Abraham Lincoln and Environmental Justice – Department of Justice Highlights Civil War-Era False Claims Act under Environmental Justice Enforcement Strategy

On May 5, 2022, Attorney General Merrick Garland  and EPA Administrator Michael Regan issued a comprehensive environmental justice enforcement strategy designed to improve and promote environmental justice through the Department of Justice (Strategy)  Along with creating an Office of Environmental Justice within the Department of Justice (DOJ), The Strategy focuses on four principles:

  • Prioritization of cases that reduce public health and environmental harms to overburdened and underserved communities;
  • Maximizing the use of all available legal tools to address environmental justice concerns;
  • Ensuring meaningful engagement with impacted communities; and
  • Promotion of transparency regarding environmental justice enforcement efforts and their results.

Much of the strategy is consistent with previous guidance and presidential directives. It seeks to “provide a roadmap” for using DOJ’s enforcement authorities “to advance environmental justice through timely and effective remedies for systemic environmental violations and contaminations … in underserved communities that have been historically marginalized and overburdened.”  Of particular interest is the strategy’s focus for DOJ  to use “all enforcement authorities,” including “tools outside of the traditional environmental statutes” as well as increased coordination with other federal agencies when addressing environmental justice issues.  The Strategy indicates that DOJ should look at other statutes and laws including civil rights laws, worker safety and consumer protection statutes, and the False Claims Act (FCA).  In addition, the Strategy encourages coordination with other relevant agencies including the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration; the Department of Defense; the Department of Commerce; the Department of Energy; the Food and Drug Administration; the Consumer Products Safety Commission and the Department of Labor’s Occupational Safety and Health Administration.

 The highlighting of the False Claims Act provides an interesting twist to particular enforcement remedies available to the Department of Justice.  The Strategy indicates that DOJ attorneys should use its investigative authorities under the FCA to investigate potential violations of “material public health-related grant or contract conditions pertaining to impacted communities”   and may be helpful as it allows DOJ to “share the investigative burden otherwise falling solely on administrative agencies.”  The Strategy also notes that the damages available under the FCA may provide greater deterrence than otherwise available under environmental laws, noting that “in the case of large grants for which materially false statements about compliance with environmental or public health-related conditions have been made—may provide significantly greater deterrence than penalties under the environmental statutes alone.”

What is the False Claims Act?

The FCA is the federal statute setting criminal and civil penalties to address fraudulent claims for federal funds and is known as one of the earliest qui tam – whistleblower- laws.[1]  The FCA dates back to the Civil War when Congress was concerned that suppliers of goods to the Union Army were defrauding the Army.  The FCA was used to recover money from unscrupulous contractors who sold the Union Army decrepit horses and mules, faulty munitions and rancid food.  At President Lincoln's insistence, the statute included a "qui tam" provision, offering a generous reward to informers who assisted the government in prosecuting fraud.  As a result, the FCA may be enforced either by DOJ or by private “whistleblowers.”  Notably, the FCA encourages whistleblowers to identify FCA violations by allowing them to share in the government’s recovery.  If an FCA suit brought by a private individual succeeds, the private party may receive up to 30% of the government's award.

What is the recovery?

The FCA provides that any person knowingly submitting false claims to the government is liable for three times the dollar amount that the government was defrauded and civil penalties, with penalties ranging from  $12,537 to $25,076 for each false claim.  If an FCA suit brought by a private individual succeeds, the private party may receive up to 30% of the government's award, along with attorneys’ fees, costs and expenses.  FCA settlements can result in payments in the millions of dollars.

How does a company fall within the web of FCA compliance?

The typical FCA defendant is a company that holds federal contracts, or receives federal funds through state, local or private programs or through federal loans. Although typical claims are often for overbilling the government or falsely obtaining federal funds through egregious circumstances (e.g., Medicaid fraud; COVID fraud), a company may also be implicated by “falsely” certifying compliance with environmental laws on a loan application. For instance, in 2019, a feed manufacturer agreed to pay $1 Million for falsely certifying compliance with federal environmental laws on a loan application. The Department of Justice successfully demonstrated that the defendant knew that is was not in compliance with the Clean Water Act when it submitted an application to the Department of Commerce for a $10 million loan.  In 2016, a major aeronautic contractor agreed to pay a $5 million penalty for misrepresenting compliance with the Resource Conservation and Recovery Act when submitting claims for payment from the Department of Energy.

Why is the “call out” of FCA in the Strategy a concern?

A company may be subject to an “environmental” FCA suit if it has any type of contract with the U.S. government wherein it indicated “compliance” with environmental laws.  As most practitioners know, the range of environmental laws is extensive and it is not difficult to be out of compliance with what are typically strict liability laws.  Potential FCA claims can be made by DOJ against a company located in an Environmental Justice area by simply determining whether the company has a government contract that contains provisions requiring environmental compliance, determine if the company made representations of compliance in seeking funds and then identify violations of environmental requirements through required monitoring or other reports.  Going a step further, such records may lead to easy-to-establish qui tam whistleblower actions.  FCA allows any person to bring a qui tam action.  A nongovernmental organization easily can obtain a wide range of government contracts from online databases and Freedom of Information Act requests.  Similarly, the NGO may obtain monitoring reports under the Clean Water Act, the Clean Air Act and similar environmental programs.  Linking those two together could lead to FCA claims.

It is also of concern that FCA claims and environmental justice concerns are not a natural fit.  Environmental justice policy looks to make things “better” for a community through increased compliance with environmental laws.  FCA claims basically are a “money” issue.  Unlike an enforcement action or “citizen suit” under environmental laws, it is not seeking “compliance” but rather recovery of money and fines.  In addition, unlike a citizens’ suit under environmental laws where the citizen is restricted to recovery of attorney fees and injunctive relief; a qui tam whistleblower recovers a portion of the penalty along with attorney fees and costs, while not causing the target to come into compliance with environmental laws. 

In the end, the recommendations remain the same for a company operating a facility within an “Environmental Justice” community.  Understand your compliance; provide outreach to the community and be ready for increased compliance monitoring.  If a company has some type of agreement with the US government such as a contract for services or supplies or a federal loan, a company should review the underlying agreement to confirm what is expected in terms of environmental compliance.   If a facility is out of compliance, the company may consider bringing this issue to the attention of the government to avoid “false” claims that could implicate a FCA action.

[1] 31 U.S.C. §§ 3729 - 3733  

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