Financial Fraud

A settlement has been reached to resolve False Claims Act allegations against North American Power Group Ltd.

The allegations arose from a lawsuit that claimed North American Power Group Ltd and its owner and president, Michael Ruffatto, submitted fraudulent claims under a cooperative agreement with the Department of Energy and National Energy and Technology Laboratory.

According to the government, allegedly, on December 8, 2009, National Energy and Technology Laboratory (NETL) awarded a $14 million cooperative agreement to North American Power Group Ltd (NAPG) for a Carbon Site Characterization Project to collect and analyze data, as well as to design and implement carbon sequestration wells at the Two Elk Energy Park (TEEP) located in Campbell County, Wyoming.   Between December 2009 and January 2012, Michael Ruffatto served as NAPG’s representative for the cooperative agreement and was responsible for authorizing the submission of the company’s invoices to NETL for payment.  During that time, NAPG was paid approximately $5.7 million by NETL for costs purportedly related to the project.  In fact, however, none of the claimed costs were for work associated with the project and instead reflected expenses incurred by Michael Ruffatto to pay legal fees, car payments, jewelry, international travel and other personal items unrelated to the scope of work under the cooperative agreement.  The Department of Energy (DOE) suspended the cooperative agreement in January 2012 after discovering the fraudulent claims.

“This $14.4 million False Claims Act settlement is the largest NETL settlement in the history of western Pennsylvania,” said U.S. Attorney Scott W. Brady of the Western District of Pennsylvania.  “Protecting taxpayer funds is an important priority of our office and this settlement, along with yesterday’s sentence, demonstrate we will use every tool in our arsenal to prevent and deter wrongful expenditures of government monies.”

North American Power Group Ltd and Michael Ruffatto have now agreed to settle the allegations for $14.4 million. Furthermore, Michael Ruffatto has pled guilty to one felony count of intentional submission of false claims against the United States. Michael Ruffatto has been sentenced to 18 months in prison, along with three years of supervised release and a $50,000 fine and ordered to pay $2 million in restitution.

A settlement has been reached to resolve False Claims Act allegations against Inchcape Shipping Services.

The allegations arose from a lawsuit that claimed Inchcape Shipping Services knowingly overbilled the U.S. Navy under contracts for ship husbanding services.

Inchcape Shipping Services, provides goods and services to Navy ships at ports in several regions throughout the world, including southwest Asia, Africa, Panama, North America, South America and Mexico. Inchcape Shipping Services provides ships with food and other subsistence items, waste removal, telephone services, ship-to-shore transportation, force protection services and local transportation.

According to the government, allegedly from 2005 to 2014, Inchcape Shipping Services knowingly overbilled the Navy for these services by submitting invoices that overstated the quantity of goods and services provided, billing at rates in excess of applicable contract rates, and double-billing for some goods and services.

“We trust contractors supporting our warfighters to act with the utmost integrity and expect them to comply with their obligations to bill the government as called for by their contracts,” said U.S. Attorney for the District of Columbia Jessie K. Liu.  “This settlement reflects our Office’s strong commitment to holding accountable those who violate these fundamental principles, no matter where they may be located.”

Reportedly, the whistleblower lawsuit was brought in 2010 under the False Claims Act by three former employees of Inchcape who alleged Inchcape conspired with subsidiaries and vendors to gouge the Navy whenever and wherever possible, triggering a management overhaul in 2015.

The whistleblowers will receive $4.4 million, plus $1.25 million in attorney fees as part of the settlement.

A settlement has been reached to resolve False Claims Act allegations against Lockheed Martin Corporation.

The allegations arose from a lawsuit that claimed Lockheed Martin Corporation violated the civil False Claims Act by providing defective communications systems for the United States Coast Guard’s National Security Cutters.

According to the government, Lockheed allegedly supplied a radio frequency distribution system for the cutters that did not meet the requirement of transmitting and receiving several different radio signals at the same time without undue interference. The Coast Guard has taken delivery of the first six Cutters and three additional Cutters are under construction.

Reportedly, Lockheed has agreed to pay $2.2 million, and to provide the Coast Guard with repairs to the Radio Frequency Distribution System on the nine Cutters at no charge.  The repairs are valued at $2.2 million.

“This office remains committed to fighting fraud and false claims against the federal government,” said Acting U.S. Attorney Tse.  “It is essential that the communications systems on the Coast Guard’s National Security Cutters work properly.  I am pleased that Lockheed has agreed to repair the systems so that they fully function to support the Coast Guard’s important mission.”

A whistleblower, a former member of Lockheed’s engineering staff working on the Coast Guard’s National Security Cutters, will receive $990,000 out of the $4.4 million settlement.

A settlement has been reached to resolve False Claims Act allegations against BP Energy Company.

