Climate change poses an enormous threat to our economy and quality of life, and readily available solutions are not being implemented fast enough to head off the worst damage. That’s why the National Whistleblower Center (NWC) is launching our Climate Corruption Campaign.
The Climate Corruption Campaign will be the first sustained effort to educate potential whistleblowers in the fossil fuel and industrial logging industries about their rights under whistleblower laws, including to keep their identities confidential. It will help these whistleblowers secure qualified attorneys, participate in high-impact prosecutions and win financial rewards when those prosecutions are successful. The campaign also will work in the policy arena to strengthen whistleblower rights.
NWC will give particular focus to assisting company insiders with evidence of potential fraudulent concealment of industry pollution risks, including risks to financial assets.
There are five key facets to our approach:
- We’re educating whistleblowers on how to come forward with allegations confidentially and which laws protect them.
- Partnering with the National Whistleblower Defense and Education Fund, a public interest law firm led by renowned whistleblower attorney (and NWC Board Chairman) Stephen Kohn, we’re assisting whistleblowers to file allegations of crimes with the appropriate law enforcement agency.
- We’re helping whistleblowers protect themselves by educating them about how to keep their identities confidential, guard against retaliation, and secure rewards when they help the government produce monetary sanctions against wrongdoers.
- We’re encouraging other whistleblowers to step forward by publicizing these protections and rewards.
- We’re defending and strengthening laws and agency rules that are needed to protect and reward whistleblowers who help expose climate-related corruption.
Helping whistleblowers navigate will be NWC’s newly-recruited Chief Counsel Sharon Eubanks, a corruption expert who served as lead counsel in the largest-ever civil RICO enforcement case, U.S. v. Philip Morris USA. Ms. Eubanks recently testified before Congress on the linkages between the organized deception campaigns of the tobacco and fossil fuel industries.
“Individuals working in the fossil fuel and logging industries with evidence of fraud and other law-breaking in their companies should know that there are safe ways to report crime without losing their jobs. Our campaign will help secure for whistleblowers protections from retaliation and, where feasible, rewards for helping prosecutors win large-scale penalties.” – John Kostyack, Executive Director
The disruption of the earth’s climate is one of the greatest challenges facing our society. Greenhouse gas emissions are continuing to increase, as evidenced by a recent Global Carbon Project report finding that in 2019, despite impressive progress with clean energy, global fossil fuel emissions had increased for the third straight year.
And these emissions are already having dramatic impacts. Sea levels are rising. Animal and plant species are rapidly going extinct. Natural phenomena like hurricanes and forest fires are becoming increasingly more violent.
Those impacts will worsen substantially unless we transition away from fossil fuel use and maintain intact forests for carbon storage. And the impacts of greenhouse gas emissions are not spread evenly. Those who have contributed the least to the problem – the poorest communities around the world and the generations to come – will experience the greatest impacts.
Fossil fuel use and deforestation are the primary drivers of this crisis. Despite recent successes in scaling back investment in oil and coal, natural gas is on the rise. And in developing countries, coal is still on the rise. As for deforestation, while sustainable forestry is on the rise, industrial logging of forests is still the primary source of timber and timber-based products and in the tropical forests with high carbon stocks, much of this logging is unsustainable and illegal.
A significant part of the responsibility for the world’s greenhouse gas emissions rests with a small number of resource extraction companies. For example, a 2017 study by the nonprofit CDP shows that nearly two thirds of greenhouse gases added to the environment since the Industrial Revolution can be traced back to just 90 fossil fuel companies.
Recently, fossil fuel companies have pledged to reduce the pollution driving climate change, but does this mean that a meaningful transition to a carbon-constrained future is truly underway inside the industry? The December announcement by Spanish energy giant Repsol is encouraging. With a remarkable degree of specificity, Repsol committed to achieving net-zero carbon emissions by 2050 – the first major fossil fuel company to align itself with the target in the Paris Agreement of staying within a 2°C global temperature increase above preindustrial levels. This commitment was backed up by a US$5.3B write-down in the value of its oil and gas assets, suggesting that Repsol is truly adjusting to the new reality.
With respect to the rest of the major fossil fuel companies, the picture is far murkier. Top officials in the oil and gas and coal industries have known since at least the 1980s that their products are irreparably damaging the world’s climate.Yet leading companies financed, and continue to finance to this day, a multi-decade disinformation campaign aimed at creating confusion about climate change and slowing policy action. NWC Chief Counsel Sharon Eubanks recently gave Congressional testimony on the links between this campaign and the similar one waged by the tobacco industry to confuse the public about harms caused by its product.
