March 7, 2013 in City

Hanford contractor CH2M Hill to pay $18.5 million for fraud

Feds found employees overbilled taxpayers by inflating hours worked on time cards; eight have pleaded guilty
By The Spokesman-Review
 
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Background and the latest updates

Whistle-blower

The fraud allegations came to light after former employee Carl Schroeder filed a whistle-blower lawsuit. Schroeder later pleaded guilty to the scheme.

Federal prosecutors announced Wednesday 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 plutonium 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 acknowledged, as part of the settlement, that certain members of its 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’s and Spokane County’s wastewater treatment plants – will pay $16.5 million to resolve its civil liability under the federal False Claims Act.

The company also agreed 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 on Tuesday was recognized for the fifth consecutive year on Ethisphere Institute’s World’s Most Ethical Companies list – 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 time-card fraud scheme.

The investigation revealed that some of the fraud ensured performance-based incentives for some managers, 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 whistle-blower 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 unless, like Schroeder, they were convicted based on their role in the scheme.

Corsi, the company spokesman, said time-card fraud by some Hanford employees 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.

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