California Joins Lawsuit Charging BP Ripped off State on Natural Gas Prices

Friday, November 14, 2014

California joined a whistleblower lawsuit against British energy giant BP, originally started by a former employee, that charges the company ripped the state off for up to $300 million between 2004 and 2012.

The lawsuit brought by Christopher A. Schroen was joined by the state, Los Angeles County, the University of California Board of Regents and the Trustees of California State University. Schroen was part of a BP team executing natural gas contracts worth between $1.5 billion and $2 billion with California that were meant to stabilize costs for state entities, including public colleges, state buildings and medical centers.

The contract, negotiated by California’s Department of General Services, smoothed out the volatility. But BP sold California gas at above-market prices, realizing a profit margin three times normal, according to the lawsuit filed in San Francisco County Superior Court. The lawsuit says BP charged the state 10 times what it was getting from other bulk purchasers.

Bloomberg, which saw the lawsuit, said it charges that BP “fraudulently concealed markups and overcharges” through a process of “margin stacking.”

Plaintiffs seek triple damages under California’s False Claims Act. Schroen claims retaliation, defamation and wrongful termination by BP. Schroen says he was fired in 2012 after learning of the overcharges and refusing to cooperate.

He said senior managers signed off daily on the profit margins, which were much higher than the contract called for. The complaint alleges that BP employees received “extravagant bonuses” based on the excessive collections.

BP says Schroen was fired a year before the suit was filed and that the claim was without merit.   

This is not the first time California has engaged BP in court. State Attorney General Kamala Harris sued BP West Coast Products, BP Products North America, Inc. and Atlantic Richfield Company (ARCO) in February 2013 for the way they took care of more than 780 ARCO stations. She was joined in the suit by district attorneys in eight counties. 

The complaint alleged that since 2006, BP and ARCO “intentionally tampered” with or disabled leak detection devices at their gas stations. The suit also claimed the defendants failed to test secondary containment systems, maintain operational alarm systems, conduct monthly inspections and dispose of hazardous waste properly. 

–Ken Broder


To Learn More:

California Joins Whistle-Blower Gas-Price Suit against BP (by Christie Smythe, Bloomberg)

California Accuses BP of Inflating Gas Contract (by Ellen Knickmeyer, Associated Press)

Lawsuit Accuses BP of Overcharging California Agencies for Natural Gas (by Marc Lifsher, Los Angeles Times)

BP Stock Lower Today after California Joins Whistle-Blower Lawsuit (by Sebastian Silva, The Street)

Attorney General Sues BP over ARCO Gas Station Storage Tank Violations (by Ken Broder, AllGov California)

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