NEW ORLEANS — Kenneth Feinberg — the attorney overseeing a $20 billion fund set up to compensate victims of the BP oil spill in the Gulf of Mexico — received three standing ovations Sunday when he addressed Realtors at their annual convention.
Realtors and association executives rose to their feet and unleashed a spontaneous round of applause when Feinberg walked into a meeting room at the Ernest N. Morial Convention Center, a few minutes late.
Feinberg got another standing ovation when he finished briefing the group on the progress the Gulf Coast Claims Facility, as the third-party administrator of the relief fund is known, has made in distributing funds set aside by oil giant BP.
After a short Q-and-A session, Feinberg said he had to leave for another meeting he expected would be more contentious. Realtors rose to their feet again and sent him on his way in another round of applause.
It was an emotional demonstration of the gratitude Gulf Coast Realtors have for Feinberg’s decision — against his initial judgment, he said — to carve $60 million out of the $20 billion relief fund for real estate licensees, allowing Realtor associations in five Gulf states to play the lead role in distributing those funds.
Feinberg said he’d welcomed the opportunity to attend the National Association of Realtors’ annual convention, not to bask in applause but to thank Realtors for helping create a novel system that could serve as a model for the future.
"I’ve had challenges and aggravations you wouldn’t believe," he said of the nearly $2 billion the Gulf Coast Claims Facility has distributed so far. Nearly 300,000 claims have been received so far from 30 states, half of which are "totally undocumented," he said.
But with the $60 million set aside for real estate licensees that’s being distributed by Realtors, that’s not been an issue, he said.
"We’ve created an interesting model," he said, in which state and local Realtor associations use their knowledge about local markets to receive claims, determine eligibility, and calculate losses.
"All I want is to make sure, before you make any payment, that you run it past me, so we can double check for fraud or double payments," Feinberg said.
Eligibility is based on proximity to the coast, and proof of loss of commission or income as a result of the oil spill. The Realtor associations have hired a third-party firm, National Catastrophe Adjusters, to process claims.
"It’s worked, (and) it continues to work," Feinberg said, calling the system "a model program I will point to time and time again."
Feinberg — who’s also administered funds set up to compensate victims of the 9/11 attacks and the Virginia Tech massacre — said there is never enough money and there is never complete satisfaction.
But, he said, "If there was ever an organization that was designed to help its members, and willing to step up and take the heat, that lived up to its reputation in saying what it would do, it is you guys."
Feinberg said he has received complaints from real estate licensees whose claims were denied. Some said they were not treated fairly because they were not members of a Realtor association.
He said he’d asked for reviews of those cases, and explanations have been provided.
"I’m not second-guessing what you’ve done," he said. "You have people in the field, on the ground, examining these claims."
It was a "huge leap of faith on my part and GCCF" to put Realtor associations in charge of administering the $60 million set aside for real estate licensees, he said, and "my trust in you has been vindicated 1,000 percent."
Feinberg said he was initially "dubious" about opening up the relief fund to Realtors "in an unlimited way." In his view, Realtors who claimed to have lost business after the spill would not be able to prevail in court.
But after meeting with Realtor associations and brokers, and engaging in talks coordinated by NAR CEO Dale Stinton, Feinberg said he "walked out on a limb" and decided that even though Realtors’ claims might not prevail in court, they had suffered real damages.
Feinberg decided to carve out $60 million for real estate professionals and let Realtor associations in five states — Texas, Louisiana, Mississippi, Alabama, and Florida — distribute the funds.
Association executives shared their recollections of those discussions with Feinberg.
"When you (first) came to the coast, many times, you said, ‘You still have your property, you still have your money, nobody was hurt,’ " recalled Tonyy Jones, president of the Mississippi Association of Realtors. "But with the united voice of Realtors, and some heat through the press, you saw it. You got it. And we can’t thank you enough … for doing something a little outside of the box when it was needed."
Keith Kelley, president of hte Alabama Association of Realtors, recalled that during his first meeting with Feinberg, "Neither of us would have gotten congeniality awards."
The conversaion was "very open, very blunt," Kelley recalled. "You kept your mind open, and said, ‘Bring me evidence that shows what you’re talking about.’ "
Kelley said Feinberg’s decision to set aside money for Realtors and let associations distribute it expedited the process, which was especially important for some members who were receiving medical treatment.
Feinberg acknowledged that some Realtors will have larger claims than the system was set up to handle. The $60 million fund was intended to cover emergency claims, and a $12,000 cap on payouts won’t cover what many will claim are their actual damages.
Realtors who receive payments from the emergency fund don’t relinquish their right to go to court to attempt to collect additional damages, he said.
He said the GCCF has reserves it may be able to allocate to states whose Realtor emergency funds are depleted. After Nov. 23, all Realtor claims for emergency funds must be submitted to the GCCF, rather than local associations.
"If somebody wants to apply, I’ll take a look at it," Feinberg said. "I’m certainly very dubious, as you know."
Chances are, he said, the GCCF will forward claims submitted after Nov. 23 to Realtor associations. If the claims are valid, "if we need to get you more money (to pay them), we will."
Another problem is that the money administered by GCCF is only intended to compensate for effects of the oil spill itself — not the moratorium on new drilling put in place after the Deepwater Horizon tragedy. Realtors say home sales in Louisiana — a state whose economy is heavily dependent on the offshore oil industry — were deeply impacted by the moratorium.
"Most of the Louisiana Realtor claims involve not the spill, but the consequences of the moratorium," Feinberg said. "There is nothing I can do about those," although he hopes BP will establish a separate fund for those claims.