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FCA and Antitrust Violations Will Cost Gunnison Energy and SG Interests for Anticompetitive Bidding

Gunnison Energy Corp. (GEC) and SG Interests I Ltd. and SG Interests VII Ltd. (SGI) have reached a settlement with the Justice Department, requiring the companies to pay $550,000 for violations of the False Claims Act and the Sherman Act. The charges grew out of a “no compete” agreement regarding bidding for natural gas leases sold at auction by the Bureau of Land Management (BLM).

Based on information provided by a whistleblower, the federal government became aware that GEC and SGI had made a written agreement that only SGI would enter bids at the BLM auctions and that an interest in the leases would then be assigned to GEC. BLM requires the company obtaining the leases to certify that its winning bid did not result from collusion with another company. Because the companies both took an interest in the leases but refused to bid competitively for them, the federal government received less money for the sale of the leases than it would have in a competitive environment.

A whistleblower filed the original lawsuit under the False Claims Act’s qui tam provisions, which allow private parties to sue on behalf of the U.S. government to address fraud against the government. The United States then has time to investigate and decide whether to intervene in the lawsuit or allow the whistleblower to proceed alone. In either event, the whistleblower who brought the fraud to light is entitled to a portion of any recovery.

The $550,000 payments from GEC and SGI will resolve both the antitrust charges against the companies and civil claims under the False Claims Act that are based on false statements made by GEC and SGI in connection with the anticompetitive bidding agreement.

This case represents the Justice Department’s first challenge to an anticompetitive agreement on bidding for mineral rights leases. As Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, noted, it is critical for our country’s financial interests in these tight economic times that the federal government obtain the most competitive prices for the BLM mineral leases.

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