We referenced corporate fraud under the federal False Claims Act in a recent blog post, noting in our September 27 entry that federal and state regulatory authorities have "long been concerned with fraudulent business activities, especially those essentially deemed as stealing from the general public."
As we further noted in that post, the government willingly interacts in select cases with private individuals having inside knowledge of fraud, sometimes intervening in so-called whistleblower or "qui tam" lawsuits and sharing money that is recovered from wrongdoers.
A recently announced settlement involving a major Texas corporate entity is quite representative of the manner in which fraud-driven whistleblower lawsuits often proceed and are resolved.
The case involves the global energy firm Shell Oil Co., which is domestically headquartered in Houston.
Like many other oil companies, Shell owns and operates gas stations, truck stops and related facilities across the country, with a large number of those being in California.
Environmental authorities in that state have a public program pursuant to which operators can apply for reimbursement following cleanups of underground storage tanks on their properties.
Shell has done that over the years, although, according to a whistleblower, with a twist: It allegedly collected payment for its remediation efforts on 100 tanks from an insurance company, and then engaged in double dipping by seeking to tap funds from California's public reimbursement program.
That didn't sit well with regulators, who now refuse to pay Shell a penny for what might otherwise have amounted to about $150 million. Moreover, the oil company is also now on the hook for about $20 million in penalties, some of which will go to the whistleblower who alerted authorities of the attempted double billings.
The matter emphatically underscores that an insider with knowledge of business fraud can materially affect an important public matter while at the same time profiting from his or her intervention.