Environmental Fraud and the False Claims Act

Most people nowadays strive to be environmentally conscious, that is until doing so impacts their company’s bottom line or personal lifestyle and preferences. Unfortunately, the tendency to prioritize profits over the environment has been a longstanding problem that is not doing our planet any favors.

Regulatory bodies and government officials recognize this fact, which is why there have been specific laws put in place to prevent companies from taking advantage of the environment. However, just because those laws were enacted does not mean they are being adhered to 100% of the time.

The good news is that individuals who witness environmental fraud have legal recourse and protection for speaking up, thanks to the False Claims Act. There is even a financial incentive for individuals who follow through with reporting fraudulent activity. If you believe you have witnessed environmental fraud and you have more questions, learn everything you need to know about how to navigate your situation from one of our whistleblower attorneys.

What is Environmental Fraud?

Environmental fraud describes a host of behaviors that curb regulations and ultimately harm the environment. Sometimes, environmental fraud also hurts the government and other parties when companies misappropriate funds that are meant for protecting the environment.

Environmental harm also impacts wildlife. Recent UN reports suggest that about one million animal and plant species are threatened by extinction over the next decade. To protect these creatures, global laws have been enacted to protect certain areas and species.

Environmental fraud committed by government contractors and similar entities who receive government funding is often prosecuted under the False Claims Act. Under this important act, whistleblowers who witness environmental wrongdoing can report the issue and pursue a qui tam claim on behalf of the government. Whistleblowers can also report environmental fraud under other federal and state environmental regulations, but the False Claims Act offers the most protection for whistleblowers.

Common Types of Environmental Fraud

There are several ways that a company can commit environmental fraud. One common way is when the government provides contracts or funding for specific environmental projects. If the company misuses those funds, falsifies data for more funding, or commits any other type of wrongdoing under such a contract, it would be committing environmental fraud. Another example is when a company knowingly puts the environment or endangered animals at risk as part of its business model.

Here are a few more common types of environmental fraud:

• Violations of federal environmental laws
• Illicit chemical or hazardous waste dumping
• Falsification of data
• Breach of contract
• Fraudulent marketing
• Inaccurate invoices or price quotes

Largest Environmental Fraud Settlements

Environmental fraud settlements can be significant. Considering that whistleblowers can receive a percentage of the settlement amount (between 15 and 30%), a large settlement equates to a high payout for the whistleblower.

An example of a large environmental fraud settlement was when Sevenson Environmental Services Inc. settled a False Claim Act lawsuit for $2.72 million in 2014. The environmental remediation firm accepted kickbacks and rigged bids for work performed at the Federal Creosote Superfund Site in New Jersey, causing the EPA to pay more for their services.

Government contractor Lockheed Martin paid $5 million to settle allegations that they violated and misrepresented their compliance with the Resource Conservation and Recovery Act for work performed at the Paducah Gaseous Diffusion Plant.

More recently in 2020, a number of biofuel companies—including E-Biofuels, Caravan Trading, Cima Green—were hit with a $70 million judgement for fraudulently obtaining biodiesel tax credits.

But perhaps the largest settlement to date was for work performed for the Waste Treatment & Immobilization Plant in Hanford. Bechtel National and AECOM paid $125 million to settle allegations of using deficient materials at the nuclear site and illegally used taxpayer dollars to fund a lobbying campaign to obtain more federal funding for the project.

What is the Comprehensive Environmental Response, Compensation, and Liability Act or Superfund Law?

The Department of Energy, as well as other US agencies, store and manage hazardous substances throughout various facilities around the country. Considering that the release of hazardous substances from waste sites, facilities, and projects that have been abandoned can have negative health consequences for the environment and local communities, it makes sense that Congress found these practices to be a problem. As a result, Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to regulate hazardous substances, respond to potential releases, and develop solutions to the problem.

Federal contractors, companies, or other entities that violate the CERCLA would be committing environmental fraud.

Does the False Claims Act Cover Environmental Fraud?

Yes, the False Claims Act covers various types of fraud and other wrongdoings against the federal government, including environmental fraud. While most False Claims Act (FCA) claims are related to other types of fraud like healthcare, defense and security government contracts, and securities fraud, the law allows for environmental fraud claims as well.

In a nutshell, this law holds any entity liable for damages when they have knowingly falsified claims to the government. Even better, the FCA provides specific protections and rewards for individuals who report wrongdoing. Whistleblowers who report environmental fraud could receive as much as 30% of the overall settlement amount reached in a successful case. The whistleblower is also protected from any retaliation actions by their employer or company accused of the wrongdoing.

How Do Government Contractors Violate the False Claims Act?

Government contractors violate the False Claims Act when they commit fraud against the government by:

• Failing to comply with the Clean Water Act or the Clean Air Act
• Using federal funds for personal use or non-approved uses
• Failing to comply with environmental laws that result in financial harm to the government
• Violating environmental laws that contractors have contractually agreed to obey
• Accepting federal funds for goods or services that were not provided
• Engaging in price-fixing schemes when bidding on federal contracts
• Accepting federal funds for expenses paid when another agency covered the expenses
• Providing or accepting kickbacks or other illicit benefits when awarding government funding
• Falsifying records to justify receiving federal aid
• Fraudulently billing the government for environmental fines or penalties

Federal Contractors Associated with these Programs Can be Prosecuted under the False Claims Act

Under the False Claims Act, companies, entities, or contractors can be held liable for fraudulent actions against the government. Often, federal contractors are hired by governmental agencies to perform specific tasks. Contractors who work for the following agencies can be reported for fraud:

• Department of Defense
• Department of Energy
• Environmental Protection Agency
• Federal Emergency Management Agency
• U.S. Fish and Wildlife Service
• U.S. Forest Service
• U.S. National Oceanic and Atmospheric Administration

Who Can Become an Environmental Fraud Whistleblower?

