The opening of new expansive markets for coal as well as its continuing global dominance in the energy market allows for massive opportunities for fraud in its various sectors, like mining, transport, and power plants.
Here are some actionable frauds that are likely occurring in the coal industry:
- Bribing foreign officials or failing to prevent illegal payments made by subsidiaries
- Misleading investors by overstating the value of assets, understating exposure to risk, or understating cleanup liabilities
- Misleading investors about the viability of clean coal technology or carbon capture technology
- Making false statements to the U.S. government to obtain a permit, lease, or loan
- Falsely certifying regulatory compliance
- Understating pollution to claim a tax credit
- Making improper requests for U.S. government funds for environmental cleanup
- Underpaying U.S. leasing royalties
Whistleblowers around the world can play a powerful role in detecting and prosecuting fraud in the coal industry under powerful U.S. reward laws. Whistleblowers, including non-U.S. citizens, can report securities fraud, bribery, tax evasion, and other forms of fraud directly to U.S. law enforcement. Whistleblowers can keep their identities confidential, and whistleblowers whose original information leads to a successful prosecution can qualify for a financial reward.
However, whistleblower laws are complex, and it is recommended that whistleblowers consult with a qualified attorney before acting on any information about potential wrongdoing. Through its Legal Assistance Program, the National Whistleblower Center helps connect would-be whistleblowers to attorneys specializing in whistleblower law.
NWC works with an independent public interest law firm, the National Whistleblower Legal Defense and Education Fund (“Fund”), which provides a secure intake form that allows whistleblowers to submit basic information about their case on a confidential basis.
Potential whistleblowers looking for a whistleblower attorney are encouraged to submit their concerns to the Fund’s intake site. Once submitted, the intake form will be reviewed by a highly qualified whistleblower attorney, who may make one of several recommendations.
Potential whistleblowers have more rights than they may think. In recent years, a powerful suite of whistleblower laws has been enacted in the United States to enable whistleblowers to report wrongdoing confidentially and to receive financial rewards for contributing to successful prosecutions.
Many U.S. laws applicable to fraud within the coal industry have transnational applications. A whistleblower does not need to be a U.S. citizen in order to receive assurances of confidentiality and monetary rewards, and the company engaged in wrongdoing does not need to be U.S.-based in order to be held accountable.
In 2019, just one of the U.S. federal laws with effective whistleblower provisions – the False Claims Act (FCA) – produced $2.2 billion in recoveries for the U.S. from companies engaged in fraud. Whistleblowers received $271 million for their contributions to these successes. The FCA could prove highly relevant to the prosecution of certain coal frauds. The Bureau of Land Management (BLM) is responsible for coal leasing on approximately 370 million acres owned by the federal government. As a result, any attempts at bid collusion, as seen in a 2012 natural gas leasing case, are a direct FCA violation, and thus subject to enforcement and treble damages.
Additionally, a provision known as ‘reverse False Claims’ is highly applicable here. It applies to instances in which a wrongdoer has prevented the government from collecting what it is owed. A relevant example concerns false statements on U.S. lease applications. In making a false statement on a lease application to the Bureau of Land Management (BLM), the company in question has kept the government from receiving proper compensation, and thus violated the FCA. Whistleblowers in multiple arenas have filed successful reverse FCA cases.
Another important whistleblower law is the Dodd-Frank Act, passed following the financial crisis of 2008-09. Since this law was enacted, the Securities and Exchange Commission (SEC) and Commodities Future Trading Commission (CFTC) have awarded hundreds of millions (US$) to whistleblowers who exposed fraud in securities and commodities trading and helped produced monetary sanctions in the hundreds of millions (US$) for the benefit of shareholders and economic fairness. The Internal Revenue Code’s whistleblower provisions have produced similar positive results in reining in tax fraud.
The Foreign Corrupt Practices Act prohibits thousands of corporations, both U.S. and international, from paying bribes to foreign officials and mandates proper financial record keeping. The FCPA is extremely broad in scope and applicable worldwide; whistleblowers can report on issuers and their subsidiaries and personnel, as well as foreign entities and agents. The FCPA allows whistleblowers, including foreign nationals, to file claims anonymously, reducing the risk of retaliation. The Dodd-Frank Act requires the SEC to reward whistleblowers who assist with FCPA prosecutions leading to monetary sanctions. Whistleblowers can obtain financial rewards of 10% to 30% of recovered sanctions.