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Heating Oil Company Case Highlights A New Take On The False Claims Act

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A heating company in the Hudson Valley pleaded guilty this week to defrauding customers, and will pay more than $3.2 million in restitution. The lawyer for the whistleblower says this is New York’s first whistleblower case leading to a criminal restitution recovery for individual consumer fraud victims. Meantime, the Dutchess County comptroller will audit all bills related to the company.

Dutchess County-based Bottini Fuel pleaded guilty Monday to falsifying business records. New York state’s attorney general and comptroller say the company was diverting credit balances to benefit its owners and employees from 2004 to 2016. They say Bottini has paid more than $1.7 million in criminal restitution and, under a separate civil agreement pertaining to False Claims Act violations, must pay an additional $1.5 million in fines and penalties. Defrauded customers include homeowners, schools, towns and governments. Manhattan-based law firm Getnick & Getnick represents the whistleblower, whose identity remains protected. Neil Getnick is managing partner.

“While the case is traditional in that the False Claims Act is typically used to recover funds for defrauded governmental entities, and we did that here, we also were able, working together with the attorney general’s office, to fashion a parallel remedy resulting from a criminal conviction leading to criminal restitution for all of the private consumer victims,” Getnick says. “And that’s very new and very different to be using a state or federal False Claims Act case to get criminal restitution allowing private citizens and private entities to get full restitution.”

The approach, says Getnick expanded application of the False Claims Act as a consumer fraud enforcement tool; that is, applying the measure to private individuals. He says this is a first, not only in New York, but in the country.

“Here is a situation where private citizens were being impacted and the government itself was a consumer of those same utility services. Looking more broadly, therefore, if one is able to point to a fraud on the government in the provision of utility services or other consumer services, it’s likely you will also expose parallel activity adversely affecting private consumer and provide a remedy for those private consumers as well,” says Getnick. “So that means using the False Claims Act to expand the fight against consumer fraud which is, in my view, a big deal.”

Bottini family members sent an email Wednesday to customers saying they are embarrassed by their failure to handle the matter right and apologizing to affected customers. They go on to say they did not follow regulations and it was wrong. The Wappingers Falls-based company that has been in business for more than 60 years says 87 residential customers were affected, and mostly by Bottini’s failure to pass along money to the state left unclaimed when customers closed their accounts. In 2016, Bottini began putting safeguards in place to make sure the company is compliant with state regulations.

Getnick says 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.

Dutchess County Comptroller Robin Lois says the county stopped using Bottini in September. As a result of the case, she says her office will undertake a review of all payments from Dutchess County to Morgan Fuel & Heating Company, doing business as Bottini Fuel.

“Well, because I saw that saw that so many of the victims were governmental agencies and local municipalities, I think it’s very important that we give the residents of Dutchess County the confidence of knowing that we’re doing our own investigation and doing our own audit on not just on Bottini but on all utility companies that service us as their customers,” Lois says.

In addition, Lois says the county has entered into a contract with a utility auditing firm to assist in undertaking a review of all utility and telecommunication accounts held by Dutchess, for a six-year period.

“We are hiring a firm that works on a contingency basis so it’s not going to cost the taxpayers any money to do it. They would get, if they recover some funds for us, they get a portion of that, but they specialize in it, so it’s really great. So our office can work with them to get all the utility information but, because they have an expertise in it, they can teach us what they’re looking for and the types of things that they’ve found in the past,” says Lois. “They’ve recovered a lot of money for many different governmental agencies and municipalities. So it’s good to work with them so that we can learn and possibly be able to do it in the future on our own.”

In the Bottini case, attorneys say the most impacted customers include Taconic Developmental Disabilities Services organization; Green Haven Correctional Facility; Rondout Valley Central School District; and Beacon City School District. Towns that will receive restitution include, in Dutchess County, Stanford and Wappinger; Hunter in Greene County; Blooming Grove and Monroe in Orange County; and Saugerties in Ulster County. The Attorney General’s office will contact all defrauded customers to distribute restitution.

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