The allegations arose from a lawsuit that claimed BP Energy Company overcharged the state of California for natural gas between 2003 and 2012.

Allegedly, BP Energy regularly violated contracts to provide gas for numerous state agencies and other governments by exceeding the agreed-upon price cap, and then concealed the overcharges by providing false and misleading information, state Attorney General Xavier Becerra said.

Reportedly, BP Energy was overcharging local jurisdictions, public agencies and universities for natural gas over the course of a decade by selling the state “exotic financial derivative products.”

According to the lawsuit, BP Energy overcharged the state at least $150 million to $300 million, and the state sought triple damages. California no longer has natural gas contracts with BP.

 “BP thought it could get away with providing false and misleading information in order to line its own pockets,” Becerra said. “Today, we send a clear message: cheating the People of California will cost you more than it’s worth.”

These allegations were brought forward by a former BP employee, Chris Schroen, accusing the oil company of quoting and charging prices above a contractual cap.

A settlement has been reached to resolve False Claims Act allegations against Triple Canopy Inc.

The allegations arose from a lawsuit that claimed Triple Canopy Inc submitted false claims for payment to the Department of Defense for unqualified security guards stationed in Iraq.

According to the Department of Justice, allegedly Triple Canopy knowingly billed the United States for security guards who could not pass contractually required firearms proficiency tests. The tests were designed by the Army to ensure that the guards hired to protect U.S. and allied personnel were capable of firing their assigned weapons safely and accurately. In addition, allegedly Triple Canopy concealed the guards’ inability to satisfy the firearms testing requirements by creating false test scorecards that Triple Canopy was required to maintain for government review, in an effort to induce the government to pay for the unqualified guards.   

Triple Canopy contracts with the government to provide private security protection forces for U.S. government and allied personnel abroad. The settlement stems from a 2009 contract for security services at Al Asad Airbase in Iraq.

Reportedly, the government’s claims were based on a whistleblower suit filed by a former employee of Triple Canopy in 2011. The whistleblowers' share of the settlement will be $500,000.

 “Contractors must be held accountable for their actions, especially when the safety of government personnel is at stake,” said Dana J. Boente, U.S. Attorney for the Eastern District of Virginia, where the suit was filed. “This settlement should remind contractors of the high value we place on safeguarding our personnel abroad.”

A settlement has been reached to resolve False Claims Act allegations against Zoladz Construction Company Inc  (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), along with two owners, John Zoladz and David Lyons.

The allegations arose from a lawsuit that claimed Zoladz Construction Company Inc (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), along with two owners, John Zoladz and David Lyons of improperly obtaining federal set-aside contracts designated for service-disabled veteran-owned (SDVO) small businesses.

Only small business owned and operated by service-disabled veterans are eligible to receive SDVO set-aside contracts. 

According to the government, allegedly ZCCI recruited a service-disabled veteran to serve as the purported owner and manager of Arsenal, which was merely a front for securing SDVO set-aside contracts.  Arsenal then subcontracted nearly all of the work under those SDVO contracts to Alliance and ZCCI.  Additionally, the owners allegedly made false representations to the U.S. Department of Veterans Affairs regarding Arsenal’s eligibility for SDVO contracts.

“Contracts are set aside for service-disabled veteran-owned small businesses so to afford veterans with service-connected disabilities the opportunity to participate in federal contracting and gain valuable experience to help them compete for future economic opportunities,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “Every time an ineligible contractor knowingly pursues and obtains such set-aside contracts, they are cheating American taxpayers at the expense of service-disabled veterans.”

The allegations were brought forward by a whistleblower, who will receive $450,000 as a result of the settlement.

A settlement has been reached to resolve False Claims Act allegations against Alaska Department of Health and Social Services.

According to the Justice Department, Alaska Department of Health and Social Services (ADHSS) has agreed to pay the United States $2,489,999 to resolve allegations that it violated the False Claims Act in its administration of the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamps Program.

A consultant, who advised ADHSS disputes the federal claims about the program that provides financial assistance to low-income families so they can buy nutritious food.

Individuals in the program receive an electronic benefit transfer card that can be used at participating stores to buy eligible food such as fruits, vegetables, whole-grain products and other items.  Since 2010, SNAP has served on average more than 45 million Americans per month, and provided more than $71 billion annually.

“This settlement reflects the Justice Department’s commitment to ensuring that taxpayer funds are spent appropriately so that the public can have confidence in the integrity of programs like SNAP,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.

Reportedly, the settlement resolves allegations that ADHSS, beginning in late 2009, contracted with a consultant known as Julie Osnes Consulting to provide advice and recommendations designed to lower its SNAP quality control error rate. The United States alleged that Osnes Consulting’s recommendations, as implemented by ADHSS, injected bias into ADHSS’s quality control process and resulted in ADHSS submitting inaccurate quality control data and information to USDA and receiving performance bonuses for fiscal years 2010, 2011, 2012, and 2013, that it should not have received.

