Federal prosecutors announced today a deal to have the world’s largest engineering firm, CH2M Hill, pay $18.5 million to resolve criminal and civil violations arising from a scheme to overbill taxpayers through time-card fraud at the Hanford Nuclear Site.
CH2M Hill contracted with the U.S. Department of Energy between 1999 and 2008 to manage and clean 177 underground storage tanks that hold radioactive and hazardous waste at Hanford, which produced nuclear weapons during World War II and the Cold War.
The fraud came as a result of employees for a CH2M Hill subsidiary, CH2M Hill Hanford Group Inc., overstating the number of hours they worked. Company officials agreed, as part of the settlement, that certain members of CH2M Hill management staff condoned the practice and furthered the fraud by submitting inflated claims for hours to the Department of Energy, U.S. Attorney Mike Ormsby said in a news release.
“This sort of systemic fraud is an appalling abuse of the trust we place in our contractors at Hanford and it simply will not be tolerated,” Ormsby said.
As part of the settlement the Colorado-based engineering firm – which designed both Spokane and Spokane County’s waste water treatment plants – will pay $16.5 million to resolve its civil liability under the federal False Claims Act.
The company also entered a non-prosecution agreement with federal prosecutors that calls for company officials to pay back $1.95 million in wrongfully obtained profits and dedicate $500,000 to pay for independent monitoring to make sure the company takes proper corrective actions.
John Corsi, vice president of media relations for CH2M Hill, said the company – which just Tuesday was recognized for the fifth consecutive year by Ethisphere Institute as one of the World’s Most Ethical Companies – is satisfied with the resolution with the government.
“It goes without saying that we are very disappointed by the conduct that made the settlement necessary,” Corsi said.
So far, eight former employees have pleaded guilty to engaging in the same time-card fraud scheme and conspiracy.
The investigation revealed that some of the fraud helped ensure performance-based incentives for some members of CH2M Hill’s upper management, according to court records.
Consequently, some managers and supervisors “accepted the practice of hourly workers … falsely claiming a full 8 hours even when the job took less than 8 hours,” according to the agreed statement of facts.
The government’s investigation also revealed that upper management did not discipline supervisors who were aware of the time-card fraud and “engaged in patterns designed to avoid detection of this routine … by law enforcement and internal auditors,” the court agreement states.
The fraud allegations came to light after former employee Carl Schroeder filed a whistleblower lawsuit. Schroeder later pleaded guilty to the scheme.
Under the False Claims Act, a private citizen can sue on behalf of the United States and share in the recovery. However, the law bars anyone from sharing in the recovery if, like Schroeder, they were convicted based on their role in the scheme.
Corsi, the company spokesman, said timecard fraud by certain employees at Hanford started before CH2M Hill became involved but a “lack of proactive steps to correct the problem” threatened the reputation of the Hanford workforce.
“This conduct was not consistent with CH2M Hill values, but it happened on our watch and we should have rooted it out sooner,” said Corsi, whose company’s website notes it was also recognized this month by Fortune as one the “World’s Most Admired Companies.”
Ormsby added that CH2M Hill management has agreed to “take substantial remedial steps going forward” including having its remaining subsidiary, CH2M Hill Plateau Remediation Company, consent to three years of monitoring in addition to paying $500,000 for that review.
Stuart F. Delery, of the Department of Justice, said in the news release that contractors owe a duty to taxpayers to accurately bill the government for work performed.
“This settlement demonstrates that the Department of Justice, working together with its law enforcement partners, will hold contractors accountable for false billing and restore wrongfully taken funds,” Delery said in the release.