Contractor Agrees to Pay $2.72 Million to Settle False Claims Act Allegations in EPA Fraud Case

In a rare False Claims Act settlement involving the Environmental Protection Agency, a superfund contractor has agreed to pay $2.72 million to resolve various allegations involving misconduct by employees. Under the False Claims Act, any person with original information about fraud involving federal funds may come forward under the False Claims Act’s qui tam  provisions. If successful, the whistleblower could receive up to 30 percent of the ultimate settlement or verdict. Most commonly, whistleblowers are current or former employees of the defendant; however, the False Claims Act is not limited to the employment relationship. In some False Claims Act cases – like today’s – the Department of Justice may opt to commence a lawsuit on its own following an investigation into the fraud.

Details of case against Sevenson Environmental Services, Inc.

Sevenson Environmental Services, Inc. (SES) is a Niagra Falls-based government contractor heavily involved in the field of environmental clean-up. The company won a large government contract several years ago for the cleanup of the federal Creosote Site – which was funded directly by the Environmental Protection Agency. The Creosote Site is a former coal tar plant located in Manville, New Jersey, that operated from 1911 through 1956. During this time, the plant also treated railroad ties with a chemical known as creosote, which has since been determined to be highly toxic. This creosote was dumped into nearby lagoons in the Manville area, polluting the water for as many as 137 homes and local businesses. As such, the EPA has been actively working to clean up the area by removing and replacing hundreds of thousands of pounds of soil.

According to allegations, SES sub-contracted with several less-than-honest subcontractors for the Creosote Site project, resulting in inflated submissions to the EPA for reimbursement. It is also alleged to have accepted over $1.6 million in kickbacks from subcontractors in exchange for winning the bid to work on the project. More specifically, SES is alleged to have conspired with the subcontractors involved in the project to concertedly inflate prices for soil removal, which resulted in the intentional submission of false claims for reimbursement.

In addition to the False Claims Act settlement, one subcontractor on the project was ordered to pay over $4 million in restitution and is now serving a 14-year prison sentence for his involvement in the fraud. A second subcontractor was recently extradited from Canada and is facing similar fraud charges.

Government’s response

Much like healthcare fraud, environmental fraud turns a benevolent mission into a costly and wasteful enterprise at the expense of taxpayer funds. According to the Department of Justice, “The integrity of the public procurement process is severely undermined when federal contractors engage in anticompetitive contracting practices for their own personal gain….The Department of Justice will hold those accountable who abuse their positions at the public’s expense.”

The EPA also remarked that it is “vigilant to ensure that the type of fraud perpetrated by [the employees] at [the] federal Creosote [site] is not tolerated and that federal funds are recovered.”

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