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BP accused of fraud in contracts with California entities

In a recent whistleblower lawsuit, a former BP employee claims that the gas and energy company may have cheated California out of millions. 

As readers may know, a whistleblower lawsuit typically claims that an organization has committed some type of illegal activity. In this case, the context is business contracts. California’s Department of General Services had entered into exclusive contracts with BP to provide natural gas to various state entities. However, the employee claims that BP overcharged California, selling at prices well above the fair market price.

The alleged illegal activity happened over the past ten years, amounting to up to $300 million. The employee claims that BP made illegal profits at least three times the amount specified in those contracts. BP’s profit margin from its California sales may have been higher than any of its other customers.

California’s contracts with BP go through 2017. However, the outcome of this lawsuit may influence whether California continues to do business with BP. Not surprisingly, the California Attorney General decided to join in the litigation after reviewing the allegations.

A business attorney knows that fraud may constitute a material breach of a contract. In fact, parties to a contract may choose to include the types of behaviors that might be deemed a material breach, and grounds for ending a contract. However, a business attorney with experience in bringing breach of contract disputes knows that fraud must still be proven by a preponderance of the evidence. That burden is not always easily met. 

Source: ABC News, “California Accuses BP of Inflating Gas Contract,” Ellen Knickmeyer, Nov. 17, 2014

 

 

 

 

 

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