Freeh, who was appointed by a federal judge to investigate alleged misconduct by a staff attorney who worked on the settlement program, cleared court-appointed claims administrator Patrick Juneau of engaging in any "conflict of interest, or unethical or improper conduct."

But the former FBI director concluded that top members of Juneau's staff engaged in conduct that was improper, unethical and possibly criminal. He recommended that his report be forwarded to the Justice Department.

"The nature and seriousness of this type conduct varied in degree but was pervasive and, at its extreme, may have constituted criminal conduct," the report said.

Juneau said Freeh's report validates his team's work, and he played down the alleged misconduct by two former members of his staff as an "isolated situation."

"We will continue the job of processing claims," he said in a statement. "We welcome the recommendations from the Freeh report and we look forward to working with him to help improve all aspects of the claims process."

BP spokesman Geoff Morrell said the report "confirms what BP has suspected for some time: there has been fraud and unethical conduct within the facility itself and among various claimants and their lawyers - and immediate steps need to be taken to prevent it in the future."

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