"Alaska terminated its contract with Osnes Consulting in early 2015 and has reviewed and changed its quality control practices," stated Department of Law spokeswoman Cori Mills.

A settlement has been reached to resolve False Claims Act allegations against Wells Fargo.

On August 4, 2017, Wells Fargo announced that it would pay the U.S. government $108 million after settling a lawsuit that claimed it had charged veterans hidden fees to refinance their mortgages.

The allegations arose from a lawsuit that claimed Wells Fargo charged veterans hidden fees when refinancing mortgages and hid the fees when veterans applied for federal loan guarantees.

The whistleblower lawsuit was filed by Georgia mortgage brokers Victor Bibby and Brian Donnelly in 2006, who sought to recoup money the government and taxpayers lost when those loans went into default. These loans were made under a Department of Veterans Affairs program.

"We're glad it's over, at least as to Wells Fargo," according to whistleblowers, Victor Bibby.

Reportedly, a Wells Fargo spokesman stated that the bank changed its methods for handling veterans' refinancing loans several years ago to fix the alleged problems and that the company settled the lawsuit to "put the matter behind us."

Allegedly, in 2011, the bank settled a similar class-action lawsuit in Georgia claiming misconduct in refinancing VA-backed loans.

"More than six years ago, when questions about fees on Veterans Administration refinance loans were raised, we resolved those concerns by improving our internal controls and made compensation available to VA customers who closed a refinance before that time," said Tim Sloan, Wells Fargo's chief executive officer. "Settling this longstanding lawsuit allows us to put the matter behind us and continue to focus on serving customers and rebuilding trust with our stakeholders. We are committed to serving the financial health and well-being of veterans, and we will continue to honor that commitment now and in the future."

Under the federal whistleblowers law, known as the Federal False Claims Act, people with knowledge of wrongdoing by a company can sue on behalf of the government and collect up to 30 percent of any resulting settlement or jury award.

A settlement has been reached to resolve False Claims Act allegations against Energy & Process Corporation.

The allegations arose from a lawsuit that claimed Energy & Process Corporation (E&P) of Tucker, Georgia, knowingly failed to perform required quality assurance procedures and supplied defective steel reinforcing bars (rebar) in connection with a contract to construct a Department of Energy (DOE) nuclear waste treatment facility.

According to the Department of Justice, allegedly Department of Energy (DOE) paid Energy & Process Corporation (E&P) a premium to supply rebar that met stringent regulatory standards for the Mixed Oxide Fuel Fabrication and Reactor Irradiation Services facility in the DOE’s Savannah River site near Aiken, South Carolina, but that E&P failed to perform most of the necessary quality assurance measures, while falsely certifying that those requirements had been met. In addition, allegedly one-third of the rebar supplied by E&P and used in the construction was found to be defective.

Reportedly, E&P replaced some of the defective rebar. The settlement award will also go to the replacement costs incurred by E&P.

“Compliance with contract requirements is expected by all who contract with the U.S. government, but is especially critical in connection with the construction of a nuclear facility,” said Acting Assistant Attorney General Chad A. Readler said in a statement.

These allegations were brought forward by Deborah Cook, a former employee of the prime contractor that subcontracted with E&P in the course of building the DOE facility. The whistleblowers' share of the settlement has not been determined.

A settlement has been reached to resolve False Claims Act allegations against Wisconsin Department of Health Services.

The allegations arose from a lawsuit that claimed the Wisconsin Department of Health Services (WDHS) violated the False Claims Act in its administration of the Supplemental Nutrition Assistance Program (SNAP), formally known as the Food Stamp Program.

According to the Department of Justice, as part of the settlement, WDHS admitted that, beginning in 2008, it utilized the services of Julie Osnes Consulting, a quality control consultant, to review the error cases identified by WDHS quality control workers. Allegedly, WDHS further admitted that based on instructions from Julie Osnes Consulting it implemented several improper and biased quality control practices, including: (1) finding a basis for dropping error cases from the review by discouraging beneficiaries from cooperating with information requests and pursuing unnecessary information; (2) selectively applying requirements and policies to overturn and reduce errors; (3) asking beneficiaries leading questions to obtain desired answers to eliminate error potential; (4) arbitrating any and all differences with USDA; (5) subjecting error cases to additional scrutiny and quality control casework with the goal of overturning an error or dropping a case; and (6) omitting verifying information in documents made available to USDA.

Reportedly, these practices improperly decreased WDHS’s reported error rate, and as a result, WDHS earned performance bonuses for 2009, 2010, and 2011 to which it was not entitled.

 "This settlement reflects the Justice Department’s commitment to ensuring that taxpayer funds are spent appropriately so that the public can have confidence in the integrity of programs like SNAP,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.