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The False Claims Act lawsuits can involve any area in which the federal government spends money, and the environment is no exception. The Environmental Protection Agency (EPA)'s $9 billion budget for FY 2020 and the Department of Energy (DoE)’s proposed $6.1 billion FY 2021 environmental management budget comprise a small percentage of the government’s fiscal budget, which makes preserving the integrity of each dollar especially important. Below are examples of how the FCA can hold contractors on federal environmental projects accountable for false claims. False claims concerning the environment can involve fraudulently obtaining environmental tax credits, providing faulty materials for environmental projects, or inflating prices of environmental services. Behind many of these cases are whistleblowers who filed FCA cases under seal through experienced attorneys like those at Goldberg Kohn, and shared in the settlements or judgments achieved by and for the government.

Exploiting Tax Incentives for Renewable Fuel Production

United States ex rel. Chepurko v. e-Biofuels, LLC et al., which resulted in a $69.6 million judgment in 2020, involved a scheme to fraudulently obtain tax credits for biodiesel. To encourage renewable fuel production, the Environmental Protection Agency created a “renewable identification number” ("RIN") system that awards tax credits based on the quantity of renewable fuel a company produces. The defendants exploited these RIN-based tax credits in their fraudulent scheme. 

The fraudulent scheme in Chepurko consisted of four entities: Astra, Caravan, e-Biofuels and Imperial (parent company of e-Biofuels). Astra produced the biodiesel and assigned it a RIN, earning the tax credit from doing so. Then, Astra would strip the biodiesel of RINs and retire them before selling the RIN-less biodiesel to Caravan. Caravan then sold this RIN-less biodiesel to e-Biofuels and Imperial, while generating internal records that said they were selling feedstock instead of finished fuel. E-Biofuels and Imperial falsely generated RINs for the biodiesel, claiming to be the original producers. 

In two years, e-Biofuels generated millions of invalid RINs in violation of the EPA’s RIN regulations. The court found that these invalid RINs were “submitted to the EPA as false claims for energy credits and to meet obligations to the Government. These Defendants’ actions also caused e-Biofuels’ customers to submit false claims to the EPA based on the fraudulent RINs,” constituting an FCA violation. Not only did this scheme financially cost the government money, but it also “set renewable fuel efforts back for the entire nation” according to Assistant Attorney General John Cruden. The Chepurko example demonstrates how the FCA helps ensure that federal environmental programs fulfill their intended purpose. 

Failure to Meet Quality Standards for Waste Treatment Plant at the Hanford Nuclear Reservation

Another example of an FCA lawsuit concerning the environment is United States ex rel. Brunson, Busche, and Tamosaitis v. Bechtel National, Inc., Bechtel Corp., URS Corp., and URS Energy & Construction, Inc, which settled for $125 million in 2016. The defendants entered into contracts with the Department of Energy to provide goods and services for a waste treatment plant ("WTP") at the Hanford Nuclear Reservation. Because the WTP is meant to treat radioactive waste, its components must meet nuclear quality standards. Allegedly, the defendants knowingly failed to meet these standards, but charged the government as if they did, thus violating the FCA. By holding the defendants accountable, the FCA helped mitigate the damage both to the treasury and to the environment. 

Inflating Prices of Environmental Services

In another environmental cleanup contract, Sevenson Environmental Services Inc. allegedly submitted inflated charges to the EPA for the cleanup of toxic soil at the Federal Creosote Superfund Site in New Jersey. Sevenson, an environmental remediation firm, paid over $2.72 million in a settlement to resolve allegations that it violated the False Claims Act and the Anti-Kickback Act. 

According to the settlement agreement, Sevenson accepted kickbacks in exchange for the award of subcontracts, and even conspired to pass some of these kickbacks to the EPA. Sevenson also conspired with subcontractors to inflate charges for various steps of the project. For example, Sevenson and subcontractor BEI inflated the bid price for soil disposal by at least $50 per ton and proceeded to dispose of "over 20,000 tons of contaminated soil at a less expensive unsecure facility while charging [the EPA] for disposal at a more expensive secure facility." These anticompetitive practices deprive the EPA of funds that could be used for other important environmental projects. 

Can the FCA Help Enforce Environmental Regulations?

The three examples discussed above demonstrate how the FCA can help protect the environment. However, the question may arise of whether the FCA can hold contractors accountable for violating the environmental regulations a contract requires. After Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), the answer to this question depends on whether compliance with environmental regulations is material to the government’s decision to pay a contractor. 

Escobar states that the FCA “is not 'an all-purpose antifraud statute,' … or a vehicle for punishing garden-variety breaches of contract or regulatory violations.” This means that if a government contract requires compliance with the Clean Water Act ("CWA") and the contractors misrepresent compliance with it, the situation would constitute an FCA violation only if the relator can show that the government factors CWA compliance into their payment decision. 

In one post-Escobar case that pertains to environmental regulations, United States ex rel. Coffman v. City of Leavenworth, Kansas, the plaintiffs argued that the defendants failed to abide by environmental regulations, therefore, the claims for payment they presented to the government were false. Even though the contract had a provision that stated “the [City] shall operate [the WTP] in conformity with applicable law, rules, and regulations,” the court applied the Escobar framework to conclude that because there was no evidence that compliance was material to the government’s decision to pay, the plaintiff was not entitled to summary judgment. 

Specifically, the Coffman court found that “there is no evidence that these agencies would refuse to pay their sewer bills had they been aware of the environmental violations.” In fact, the government entities paying these claims “never requested or audited the WTP to ensure environmental compliance, which suggests that regulatory compliance was not material to payment.” While there have been very few environmental cases like Coffman since Escobar, the Tenth Circuit’s application of Escobar provides a glimpse into how this landmark case would be applied in the context of environmental regulation enforcement.

Fight Environmental Fraud with the Whistleblower Attorneys at Goldberg Kohn

The whistleblower attorneys at Goldberg Kohn are committed to fighting fraud against the government and protecting the rights of whistleblowers. Please contact us online if you would like to learn more about environmental fraud or would like to schedule a free, confidential appointment with one of our nationally recognized whistleblower attorneys.

Interested in learning more about the topics discussed in this article? For further reading about fraud against the EPA, click here. For further reading about the post-Escobar landscape, click here

[1] United States ex rel. Chepurko v. e-Biofuels, LLC, No. 114CV00377TWPMJD, 2020 WL 2085071, at *8 (S.D. Ind. Apr. 30, 2020)


[3] Universal Health Servs., Inc. v. United States, 579 U.S. 176, 194, 136 S. Ct. 1989, 2003, 195 L. Ed. 2d 348 (2016)

[4] United States ex rel. Coffman v. City of Leavenworth, Kansas, 303 F. Supp. 3d 1101, 1120 (D. Kan. 2018), aff'd, 770 F. App'x 417 (10th Cir. 2019)