(Bloomberg) — After fighting for more than two years to avoid paying almost $1 billion in oil spill damages to Gulf Coast shrimpers, oystermen and seafood processors it claimed didn’t exist, BP Plc has thrown in the towel.

Oil from the Deepwater Horizon spill in the Gulf of Mexico. U.S. Coast Guard photo.“We have withdrawn our claims seeking an injunction against payments by the Seafood Program so the program can be concluded,” Geoff Morrell, a BP spokesman, said in an e-mail Tuesday. The company will keep pursuing fraud claims against lawyer Mikal Watts and his firm, Morrell said. Watts was indicted for allegedly making false claims in connection with the BP spill.

A federal judge in New Orleans Monday allowed BP to drop its bid to avoid paying the second half of $2.3 billion in compensation promised to seafood interests harmed by the blown-out well. The subsea gusher pumped more than 4 million barrels of crude into the Gulf of Mexico in 2010, closing fisheries and blackening the shores of five states.

BP claimed lawyers negotiating on behalf of the seafood industry fraudulently inflated the number of Southeast Asian immigrant fishermen and boat hands claiming damages from the spill. The overstatement jacked up BP’s settlement by hundreds of millions of dollars, the company said.

BP had paid out about $1 billion of the seafood fund when it balked at paying the remainder after discovering irregularities in a law firm’s client list. The seafood payout is a separate earmark within BP’s larger settlement of all spill-related economic and property damage claims, which the company said in an April 26 earnings statement will now cost “significantly” more than $12.9 billion.

Watts Indicted

Watts, a Texas attorney, was indicted last year for allegedly lying about representing more than 40,000 mostly Vietnamese American boat captains and crew members in spill claims against BP. He was appointed to a lucrative seat on the lawyers’ steering committee largely on the strength of his client roster, which BP and federal prosecutors claim was riddled with fake names and Social Security numbers, dead people and even a dog.

Watts is set to face trial in Mississippi in July.

BP held onto its civil fraud claims against Watts and his San Antonio law firm, while dropping the rest of the fight against the seafood industry payout, according to court records. Tammy Tran, a spokeswoman and attorney for many in the Gulf Coast Vietnamese community, has submitted in a separate fraud lawsuit against Watts what she said is proof that most of the Vietnamese fishermen and women on the disputed client roster are real people with real claims against BP.

The court order doesn’t specify how quickly BP would pay the balance of the seafood fund.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 10-md-02179, U.S. District Court, Eastern District of Louisiana (New Orleans).

A collection of stories from guest authors.

Join the Conversation