* BP seeks to suspend payouts until Freeh finishes report
* Questionable claims, conflicts of interest alleged
By Jonathan Stempel
Aug 5 (Reuters) - BP Plc said Monday it hasdiscovered new evidence of fraud and conflicts of interest inthe program that is paying billions of dollars to businesses andresidents who claimed they were harmed by the 2010 Gulf ofMexico oil spill.
The oil company made the disclosure in a filing with theU.S. District Court in New Orleans as part of a renewed effortto suspend payouts until a court-appointed monitor, former FBIDirector Louis Freeh, finishes investigating the payout program.
BP said it learned within the last week that two lawyersreviewing appeals of disputed claims were partners at law firmsrepresenting claimants before the Court Supervised SettlementProgram (CSSP), and thus had apparent conflicts of interest.
It also said it learned through its fraud hotline ofallegations that a worker at a Mobile, Alabama spill claimscenter helped people submit fraudulent claims in exchange for ashare of the settlement amounts. BP said the CSSP suspended twoemployees in connection with this matter.
"BP should not have to face the substantial risk ofirreparable harm from improper payments," the company said.
Temporarily halting payments until Freeh finishes his reportis "modest relief" that will at most "slightly delay" payouts,which have been running at $93 million a week, it added.
Patrick Juneau, the Louisiana lawyer who administers thepayout program, previously announced an internal probe ofallegations that a former worker in the payout program referredclaimants to lawyers in exchange for a share of payments.
Juneau said in an email on Monday after BP's latest filing:"As has been the case since day one, we have investigated allallegations brought to our attention, and until ourinvestigation is complete, we will not and should not comment."
The program was designed to compensate victims of the April20, 2010 explosion of the Deepwater Horizon drilling rig andrupture of BP's Macondo oil well, a disaster that killed 11people and resulted in the largest U.S. offshore oil spill.
BP has already incurred about $42.4 billion of chargesrelated to the disaster. It originally expectedthe payout program to cost $7.8 billion, but last week boostedits estimate to $9.6 billion and said it could go much higher.
The company considers Juneau's payout formula too generousand believes it compensates people who were not harmed. About$3.1 billion has been paid so far, the program's website shows.
BP is awaiting a decision by a federal appeals court on itschallenge to the payment formula, which U.S. District Judge CarlBarbier in New Orleans had previously rejected.
Barbier on July 19 rejected an earlier BP request to suspendpayouts pending Freeh's review. He also oversees a consolidatedcivil lawsuit against BP and its contractors over the spill.
The case is In re: Oil Spill by the Oil Rig "DeepwaterHorizon" in the Gulf of Mexico, on April 20, 2010, U.S. DistrictCourt, Eastern District of Louisiana, No. 10-md-02179.
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