The Clearlake Oaks County Water District has recently agreed to pay over $1.5 million to settle allegations that it knowingly held onto overpayment of federal and state grant funds. Following severe winter storms in California in 2017, the District applied for disaster relief funds from FEMA and the California Governor’s Office of Emergency Services. However, it is alleged that the District had already been reimbursed for these expenses by its insurer, and instead of returning the funds, it retained them. The settlement includes repayment to both the United States and Cal OES, and the resolution of claims brought under the False Claims Act by a former employee of the District. This settlement highlights the government’s commitment to combating fraud in federal grants and ensuring that allocated funds are appropriately used.
Summary
The Clearlake Oaks County Water District (District) located in Lake County, California, has agreed to pay over $1.5 million to resolve allegations that it knowingly retained overpayment of federal and state grant funds. During severe winter storms, flooding, and mudslides in February 2017, the District applied for disaster relief funds from the Federal Emergency Management Agency (FEMA) and the California Governor’s Office of Emergency Services (Cal OES). The United States alleges that the District received reimbursements from FEMA and Cal OES for expenses it had already been reimbursed by its insurer. Instead of returning the funds, the District knowingly retained them in violation of the False Claims Act and state law. The District also knowingly concealed the funds and made false statements to the United States and Cal OES. This settlement, which includes whistleblower claims brought under the False Claims Act, reflects the government’s commitment to combat fraud in federal grants.
Background
In February 2017, severe winter storms, flooding, and mudslides affected California counties statewide. These natural disasters triggered major disaster declarations from FEMA, allowing eligible entities, including public entities like the District, to apply for reimbursement of disaster-related expenses. The District, a county water district formed under the California Water Code, applied for assistance from FEMA and Cal OES. The United States alleges that the District received reimbursements from FEMA and Cal OES for expenses it had already been reimbursed by its insurer, CJPIA.
False Claims Act Allegations against the County Water District
The United States alleges that the District violated the False Claims Act by retaining overpayment of federal and state grant funds. These funds were meant to aid in the recovery from the natural disasters but were retained by the District instead. This alleged violation of the False Claims Act carries significant consequences, as it involves fraudulently retaining funds that were intended to assist the community.
District’s Receipt of Federal and State Grant Funds
Following the District’s application for disaster relief funds, it received reimbursements from FEMA and Cal OES for expenses that it had already been reimbursed by its insurer. These funds were meant to cover disaster-related expenses incurred by the District during the severe winter storms. However, instead of returning these duplicate funds, the District knowingly retained them, leading to the allegations of false claims and fraudulent behavior.
The Allegation of Overpayment Retention
The United States alleges that the District knew it had received an overpayment of funds from FEMA and Cal OES. Instead of returning these excess funds, the District retained them, raising questions about the integrity and transparency of the District’s financial practices. The Act of retaining overpayments raises serious concerns about the proper use of federal and state funds and the District’s compliance with laws regulating the use of such funds.
Knowingly Concealing Funds and Making False Statements
In addition to retaining overpayment of funds, the United States alleges that the District knowingly concealed these funds and made false statements to the United States and Cal OES. The District submitted quarterly reports stating that it had not received excess funds, despite knowing otherwise. The District also made false statements in project closeout certifications, claiming entitlement to the full amount approved, without deducting the excess funds it had received from its insurer. Knowingly concealing funds and making false statements undermines the integrity of financial reporting and misleads government agencies overseeing the distribution of funds, further exacerbating the alleged fraudulent actions of the District.
Importance of FEMA Disaster Relief Funds
FEMA disaster relief funds play a critical role in helping communities recover from natural disasters. These funds are intended to support the recovery and rebuilding efforts of affected areas, providing financial assistance to individuals, families, and public entities. When these funds are misused or fraudulently retained, it undermines the recovery process and hampers the ability of communities to rebuild and recover effectively. The allegations against the District highlight the importance of ensuring the proper and transparent use of FEMA disaster relief funds.
Statement by U.S. Attorney Ismail J. Ramsey
U.S. Attorney Ismail J. Ramsey emphasized the significance of FEMA disaster relief funds and the consequences of diverting funds through fraud. Ramsey stated, “It is unacceptable for any entity, including a public entity, to divert funds from these programs through fraud and enrich itself at the expense of the American taxpayer.” He affirmed the commitment of his office to pursue recipients of disaster relief funds who misuse the program by retaining funds they are not entitled to. The statement highlights the seriousness of the allegations against the District and the need to hold entities accountable for their actions.
Statement by Dr. Joseph V. Cuffari, Inspector General of the U.S. Department of Homeland Security
Dr. Joseph V. Cuffari, Inspector General of the U.S. Department of Homeland Security (DHS), expressed gratitude for the collaboration between his office and the U.S. Attorney’s Office for the Northern District of California. He highlighted their joint effort to ensure the repayment of over $1.1 million to the United States. Cuffari emphasized the commitment of DHS-OIG to aggressively investigate and support the prosecution of fraudsters who misuse and divert appropriated relief funds. The statement underscores the government’s dedication to accountability and transparency in the use of disaster relief funds.
Conclusion
The Clearlake Oaks County Water District has agreed to pay over $1.5 million to resolve allegations that it knowingly retained overpayment of federal and state grant funds. These funds were intended to aid in the recovery from severe winter storms, flooding, and mudslides in California. The District is accused of retaining reimbursements it received from FEMA and Cal OES, despite already being reimbursed by its insurer. The United States alleges that the District knowingly concealed these funds and made false statements, violating the False Claims Act and state law. The settlement reflects the government’s commitment to combat fraud in federal grants and emphasizes the importance of transparent and accountable use of FEMA disaster relief funds.