In September, Chilivis Grubman attorneys wrote about a False Claims Act (“FCA”) settlement for $900K involving a Georgia-based defense contractor.  The settlement reminded all individuals and businesses doing business with the government that the FCA applies to all industries, not just healthcare.  Often the FCA is discussed in the context of a claim being submitted to the government for payment because the FCA prohibits any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government.  However, the FCA also prohibits the possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivering, or causing to be delivered, less than all of that money or property.  31 U.S.C. § 3729 (a)(1)(D).  The FCA further prohibits any person from knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim.  

In a recent press release, the U.S. Department of Justice (“DOJ”) announced a settlement that demonstrates these often-overlooked FCA applications – those involving non-healthcare businesses and related to money owed to the government.  According to the press release, Devon Energy Corporation and its affiliates, Devon Energy Corp., and Devon Energy Production Company LP (collectively, “Devon”) agreed to pay $6.15 million to resolve allegations it violated the FCA while acting as a lessee and removing natural gas from federal lands.

The U.S. government leases federal lands to companies for the extraction and production of natural gas.  In exchange for the lease, companies must pay the U.S. government royalties on the value of the gas produced.  These companies must convert the gas extracted and produced into a marketable condition at no cost to the United States.  The government’s royalties should not be affected by the cost to process and make the gas marketable. 

According to the government, Devon improperly deducted costs of gas transportation and processing when calculating royalties owed to the United States.  The government considers these expenses to be the cost of placing the gas in marketable condition.  Since Devon allegedly deducted this cost in its royalty calculations, the government alleges that Devon “thereby knowingly underreported and underpaid royalties to the Department of the Interior (DOI).”

This settlement provides another example of the DOJ’s willingness and ability to use the FCA as a tool to sue any company in any industry that does business with the federal government.  Any entity doing business with the federal government – in any industry – must follow contractual obligations to avoid running afoul of fraud, waste, and abuse laws like the FCA.  

The attorneys at Chilivis Grubman represent both companies and individuals in connection with government investigations, both criminal and civil, and in False Claims Act litigation.  If you have any questions related to such matters, please contact us today.