California Sues BP for Violations of False Claims Act
The state of California has joined in a lawsuit against BP, the British energy giant, in a whistleblower action that was originally brought by a former BP employee, Christopher A Schroen, and alleged violations under the False Claims Act. Since Schroen’s suit, Los Angeles County, the University of California Board of Regents, and the Trustees of California State University have also joined the suit alleging that between 2004 and 2012, BP defrauded the state of California of up to $300 million.
BP is the exclusive supplier of natural gas to California state buildings, including university and state government agency buildings. California entered into a long-term, $250 million annual contract with BP for natural gas, intending to leverage its immense buying power to secure favorable prices and protect itself from unexpected spikes in the cost of natural gas.
However, allegedly, the oil company did not buy gas for the state at competitive prices, and then knowingly sold it at inflated prices, padded its billing by exceeding the agreed-upon maximum profit margin of 15%, and hid these excess charges “in an intentionally convoluted fashion so the state could not unwind the transactions.”
The California Attorney General’s Office is alleging that these actions are violations of the False Claims Act, which can impose hefty liability on persons and entities who defraud governmental programs. Indeed, because it was allegedly overcharged, the state of California is looking to recoup between $150 million and $300 million, and is also hoping to win treble damages which are available in False Claims Act cases.
According to the lawsuit, BP management “had actual knowledge” that the company was overcharging California state agencies, and that BP management also knew that the company was billing California for more than it charged similar bulk clients. A spokesman for BP states that the allegations are “meritless.”
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