By Jef Feeley and Allen M. Johnson, Jr.

A federal judge said Kenneth Feinberg, the lawyer paying victims of BP Plc’s Gulf of Mexico oil spill, can’t identify himself as an independent administrator of a $20 billion settlement fund.

U.S. District Judge Carl Barbier in New Orleans concluded yesterday that Feinberg must fully disclose his ties to BP when communicating with potential claimants. Lawyers for oil-spill victims had questioned Feinberg’s handling of the $20 billion trust fund, known as the Gulf Coast Claims Facility, or GCCF.

“A full disclosure of the relationship between Mr. Feinberg, the GCCF, and BP will at least make transparent that it is BP’s interests” that Feinberg is promoting in his role as head of the fund, the judge said in a 15-page ruling.

“We have no comment on the ruling,” Amy Weiss, a spokeswoman for Feinberg, said. “We are moving forward paying claims.”

Feinberg is best-known for serving as a mediator who oversaw claims by victims of the Sept 11, 2001, terrorist attacks.

BP is paying Feinberg’s law firm $850,000 a month to run the trust fund, victims’ lawyers said in court filings. The Deepwater Horizon drilling rig, under contract to BP, exploded off the Louisiana coast in April, triggering the worst offshore oil spill in U.S. history.

‘Carte Blanche’

“Today is a good day for the thousands of victims of the Deepwater Horizon tragedy,” Jim Roy, a lawyer for spill victims, said yesterday. “With this ruling, the court is protecting the rights of the thousands of victims of this preventable tragedy, and has unequivocally stated that Mr. Feinberg no longer has carte blanche to mislead the public on BP’s behalf.”

Attorneys for spill victims asked Barbier to order the fund to post information on its website declaring that Feinberg, his firm and the fund are acting as “BP’s agents.”

They contend Feinberg is using misleading tactics to persuade thousands of potential claimants to sign away their rights to sue the company in exchange for smaller payments than they might win in a lawsuit. Feinberg has encouraged claimants not to hire lawyers to evaluate their claims, spill victims’ attorneys contend.

BP’s lawyers countered in court filings that Feinberg, tapped by both BP and President Barack Obama to oversee the fund, is an independent party who isn't taking sides on the issue of whether spill victims should sue over their damages. The company’s lawyers also said restrictions would violate Feinberg’s constitutional free-speech rights.

BP’s Objections

Barbier rejected BP’s objections to limits on Feinberg’s communications, saying the restrictions were designed to clear up “confusion and misunderstanding” among spill victims.

“The clear record in this case demonstrates that any claim of the GCCF’s neutrality and independence is misleading to putative class members and is a direct threat to this ongoing litigation, as claimants must sign a full release against all potential defendants before obtaining final payments,” the judge said in yesterday’s ruling.

The case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 10-md-2179, U.S. District Court, Eastern District of Louisiana New Orleans).