Two huge multinational oil companies profited off pollution and defrauded taxpayers out of millions of dollars in Oklahoma and other states, lawsuits allege.
ConocoPhillips and BP, along with their predecessor companies and subsidiaries, filed false statements to get insurance companies and taxpayers to double-pay them for the cleanup of fuel leaking from underground storage tanks located beneath filling stations, the civil lawsuits claim.
ConocoPhillips' attorneys also resorted to bribery, blackmail, threats, extortion, corruption and legislative pressure to get Oklahoma Corporation Commissioners to tap the Petroleum Storage Tank Release Indemnity Fund to pay the company millions of dollars for ineligible expenses, documents filed in one lawsuit claim.
“There is no doubt the payment of this money is morally wrong,” then-Corporation Commission attorney Charles Wright said in an Aug. 12, 2003, memo to Ben Jackson, who was the commission's acting general administrator at the time. “Phillips is not owed the money. … There is no doubt that the program is the victim of a conspiracy, conducted by Phillips and associated parties, that threatens the destruction of the program if the money is not paid. In short, we are paying protection.”
ConocoPhillips' attorneys filed an answer to the allegations in court on Oct 4. In that answer, the company said it had “insurance polices of various types at various times” but denied engaging in fraudulent conduct.
Janet Grothe, spokeswoman for Phillips 66, which spun off from ConocoPhillips last April, declined to elaborate on the company's position beyond what its attorneys have stated in the lawsuit.
“As a matter of policy, we don't comment on legal matters,” she said.
Sued by other states
Records show the FBI conducted a criminal investigation, but FBI spokesman Rick Rains declined to confirm the existence of the investigation or say whether it was ever completed. No criminal charges have been filed.
Wright joined forces with fellow former Corporation Commission attorneys William Burkett and Rachel Mor, former Corporation Commissioner Ed Apple and others to file a taxpayers group lawsuit against ConocoPhillips after efforts by Corporation Commission staff attorneys to halt payments to the company failed.
ConocoPhillips also is being sued by the states of Montana, Colorado and Utah, while BP is being sued by Oklahoma Attorney General Scott Pruitt.
ConocoPhillips and BP are accused in those lawsuits of “double-dipping” and profiting from pollution by billing state environmental cleanup funds for costs of cleaning up underground storage tank leaks that already had been paid by insurance companies.
In Oklahoma, the environmental cleanup fund is called the Petroleum Storage Tank Release Indemnity Fund and is financed by a penny-per-gallon tax on the sale of motor fuel.
The fund is supposed to be used to pay for the cleanup of sites that were not covered by insurance.
BP and its related companies “knowingly double-dipped by collecting reimbursements for corrective action environmental remediation costs for sites they polluted from both the Indemnity Fund and their insurance carriers in violation of Oklahoma Law,” Pruitt alleges.
As part of a “fraudulent insurance scheme,” officials with BP and related companies falsified their State Indemnity Fund applications by stating they were “self-insured and had no insurance coverage” when, in fact, they “maintained multiple insurance polices,” the lawsuit alleges.
BP and its related companies received “hundreds of millions of dollars” from insurance companies based on claims filed regarding fuel leaks in Oklahoma and other states, but failed to disclose that to Oklahoma officials and improperly collected millions more from the Indemnity Fund, Pruitt alleges.
Brett Clanton, spokesman for BP America Inc., declined to discuss the issue, saying, “We don't comment on pending litigation.”
ConocoPhillips is accused of similar fraudulent misconduct in the lawsuits filed by Oklahoma taxpayers and the states of Colorado, Montana and Utah.
The Oklahoma taxpayers group alleges ConocoPhillips received $7,541,170 in improper payments from the Indemnity Fund in connection with 46 environmental remediation cases.
The taxpayers group is seeking to recover those costs plus triple that amount in damages.
But the group's allegations against ConocoPhillips go way beyond double-collecting from insurance companies and the Indemnity Fund for cleanup expenses.
The group claims attorneys for Phillips Petroleum, before it became part of ConocoPhillips, used friends in the Oklahoma Legislature to coerce commissioners into inappropriately paying the company several million dollars from the fund.
They cite an April 2001 meeting between representatives of Phillips, then-state Sen. Kevin Easley and members of Petroleum Storage Tank Advisor Committee that took place in the conference room of then-Senate President Pro Tem Stratton Taylor.
Phillips attorneys emerged from the meeting claiming that a settlement agreement had been reached that would require the Corporation Commission to pay the company $2.5 million more than the $3,941,170 it already had received in connection with 27 reimbursement claims.
Corporation Commission officials refused to pay, saying commissioners and commission staff attorneys were not part of the negotiations and Easley had no authority to bind the commission to an agreement.
A bitter exchange of letters followed. Phillips' attorney, D. Kenyon Williams Jr., charged that the Commission had “dishonorably declined to complete the settlement.”
Burkett countered for the Corporation Commission by stating Williams' allegation was “libelous” and that Williams had engaged in “professional misconduct.”
Phillips' attorneys backed down.
Adding fuel to the controversy was a 2002 study by the state auditor and inspector's office that concluded the $3,941,170 Phillips already had been paid was more than $1 million too much.
After the settlement was rejected, ConocoPhillips representatives “threatened” Corporation Commission employees that they would cause their “associates in the Legislature” to move administration of the Indemnity Fund from the commission to another agency if they were not paid more money, the taxpayers group alleges.
Easley and then-Sen. President Pro Tem Cal Hobson subsequently authored legislation in 2003 to take the Indemnity Fund away from the Corporation Commission and move it to the state Department of Environmental Quality.
The group claims the threat of such a move put pressure on Corporation Commissioners, who would have been forced to eliminate a number of agency jobs if the measure had gained legislative approval.
ConocoPhillips attorneys Shawn Fulkerson and Richard Parrish subsequently hosted a fundraiser for then-Commissioner Jeff Cloud in mid-2003.
During the fundraiser, the attorneys promised acting fund administrator Brooks Mitchell that the agency's problems at the Legislature would “go away” if ConocoPhillips was paid the money it demanded, the taxpayers group claims.
“This proposed bribe (and others) led to an agreement to settle ConocoPhillips claims” by paying the company an additional $3.6 million, even though the state auditor contended the company already had been paid more than $1 million too much, the taxpayers group alleges.
ConocoPhillips attorneys stated in court filings that one of its defenses to the allegations will be the oil company's “constitutional rights to free speech and to petition its government.”
The company contends the settlement was “valid, binding and legally enforceable.”
Cloud, who now works for Continental Resources, declined to comment on the events that took place.
“I'd love to talk about that, but I think we're getting ready to go to trial,” he said.
Easley, who is now chief executive officer of New Dominion LLC, did not return repeated calls to his office.
Hobson also could not be reached for comment.