British Petroleum is set to pay the biggest criminal fine in U.S. history, while both the U.S. Postal Service and the Federal Housing Administration are running out of cash and appear to need help. Also on Friday, Hostess Brands, the maker of Twinkies, goes belly-up, and a small town in Illinois gets robbed by its own financial officer.
BP Pleads Guilty
British oil giant, BP Corporation, pleaded guilty yesterday, to 14 charges of criminal behavior related to the 2010 Deepwater Horizon disaster in the Gulf of Mexico and will pay fines exceeding $4 billion. The oil rig explosion that killed 11 workers also caused the largest offshore oil spill in U.S. history.
In addition to being liable for the largest criminal payment ever, two BP supervisors were indicted on 23 counts, including involuntary manslaughter, for ignoring warning signs of the impending blowout that eventually set fire to the rig and sunk it.
The fine is not expected to hurt BP’s bottom line – in the past quarter alone, it had sales of $93 billion and net profit of more than $5.2 billion.
U.S. Postal Service Reports Record Loss
The U.S. Postal Service continues to bleed red ink. It lost $5.1 billion in 2011, and on Thursday it reported a record annual loss of $15.9 billion for the fiscal year that ended on September 30.
Costs for future retiree health benefits made up the bulk of the deficit – some $11.1 billion. Operating losses for the struggling, independent federal agency were estimated at $2.4 billion.
The Postal Service is subject to control by Congress, but receives no taxpayer dollars for its support, relying only on the sale of stamps and other products to sustain its operations.
FHA Running Out of Money
According to officials at the Federal Housing Administration (FHA), the agency will need billions of dollars in aid from the U.S. Treasury between now and the end of the year to cover losses on mortgage loans it backs for low-income borrowers.
The request for funds, caused by an unprecedented number of foreclosures over the last several years, would be the first in the agency’s 78-year history.
Up until now, the FHA has covered costs related to its $1.1 trillion loan portfolio through premiums it charges borrowers.
Iconic Twinkies Brand Bankrupt
Hostess Brands, Inc., maker of Twinkies and Wonder Bread, suspended operations at 33 plants nationwide and is seeking bankruptcy court permission to shut down and liquidate its assets.
The company blames its latest financial woes on a week-old strike by workers that has stymied its ability to produce and ship product. Union officials maintain the company’s problems stem from years of mismanagement.
The Texas-based firm is planning to lay off most of its 18,500-member workforce from its 565 distribution centers, 570 outlet stores, and 33 bakeries.
Town Comptroller Raids Funds, Buys Horses
Dixon, Illinois, President Ronald Reagan’s boyhood home, is in the news again, but not for a flattering reason. A former city comptroller for the small Midwestern town pleaded guilty to embezzling $53 million from municipal coffers over the course of several years, to feed a lavish lifestyle that included a $2 million RV, a vacation home in Florida and 400 horses.
The revelation of Rita Crundwell’s crimes, which could put her behind bars for 20 years, seemed to come as a surprise to Dixon’s residents who claim they did not notice the steady siphoning off of town funds, but did wonder where all the horses came from.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].