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BP’s $102 million settlement shows effectiveness of California False Claims Act

BP agreed to pay $102 million to settle a whistleblower lawsuit alleging it violated the California False Claims Act by overcharging the state and local governments for natural gas. (Image via Flickr)

The California False Claims Act, the oldest state false claims “qui tam” statute modeled on the federal False Claims Act, has shown once again its strength and efficacy in rooting out wrongdoing, this time in a recent whistleblower case against oil and gas giant BP.

BP agreed on Jan. 11 to pay $102 million to settle a whistleblower lawsuit brought under the California False Claims Act and alleging the company overcharged California cities, counties, agencies, and schools for natural gas. The state attorney general joined the case after investigating the allegations.

The California False Claims Act allows whistleblowers, like the former BP employee who filed this case, to sue companies that are defrauding government entities in California and collect a financial award of between 15 percent and 33 percent of the amount recovered. The whistleblower award in this case has not yet been made public.

The state law also provides protection and compensation for retaliation against whistleblowers.

Whistleblower Christopher Schroen filed his whistleblower complaint against BP in 2012. He alleged that the company overcharged California’s Department of General Services for natural gas through its Natural Gas Services program. The NGS program is the primary supplier of natural gas to California’s state and local governments. BP has been the exclusive supplier to the NGS program since it won the contract in 2004. Schroen worked at BP as an internal marketer of natural gas.

Since the California False Claims Act was passed in 1987, the state has put the law to good use. California has recovered well over $1 billion under the law, including more than $300 million from qui tam cases brought by Phillips & Cohen on behalf of its whistleblower clients.

While BP’s $102 million settlement is the largest cash payout by an oil company in a California False Claims Act case, Shell Oil gave up $150 million in reimbursements from the state and paid an additional $20 million in 2016 as part of a state false claims settlement for allegedly double billing the state for its work cleaning up underground storage tanks.

Other companies have paid even larger settlements under the law. In 2011, laboratory services company Quest Diagnostics paid $241 million for allegedly overcharging California’s indigent healthcare program, Medi-Cal, after a whistleblower filed suit under the California False Claims Act.

The BP settlement and other large settlements under the California False Claims Act demonstrate how seriously the state takes allegations of companies knowingly defrauding the state.

Following California’s lead, a number of other states adopted similar false claims laws based on the US False Claims Act. The federal government recovered $3.7 billion from False Claims Act cases in fiscal year 2017 alone. Although many false claims cases involve claims under both federal and state false claims acts, the BP case shows that cases involving solely state money can be successful.

For states that have yet to pass their own false claims laws (or have rescinded them) the BP settlement should give their lawmakers another reason to consider enacting such a law. As this settlement shows, states can recover millions of dollars of taxpayer money that would otherwise have been lost had there not been a state law that incentivizes whistleblowers to step forward.

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