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BP sued by Minnesota for fraud over $25 million in tank cleanups

The Minnesota Commerce Department on Monday sued BP PLC, alleging that it has fraudulently collected more than $25 million from a state fund while also being reimbursed by insurers for cleaning up leaking underground petroleum tanks.

The lawsuit alleges BP violated the Minnesota’s False Claims Act, which carries the risk of triple damages.

The state also accuses the oil company of misrepresentation, fraud and unjust enrichment.

“They lied on their applications,” said Minnesota Commerce Commissioner Mike Rothman, whose department sued BP in Ramsey County District Court seeking reimbursement and other damages, civil penalties and interest.

BP denied wrongdoing and said its dealings with the storage tank funds have been proper.

“BP acted at all times in good faith, and believes its dealings with the Minnesota state underground storage tank fund have been proper,” spokesman Jason Ryan said in an e-mail. “BP plans to defend itself against the allegations in the complaint.”

The lawsuit, filed in Ramsey County District Court, is the fourth and largest case the state has brought against an oil company for allegedly double dipping from the state Petroleum Tank Release Cleanup Fund and private insurers.

Last July, Chevron, ExxonMobil and ConocoPhillips agreed to settlements, paying $7.4 million to the fund, also known as the Petrofund. The fund was created by the Legislature in 1987, and it is supported by fees on petroleum products.

Minnesota is one of several states to accuse oil companies of double dipping on tank cleanups. Montana in 2011 also brought a lawsuit against BP over that state’s tank cleanup program. A Montana official said the case is still pending.

Rothman said the Minnesota Department of Commerce still is investigating one other oil company for alleged double dipping. He declined to identify the company because the case is under investigation. He said the investigations began after state officials learned that oil companies had been caught in other states engaging in similar misconduct.

The amount of damages sought in the BP case dwarfs that of the other companies investigated in Minnesota.

Rothman said BP built a vast U.S. retail presence through acquisitions, resulting in the need to clean up many tank leaks. BP’s retail network includes former Standard, Amoco and Arco stations across the state.

Minnesota state agencies have worked for decades to clean up more than 18,000 leaking underground petroleum tanks.

The Minnesota Pollution Control Agency handles the technical work and the Commerce Department oversees reimbursements from the Petrofund.

From 1988 until now, BP submitted 1,407 applications to the fund for cleanups of underground storage tanks around the state, the suit alleged. In each case, the suit said, BP was required to say whether it had insurance to cover the cleanup.

In every case, the suit alleges, BP had insurance coverage that it concealed from the five-member Petrofund board.

BP and its predecessor, Amoco, even went to court against insurers to collect on policies through settlements of nearly $300 million, the suit said. http://www.startribune.com/business/244817071.html]
From Reuters:

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A pioneer in cleaning up toxic messes, Thomas Schruben long suspected major oil companies of being paid twice for dealing with leaks from underground fuel storage tanks - once from government funds and again, secretly, from insurance companies.

Schruben, a detail-oriented Maryland environmental engineer who helped draft government pollution rules going back 30 years, looked for a lawyer to help ferret out what he believed could in some cases be fraud. He found a partner in Dennis Pantazis, a buoyant, mustachioed son of Greek immigrants in Alabama known for bringing environmental and civil rights cases.

"Together we started unraveling the mystery," Schruben said.

The U.S. Environmental Protection Agency, Schruben's former employer, has called the rusted, leaky steel tanks the single largest threat to groundwater in the United States. Often built for gas stations during the 1950s and '60s highway construction boom, the tanks corroded over time, spilling gas and diesel with

potentially cancer-causing chemicals under properties and into aquifers.

The two men assembled a team of lawyers, investigators and experts to search public records and case files for evidence and brought their findings to state governments, hoping to be hired as advisers or legal counsel. New Mexico paid more than $1 million in attorney fees after one $5.2 million settlement from Chevron last September.

They now are involved in around 20 cases across the country and officials in several states said they could never have brought the cases without Schruben, Pantazis and their team.

Court documents show many of the cases and settlement agreements follow a similar pattern, accusing the oil companies of "double-dipping" by collecting both special state funds and insurance money for the same tank cleanups. Some states say any insurance payouts should have gone to them since they covered the cost of the work.

"It appears this was a really common practice and it's very disconcerting," Colorado Attorney General John Suthers said in a phone interview. "Basically the companies were defrauding the state." Colorado has so far signed settlement agreements with three companies for $35 million, according to documents seen by Reuters.

While the underground tank expert and the lawyer are reluctant to discuss details of ongoing litigation, Reuters found nine states have won settlements worth more than $105 million with four companies in the past three years - Chevron, Exxon, ConocoPhillips and its downstream arm Phillips 66, and Sunoco.

