawyers, public interest groups, GM and others interested in the compensation program," Feinberg said in a statement Thursday.

Speaking with Morley Safer on CBS in 2010, Feinberg laid out the pros of settling, not suing. You are offered payment for losses upfront instead of fighting long, expensive and uncertain lawsuits, he said.

"If you don't like what we're paying you, if you think we're nickel and diming you, if you think we're not being fair, opt out and go the other route," Feinberg said. In 9/11, "only 94 people out of 3,000 decided to litigate."