BP Is the Real Winner From the Escrow Fund Deal

By Rojodee

It seems like a miracle that our anointed leader was able to convince BP to establish a $20 billion slush escrow fund to compensate those hurt by the ongoing oil plume in the Gulf of Mexico. After all, he had no constitutional power to force them to do so; so had to resort to Chicago-style arm twisting.

But, let us take a closer look at the effect on BP’s finances:

1. BP will establish a $20 billion fund, but will pay only $7 billion into it during 2010.

2. BP is a British corporation, but has a very large operating entity in the US.

3. By Generally Accepted Accounting Principles (GAP), BP must book the entire $20 billion expense in the year accrued, i.e., year the liability is incurred. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.

4. Our anointed leader also convinced this massive corporation to show their concern for the “small people” by withholding dividends to their shareholders for the last 3 quarters of 2010. This reduces their outward cash flow by about $7.5 billion, including approximately 40% of that amount to US citizens. Assuming that the Bush tax cuts will survive through 2010, the US Treasury will lose another $450 million in taxes on that amount. We won’t even discuss the effect on the US economy.

Let us put the results into a table easily understood by the “small” people:

BP Cash Flow:

o Escrow funding ($7 billion)

o Dividend saving $7.5 billion

o Tax savings $7 billion

o Net favorable cash flow : $7.5 billion

US Treasury Tax Receipts:

o BP Corporate income tax (-$7.5 billion)

o BP Shareholders (-$0.45 billion)

o Net unfavorable tax receipts ($7.95 billion)

I guess we really should expect this. After all, our annointed leader is the most inexperienced man in any room he enters.

Scorecard:

BP Corporate Bean Counters – +1

Washington Tax Cheating Ambulance Chasers – 0

American People – We Got BP (Bean @#$%&!)

This isn’t so hard to understand – BP made their largest political contributions to Obama’s campaign. Obama plays politics acting tough on BP. We pay. Anything different from Obama’s corrupt deals?

Actually, I admire BP for their deal-making ability. After all BP is not a fly by night operation and Obama thought he and his minimal business experienced tax cheats could take on BP.

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