In none of the settlements or comments to Reuters did companies admit wrongdoing.

Lawsuits are pending in at least seven other states.

Pantazis declined to say whether he was involved in all the cases Reuters found.

Some oil companies said they were cooperating with officials. Exxon, in particular, said it informed the states about cases in which it found it was paid twice. In the settlement documents, companies say they followed the law when receiving reimbursement from the funds.

The settlements represent a tiny amount of money for oil firms but can make a big difference for cash-strapped states.

UNTOLD STORY

Schruben left the EPA in the 1990s to work at insurance companies and as an independent consultant. After years working on the tank cleanups in and out of government, he started developing suspicions. But it took a deeper look at documents from state tank funds and insurance litigation, some going back as far as the 1940s, to start uncovering answers.

He laid out the kind of information the group found in a PowerPoint presentation given in 2009 to Arizona's Department of Environmental Quality, which oversees that state's underground tank fund. It was obtained by Reuters through a Freedom of Information request.

The first slide declares: "The state cleanup fund paid for the clean up: Major oil collected the same dollars from their insurance carriers!"

It shows how the team - with documents uncovered by their legal research - matched specific gas stations covered by multimillion-dollar insurance payouts with the same stations that had received state funds.

Insurance companies are not named as parties in any cases and the policies cited go back many years and cover a wide range of liabilities, not just underground tanks.

STATE FUNDS

Approximately 40 states and the District of Columbia have special funds to cover the costs of removing and replacing the old tanks, excavating tainted dirt and pumping out dirty groundwater.

Since 1988, there have been more than half a million leaky tanks reported across the country. Nearly 80,000 spills still are waiting to be cleaned up.

In the New Mexico settlement last September, court documents show the origin of the case against Chevron was a sealed lawsuit filed by Schruben and Pantazis' team in 2009 under a state law designed to protect taxpayers from fraud.

One document from 2006, for example, shows Chevron received a check for $19,000 from the state to clean up and monitor a leak at a gas station in the small, southern New Mexico town of Artesia. On the application to receive money from the tank fund, the company checked "No" next to the question: "Do you have insurance?"

The lawsuit accused Chevron of receiving insurance payouts to deal with many kinds of environmental contamination, including policies that would have covered leaks at the gas station in Artesia - a fact it kept hidden from the state.

"When I first saw these cases, I thought this is kind of incredible," said New Mexico assistant attorney general Seth Cohen, who handled the lawsuit for the state. "The oil companies have, in effect, profited off polluting."

Cohen said prosecutors would not have known about the problem if the duo and their team had not filed the lawsuit.

Chevron spokeswoman Sheila McNulty said the company had negotiated with the states in good faith to reach agreements in which the company does not admit any fault.

Chevron "takes seriously any allegation that it made misrepresentations or otherwise acted improperly (and) is conducting on-going dialogue with various state officials," she wrote in an email.

A separate case against Exxon is pending in New Mexico.

Exxon spokesman Todd Spitler said that in 2004, the company told 24 states it had discovered insurance payouts it received on top of state claims and, in some cases, voluntarily offered compensation.

"ExxonMobil has always sought to act transparently and honestly with all of the state funds - both in the communications of our actions and in the filing of reimbursement claims," Spitler wrote in an email.

Some companies challenged the accusations in court. For example Phillips 66, the arm of ConocoPhillips, denies in court documents that its insurance policies covered underground storage tank leaks. A ConocoPhillips spokesman declined to comment beyond the court filings.

Other companies involved in lawsuits, including Shell and Sunoco, said they do not comment on ongoing litigation. A BP spokesman said, "The claims in the complaints are without merit, and BP plans to defend itself against the allegations."

CIVIL SUITS

The lawsuits against the oil companies allege fraud or other civil, not criminal, claims, which have a lower burden of proof and do not lead to jail time.

Pantazis said the companies were largely cooperating to forge settlement deals and were interested in partnering with the states to clean up the legacy of petroleum leaks.

"In some instances you might say these were intentional actions. In some instances it may have been a case of the right hand not knowing what the left hand was doing," Pantazis said.

More settlements are expected. In Arizona, Chevron and Exxon settled claims out of court, with Chevron paying $14 million last April and Exxon paying $11.5 million in 2011. In November, Utah settled a case for $2 million with ConocoPhillips/Phillips 66, according to documents from the office of the attorney general.

New Mexico has around $13 million per year to spend on cleaning up leaky tanks and returned about $4 million to the fund, said Cohen, the state's assistant attorney general.

"They certainly can put this money to very good use." http://planetark.org/wen/71031

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