United States: State Water Resources Control Board Gets New Tools To Fight Fraud On Underground Storage Tank Cleanup Fund

Senate Bill No. 445 ("SB 445"), signed into law by California Governor Brown late last year, makes several significant changes to the Barry Keene Underground Storage Tank Cleanup Trust Fund Act of 1989 ("The Fund Act").  The Fund Act created a fund (the "Fund") that provides eligible owners and operators of petroleum underground storage tanks the means to meet federal and state financial responsibility requirements and pay for the costs of cleanup of petroleum releases. Significantly, SB 445 has given the State Water Resources Control Board (the "Water Board") a whole host of new enforcement tools to target those suspected of defrauding the Fund.

Important Changes to the Law

The new law extends the Fund's operations for an additional ten years.  Provisions of the Fund Act that were scheduled to be repealed on January 1, 2016, will now continue in effect until January 1, 2026. 

The bill makes several changes to the Fund Act, including requiring that owners and operators of single-walled underground storage tanks permanently close those tanks by December 31, 2025.  The law also lowers the maximum amount that the Water Board will pay for corrective action on a site from $1,500,000 to $1,000,000.

Perhaps most significantly, the changes to the Fund Act reflect a significant focus on targeting suspected Fund fraud.  Fund fraud typically arises in two ways: a claimant submits a false or fraudulent claim as part of a request for reimbursement, or as part of the Fund's investigation of the legitimacy of the claim, perhaps by conducting an audit, the claimant obstructs the audit by refusing to provide documents the claimant is required to provide or provides false documents.

The new provisions of the Fund Act include new, streamlined procedures for prosecuting claimants who are suspected both of obstructing justice during a Fund audit, and suspected of defrauding the Fund in connection with the submission of a request for reimbursement. In addition, the new law arms the Water Board with new penalties that may be imposed on claimants found guilty of those violations.

Generally speaking, the Water Board now has three different venues in which to seek redress for misconduct in connection with the Fund's operations instead of two: have the Attorney General's Office file criminal charges in a criminal court, have the Attorney General's Office file a civil complaint, or have the Water Board file an administrative complaint in front of an administrative law judge. 

With respect to a claimant who is suspected of filing a false or fraudulent claim, it was previously the case that the Water Board had to rely on the Attorney General to file a civil lawsuit for fraud, or an action under the California False Claims Act, which contains a treble damages provision and also allows for a civil penalty of between $5,500 and $11,000.

Pursuant to the new provisions of the Fund Act, the Water Board itself, without the involvement of the Attorney General, can file an administrative lawsuit against anyone who makes a misrepresentation in any claim or other document submitted to the Fund relating to a claim.  Significantly, the claimant may be subject to civil liability of up to $500,000 for each violation. 

In addition to these new civil remedies, the Fund Act now includes a provision that imposes criminal penalties on anyone who knowingly makes a false statement, material misrepresentation, or false certification to the Fund in support of any claim.  Previously, the Attorney General could only bring criminal charges under Penal Code 72, which criminalizes presenting false claims to the state.  The Fund Act now contains its own criminal penalty provision very similar to Penal Code 72 but very much more specific.  As before, only the Attorney General, not the Water Board, can initiate criminal prosecutions.

With respect to obstructing a Fund audit, it was previously the case that there was no civil liability that the Water Board could impose.  The Water Board's only recourse was to refer the matter to the Attorney General's Office for criminal prosecution under a general criminal obstruction of justice statute.  Now, for conduct that may not be egregious enough to result in a criminal prosecution, the Water Board has the option of initiating an administrative action against anyone who fails or refuses to furnish information or furnishes false information to the Fund.  Individuals who are guilty of this misconduct may be subject to civil liability of up to $10,000 for each violation. 

Furthermore, the Fund Act now contains a debarment provision that authorizes the Water Board to permanently disqualify from further participation in the Fund contractors or consultants who have been found civilly or criminally liable, and authorizes the Water Board to permanently disqualify claimants from further participation with respect to claims that are the subject of the civil or criminal action. Previously, permanent disqualification was something that the Fund could only achieve through negotiation.  

These enhanced enforcement powers follow on the heels of an April 1, 2013 decision to make permanent the Fraud, Waste and Abuse Prevention Unit in the Fund's Office of Enforcement.  There can be no doubt that enforcement of Fund fraud is here to stay. 

What These Changes Mean for Claimants

The changes recently made to the Fund Act empower the Water Board to proceed administratively in civil actions against claimants, rather than involve the Attorney General to bring a civil case in state court, as was previously required.  This means that the Attorney General's Office, the state's traditional litigation arm that previously was responsible for reviewing and litigating these matters, no longer needs to be involved.  As a result, the Water Board now has expedited power to sue claimants without having to involve the Attorney General's Office. 

Since these administrative proceedings are governed by common-law rules, they do not have to be conducted according to traditional court rules relating to evidence, discovery, or witnesses.  In typical court cases, these rules collectively provide important "due process" rights for defendants such as the right to conduct discovery, the right to have adequate time to prepare for trial, and the right to a jury trial.  The informal hearing procedures that will now be used by the Water Board in civil cases are intended to create a forum resembling a conference at which the parties have an opportunity to be heard by the presiding officer.  They are intended to be simpler and more expeditious than civil proceedings or formal hearings.  In these types of informal hearings, claimants will have very little, if any, ability to conduct discovery, and will not be entitled to a jury trial.  Parties appearing in these administrative hearings will in most cases be limited to presenting and rebutting evidence, including witnesses, and making closing statements; however, the presiding officer can limit or even eliminate any of these rights.

As a result of these changes, there is a greater possibility that a Water Board investigation, which typically includes an audit, can turn very quickly into an administrative complaint that can speedily result in a judgment against a claimant.  There will be much less time to get organized and prepared to respond than there has been in the past.  There may also be little legal ability to conduct discovery or obtain information from third parties such as subcontractors, local oversight agencies, and even the Water Board itself in order to prove one's innocence.  It is therefore imperative – now more than ever – that owners, operators and contractors be prepared for the possibility of an enforcement action before they even have notice of it.  This preparation should include keeping all records, including sub-contractors' records, up to date and organized, and to keep counsel informed of any Water Board inquiries or other actions regarding Fund claims.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
28 Aug 2019, Webinar, San Francisco, United States

This CLE webinar will analyze the potential antitrust ramifications of joint ventures (JVs) and other collaborations between competitors and how to balance the pro-competitive efficiencies against the anti-competitive effects of a proposed JV.

1 Oct 2019, Other, Washington, DC, United States

Orrick is proud to host the AIPN for its final breakfast meeting of 2019 for a session titled “Helping the World Gasify”. As natural gas production and use is very unevenly distributed throughout the world, often gas produced in association with crude oil is sold below cost or flared.

25 Nov 2019, Speaking Engagement, New York, United States

Lorraine McGowen will be speaking on the upcoming “Evaluating the Financial Health of an Entity” panel at the New York session of the Pocket MBA: Finance for Lawyers and Other Professionals program, hosted by the Practising Law Institute.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions