The Qui Tam Team Blog Join In the Fight Against Fraud

Qui Tam Bites Big Oil

This post was written by Josh

A prominent member of Big Oil has joined the ranks of industries entering into multi-million dollar False Claim Act settlements with the government. In the latest case, Chevron has agreed to pay more than $45 million to resolve allegations that it underpaid royalties on natural gas leases for land owned by the federal government and Native Americans. This case shows that False Claims Act violations can pop up just about anywhere, with oil companies being more than willing to defraud tax payers and Native Americans out of royalties that are rightfully theirs.

Every month, oil companies must report to the Minerals Management Service of the U.S. Department of the Interior the value of the natural gas extracted from their federal and Native American leases. The companies must then pay a percentage of the value as royalties to the leaseholders. The Chevron companies allegedly used a variety of fraudulent tactics in order to avoid paying full royalties to the federal government and Native Americans. This was no short-term fraud, either. The Chevron companies allegedly bilked leaseholders for two decades!

A major issue in this qui tam suit was whether the whistleblower plaintiff's claims would survive his death. In U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.), the court ruled that the whistleblower's claims did in fact survive his death, meaning that his heirs were entitled to what would have been the whistleblower's share of the settlement. As a result, the whistleblower's heirs will receive $12,303,787.88, plus interest.

Regarding the settlement, the U.S. Attorney for the Eastern District of Texas said,

Perhaps it is part of the human condition to take advantage of others and to not conduct business in a honorable fashion.  But it will never be the right way to do business.  Today’s settlement affirms the basic truth that it is never a good idea to cheat.

When will corporations and individuals realize that defrauding the government is never the "right way to do business"? Perhaps never. As long as unscrupulous corporations and individuals can get their sticky fingers on the vast amounts of money spent by the government, the possibility of fraud will exist. Fortunately, there are individuals with honor and integrity who will blow the whistle on wrongdoers, whether they are bilking Medicare or stealing oil and gas royalties.