Fuel Firm That Cheated Customers Owes $3.2M After Guilty Plea

HUDSON VALLEY – A Hudson Valley fuel company that cheated school districts, prisons, town governments, and state agencies as well as local businesses for more than 10 years will pay more than $3.2 million in restitution as part of a guilty plea entered Tuesday in Wappingers Falls Justice Court. The case was prosecuted under the New York False Claims Act.

That act entitles whistleblowers who report fraud against the government to a share of the recovery. The whistleblower in this case will receive $491,358 for bringing the misconduct to light, Attorney General Barbara D. Underwood and State Comptroller Thomas P. DiNapoli announced.

The biggest victims, according to the lawyers for the whistleblower, include: the Taconic Developmental Disabilities Services Organization ($281,630), the Greenhaven Correctional Facility ($145,957), Roundout Valley Central School District ($83,044) and Beacon City School District ($10,375). Towns getting restitution include Saugerties, Blooming Grove, Monroe, Hunter, Wappinger and Stanford.

Morgan Fuel & Heating Company, Inc., which conducts business as Bottini Fuel, pleaded guilty Tuesday to a charge of falsifying records. Bottini Fuel also settled a civil case.

“Bottini Fuel orchestrated a brazen scheme to defraud its customers for the benefit of the company and its owners,” Underwood said in the announcement. “This conduct was longstanding and harmed individual, business, and government customers. We are grateful to the whistleblower who helped bring this illegal conduct to light and are pleased to be able to give back the money rightfully owed to Hudson Valley customers.”

Bottini Fuel, headquartered in Wappingers Falls, provided heating oil to customers throughout the Hudson Valley.

From 2004 to 2016, Bottini Fuel improperly held onto customer overpayments and duplicative payments for heating oil. Company officials didn't tell customers that they had overpaid for heating oil; instead, the company swept excess customer balances out of customer accounts and used them to benefit its owners and employees. The company admitted to this conduct as a term of the civil settlement, which can be found here.

The civil and criminal investigations began in 2015 after a whistleblower filed an action pursuant to the qui tam provisions of the New York False Claims Act.

First, the Attorney General’s Taxpayer Protection Bureau commenced a civil investigation. Its preliminary findings revealed substantial indications of knowingly fraudulent conduct. Thereafter, the Attorney General’s Criminal Enforcement and Financial Crimes Bureau, in conjunction with the New York State Office of the Comptroller, commenced a parallel criminal investigation into Bottini Fuel, which included the execution of a search warrant at Bottini Fuel’s corporate headquarters.

When a customer overpays for heating oil, a provider normally either applies credit balances to future purchases of oil or refunds the credit balance to the customer.

The Attorney General’s investigation revealed that instead of doing this, Bottini Fuel regularly transferred such overpayments, or credit balances, out of customer accounts and into fictitious intermediate “dummy” accounts in the company’s sales database without the customer’s knowledge. Once credit balances were transferred, customer accounts would show a zero balance, which was also reflected in subsequent bills and/or invoices to customers.

The credit balances transferred into dummy accounts were then diverted to customer accounts held by Bottini Fuel’s owners, friends, family members, certain employees, and businesses in which Bottini Fuel’s owners held an interest.

Those transfers offset their balances, reducing amounts owed for fuel usage; in essence, Bottini Fuel used regular customers’ money to pay for their own personal fuel expenses and those of their friends, families, and other businesses.

The Attorney General’s investigation revealed that Bottini Fuel had transferred a total of $1,762,771 in customer funds, including $590,887 from government customers.

Pursuant to today’s guilty plea, Bottini Fuel paid $1,762,771 in criminal restitution to the Attorney General’s Office. The Attorney General’s Office will contact all defrauded customers to distribute the restitution owed. In the event that certain customers cannot be located, money relating to their accounts will be deposited with the New York State Comptroller’s Office of Unclaimed Funds, where they can be claimed in the future.

“Bottini Fuel systematically defrauded private customers and municipalities out of rebates they were due,” said DiNapoli. “Thanks to my partnership with Attorney General Underwood millions are now being returned to the taxpayers. I will continue to work to safeguard the expenditure of public funds and partner with law enforcement to punish those who attempt to defraud the public.”

Bottini Fuel must pay an additional $1,500,000 in civil fines and penalties.

The Attorney General expressed her appreciation to the whistleblower, without whose information the misconduct might have remained concealed from the authorities, and to the whistleblower’s attorneys.

The resolution marks the first time that the New York False Claims Act, which empowers and rewards whistleblowers who report a fraud against governments, also led to a criminal conviction and restitution for victimized New York consumers, according to Getnick & Getnick, the firm that represents the whistleblower in the case, whose identity remains protected.

The whistleblower will receive 23.5 percent of the government’s recovery in the settlement, the largest percentage ever for any New York False Claims Act case not involving Medicaid.

Getnick & Getnick partners Richard Dircks, Margaret Finerty, and Neil Getnick worked closely with the Attorney General’s Office in the successful prosecution and resolution of this case.

“We appreciate the effort of the Attorney General’s office to work with us and our client to prosecute this important case and bring justice and restitution to hundreds of customers throughout the Hudson Valley, ranging from homeowners and businesses to schools, towns, and state facilities,” said Richard Dircks.

Margaret Finerty, a former NYC Criminal Court Judge and former Deputy Chief of the Manhattan District Attorney’s Office Frauds Bureau, said “This case demonstrates how the New York False Claims Act can be used as a fraud-fighting tool alongside the criminal law to achieve justice for all the victims, private individuals as well as government entities.”

Managing Partner Neil Getnick added, “This case illustrates the unusual strength of New York’s False Claims Act and serves as a guiding example for how this whistleblower law can be used to target scams aimed directly at consumers. This approach will become increasingly important as mandatory arbitration and class action limitations impede consumer fraud enforcement.”

Image via Google maps

Get Patch’s Daily Newsletter and Real Time News Alerts
>> Check Out The Hudson Valley Patches' Facebook Pages