By MICHAEL KUNZELMAN / Associated Press

NEW ORLEANS (AP) -- A federal judge on Friday rejected BP's bid to temporarily halt all settlement payments to Gulf Coast businesses and residents who claim they lost money after the company's 2010 oil spill.

BP PLC attorneys argued that payments should be suspended while former FBI Director Louis Freeh investigates alleged misconduct by a lawyer who helped administer the multibillion-dollar settlement program.

U.S. District Judge Carl Barbier said he was troubled by the allegations but didn't see any reason to take the 'drastic step' of shutting down the program without evidence of widespread fraud.

Lionel H. Sutton III, a target of Freeh's probe, allegedly received a portion of settlement proceeds for claims he referred to a law firm before joining the staff of court-supervised claims administrator Patrick Juneau.

Barbier lashed out at critics who have questioned Juneau's handling of the process of evaluating and paying claims and who have tried to portray the Lafayette-based lawyer as a 'good ol' boy' beholden to plaintiffs' attorneys.

'I find the recent attacks on Mr. Juneau's character are highly offensive, inappropriate,' Barbier said.

Barbier said he found it 'especially offensive' that BP CEO Robert Dudley claimed during a recent television appearance that the settlement process had been 'hijacked.'

'Personal attacks, hyperbole and use of such language in my opinion crosses the line,' he said.

BP says there is a risk that hundreds of millions of dollars in claims payments could be tainted by fraud. Plaintiffs' attorneys say the company hasn't provided any evidence that Juneau has improperly paid any claims.

Sutton, who resigned on June 21, has denied the allegations. Sutton's wife, Christine Reitano, who also worked as a lawyer for the settlement program, had her contract terminated June 26.

Barbier appointed Freeh as a 'special master,' authorizing him to conduct an independent investigation of the alleged misconduct and take a broader look at the program, after Juneau reported the allegations to the judge last month.

Freeh, who founded a consulting firm in 2007 after serving as FBI director from 1993 to 2001, hasn't indicated how long it will take to complete his investigation.

Juneau's attorneys argued in a court filing Thursday that BP's request for a suspension of payments is partially based on 'premature speculation' and is 'completely overbroad in its scope.'

BP has argued that Barbier and Juneau have misinterpreted the settlement and forced the company to pay businesses for inflated and fictitious losses. The company appealed Barbier's decision to uphold Juneau's interpretation of settlement terms governing payments to businesses.

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