Hanford contractors to pay $58 million to settle claims of overbilling federal government

Federal prosecutors from Spokane announced Tuesday a $58 million settlement with two major contractors who acknowledged they improperly billed the government for thousands of hours not worked at the Hanford Nuclear Reservation near Richland.

The settlement was reached between Bechtel Corp. and AECOM Energy & Construction, which joined to form a subsidiary called Waste Treatment Completion Co., LLC, to bid on the multibillion-dollar effort by the government to clean up the Hanford site, which produced much of the plutonium for this country’s nuclear arsenal.

The case started after four whistleblowers came forward four years ago, alerting federal prosecutors about the alleged time card fraud, in which the companies billed the U.S. Department of Energy for millions worth of work that was never completed.

“It is stunning that, for nearly a decade, Bechtel and AECOM chose to line their corporate pockets by diverting important taxpayer funds from this critically essential effort,” Assistant U.S. Attorney Joseph Harrington said in a news release.

The settlement is one of dozens of cases where major contractors have been caught overbilling the government. They generally face stiff fines, agree to mitigations and are allowed to continue to seek lucrative government contracts that flowed from the cleanup efforts that started in 1989.

As part of the agreement, the contractors deny any liability in regard to further legal actions.

“As a company, we felt it was in the best interest of the project and our customer to resolve this matter so that we can avoid the distractions and expenses of a protracted legal proceeding,” Barbara Rusinko, president of Bechtel’s Nuclear, Security & Environmental global business unit, said in a statement.

The government created Hanford as part of the Manhattan Project during World War II to create nuclear weapons. Hanford produced the plutonium for the atomic bomb dropped on Nagasaki, Japan, that effectively ended World War II.

During the Cold War, Hanford produced about two-thirds of the plutonium for the nation’s nuclear arsenal, resulting in the nation’s largest collection of highly toxic radioactive waste.

The Waste Treatment Project, which is part the current settlement, started in 2001. Between that time and the present, the Department of Energy has paid billions to Bechtel and AECOM to design and construct the project to treat hundreds of millions of gallons of radioactive waste that is stored at the Hanford site.

To accomplish that project, the companies hired hundreds of electricians, millwrights, pipefitters and other skilled tradesman known as “craft” workers, according to court records.

Between 2009 and 2019, Bechtel and AECOM executives admitted to overcharging the government for “unreasonable and unallowable idle time” by craft workers even when those workers had no duties to perform. The company executives admitted they continued to overbill the government “even after Bechtel and AECOM knew they were under investigation for the improper billing practices,” the news release states.

Attorney Brad Brian, of San Francisco, who signed the agreement on behalf of Bechtel, could not immediately be reached Tuesday for comment.

The announcement Tuesday is the second major settlement agreement between federal regulators and Bechtel and AECOM. Those companies agreed to pay $125 million in November 2016 for allegations that they “knowingly violated quality standards at Hanford and used substandard materials” in constructing portions of the Waste Treatment Project.

As part of the same case, the companies acknowledged using federal funds to lobby Congress to cut the Department of Energy’s budget that went for independent oversight to catch the abuses that they agreed they committed.

Just like the prior case, Bechtel and AECOM entered into a three-year independent corporate monitor agreement going forward. The engineering and construction giants face an additional $10 million penalty if they violate the terms of that monitoring agreement.

“Requiring Bechtel and AECOM to admit to their conduct and to subject themselves to independent monitoring reflects not only the seriousness of this matter, but the USAO’s commitment to holding repeat offenders accountable, whether they are multinational corporations or individuals,” Harrington said in the release.

The case began in 2016 when four whistleblowers came forward with allegations of time card fraud. The individuals filed complaints that remained under seal as investigators began hundreds of hours to untangle the scheme.

As a result of coming forward, the whistleblowers will receive $13.7 million of the settlement amount. About $26 million of the settlement will be paid to the Department of Energy for restitution for the overbilling.

The order closing the file “with prejudice,” meaning the companies do not face further legal liability in the case, was signed today by U.S. District Court Judge Salvador Mendoza.

Harrington praised the work of the investigating agents to unravel the fraudulent time card scheme.

“Their hard work, persistence, and professional skill made this complex and challenging case possible,” he said. “This office will continue to work … to safeguard public funds, and protect the critical work being done at Hanford.”

Tom Clouse can be reached at (509) 459-5495 or at tomc@spokesman.com