Anyone who witnesses environmental fraud can become a whistleblower, but they must have unique information regarding a violation of an environmental law or regulation. If pursuing a lawsuit under the False Claims Act, the information must involve government funding. Many federal statutes contain a citizen suit provision, so you can pursue a claim even as a private citizen, but some restrictions apply. For instance, if you want to pursue a claim under the Clean Water Act, then you must have been personally impacted by the wrongful action.

If you believe you have witnessed environmental fraud and you are not sure what to do next, consider scheduling a confidential case evaluation with our legal team to learn more about your legal options.

What Laws Protect Environmental Whistleblowers?

Several laws protect environmental whistleblowers. Many of these laws and regulations exist is to protect the environment, but whistleblowers need protection, too, in order for them to come forward with evidence of wrongdoing. Without protection, whistleblowers might not feel safe enough to report a known violation.

False Claims Act

The main law that protects environmental whistleblowers is the False Claims Act. In general, this law allows a whistleblower to pursue a claim on behalf of the government when an entity or organization is knowingly making false claims to the government. Under this law, whistleblowers are protected from employer retaliation and offered a financial incentive for blowing the whistle on fraud.

Safe Water Drinking Act

The Safe Water Drinking Act was originally enacted to ensure that water sources reserved for drinking contain clean, safe, and healthy water. This Act prohibits anyone from using dangerous materials, like lead piping, to hold and transport water. It also regulates pollution to ensure that water sources do not get contaminated.

This law also protects any public or private employee who reports violations of the Act to the government.

Federal Water Pollution Control Act

This Act was originally passed in 1972 as an amendment to the Safe Water Drinking Act. This amended law quickly became the primary federal law used to protect the nation from water pollution. As part of this Act, any government, industrial, or agricultural entity must receive a permit to discharge anything into surface water. This Act protects employees or authorized representatives of an employee who have witnessed a violation of this law.

Clean Air Act

The Clean Air Act seeks to regulate air pollution from many sources and requires polluters to obtain a permit from the federal or state government before discharging certain pollutants. Whistleblowers who notice a violation are protected from retaliation when they report it.

Energy Reorganization Act

The Energy Reorganization Act, which was passed in 1974, split the responsibility for developing and producing nuclear weapons between the Energy Research and Development Administration and the U.S. Atomic Energy Commission. An amendment to the law was later passed to help protect whistleblowers with nuclear safety concerns.

Solid Waste Disposal Act

This Act seeks to protect and improve waste disposal technology throughout the US. The Act sets out a framework for states to control waste, as well as specific safety requirements for landfills. Whistleblowers who notice a violation should report it.

Toxic Substances Control Act

This Act gives the Environmental Protection Agency the authority to regulate, record, and restrict chemical substances and mixtures. The Act addresses how entities can produce, import, use, and dispose of specific chemicals.

Comprehensive Environmental Response, Compensation, and Liability Act

As mentioned above, the CERCLA, which is also often referred to as Superfund or a federal Superfund, helps protect the environment from hazardous waste.

When Are Environmental Whistleblowers Entitled to a Reward?

Environmental whistleblowers may be entitled to a reward when they report a wrongful action and are able to provide unique evidence of the alleged fraud. If their False Claims Act claim is later successful and a settlement is reached, the whistleblower whose information helped secure the settlement is entitled to a portion thereof. Other laws and regulatory bodies might fine violators or prosecute them but do not usually offer any type of reward for whistleblowers.

Here are a few examples of fraudulent behavior for which a whistleblower can get a financial reward if their claim is successful under the False Claims Act:

• Overcharging the government for environmental clean-up projects
• Violations of securities laws in the form of misrepresentations by financial advisors or funds regarding ESG strategies
• Violations of securities laws by securities issuers who misrepresent material risks stemming from climate change, sustainability issues, or environmental issues
• Underpayment of taxes using fraudulent tax credits aimed at conservation and renewable energy efforts
• Avoidance of environmental fines through falsification of data
• False representation of compliance by government contractors who have failed to adhere to contractual requirements or environmental regulations
• Underpayment of government royalties by misrepresenting the amount of natural resources extracted from public land
• Violations of the Endangered Species Act and wildlife protection laws
• Violations of the Act to Prevent Pollution on Ships
• Violations of the Clean Air Act

Have You Witnessed Environmental Fraud? Speak to an Experienced Qui Tam Attorney

Do you believe you have witnessed environmental fraud? Reporting the wrongdoing is not only the right thing to do, but it is also worth your effort considering you could get paid if the claim is successful and a settlement is reached.

So, how do you move forward? Whistleblowing can be an intimidating process, but with help from an experienced qui tam attorney who can inform you about your legal options and rights it does not have to be. Before you take any action against your organization or report the wrongdoing, talk to a lawyer first.