Another potentially actionable fraud relates to how fossil fuel companies have addressed stranded assets – assets that lose value due to regulatory, economic and physical shocks linked to climate change. Despite making various statements in support of the Paris Agreement, many companies continue to hatch infrastructure development plans that would guarantee large emissions increases over the coming decades.
Numerous financial analyses suggest that climate change-related risks may not be properly accounted for. For example, in September 2019 the investment advisory firm Carbon Tracker released a report showing that in 2018 oil and gas companies sanctioned over US$50B worth of new projects. Many of these projects would not be viable if world leaders were to follow through on the Paris Agreement’s pledges to stay within the limit of 2°C global temperature increase.
Similarly, earlier this year the Rocky Mountain Institute concluded that by 2035, over 90 percent of proposed combined-cycle natural gas power plants in the United States, if built, would be uneconomic to run compared to the cost of building a new clean energy portfolio. The authors found that plant owners could face “tens of billions of dollars in book value … without a clear source of future revenues given competition from clean energy.” They made similar findings with respect to natural gas pipelines.
The urgent need for action is clear. We must not only bear down on proven strategies like rapidly deploying wind and solar energy. We also must finally come to grips with what is happening inside the companies producing fossil fuels. This is where whistleblowers come in.
“Law enforcement officials have long known that if you want to learn about crime, you need whistleblowers. Now is the time to incentivize whistleblowers who know about crimes in the fossil fuel and industrial logging industries to step forward so that law enforcement agencies can do their jobs and rein in corruption.” – NWC Board Chairman Stephen Kohn
How Whistleblowers Can Help
Whistleblowers have a proven track record in battling corruption in other arenas. Many high-impact prosecutions have taken place only because whistleblowers delivered otherwise-unavailable evidence to law enforcement officials and have produced billions and penalties.
In FY 2017, the US government recovered over $3.7 billion through its civil fraud program. Whistleblowers were directly responsible for reporting over $3.4 billion of these recoveries, making them the source of 92% of all civil fraud recovered that year.
And whistleblowers can have industry-changing impact. One of the best-known examples is Bradley Birkenfeld, who was the first international banker to blow the whistle on secret Swiss bank accounts. His disclosures resulted in unprecedented recoveries for U.S. taxpayers, with over $780 million dollars in civil fines and penalties paid by UBS and over $5 billion dollars in collections from U.S. taxpayers who had illegally held “undeclared” offshore accounts in Switzerland and other countries.
As a result of his whistleblowing, these secret accounts are no longer available for corrupt US taxpayers to hide their earnings, and the Swiss government was ultimately forced to change its treaty with the United States in order to turn over the names of nearly five thousand Americans who held illegal offshore accounts.
He received a reward of $104 million under the IRS Whistleblower Program for his invaluable assistance with the case, the largest whistleblower reward ever given. His reward has helped to drive massive growth in prosecutions of securities, commodities and tax fraud by demonstrating to both whistleblowers and prosecutors the critical role of this economic incentive to motivate high-level executives to take the substantial risk of exposing crime.
There are similar stories across industries and sectors – whistleblowers who gave disclosures that changed corporate behavior for the better. You can learn more about those here. However, as a general matter, whistleblowers have not played a major role in convictions of corrupt fossil fuel or industrial logging companies and, when they have played a role, they have not been rewarded adequately.
Now is the time to harness the powerful whistleblower laws to rein in corruption in the fossil fuel industry. Only company insiders would know the extent to which the impact of climate change-related risks on financial assets have been illegally concealed from shareholders, the IRS and the public. The Climate Corruption Campaign will help these insiders secure confidential whistleblower status so that the facts can safely be delivered to law enforcement authorities.
Learn the Laws
Climate change and corruption are global problems, and as such they need global solutions. U.S. laws are uniquely well-suited for enlisting citizens to help fight global environmental crime.
There have been a host of laws enacted by the U.S. Congress and the states in the past few decades encourage whistleblowers to report corporate fraud to authorities. The best of these laws, such as state and federal False Claims Acts and the federal laws on tax, securities and commodities fraud, allow whistleblowers to report crimes without revealing their identities.
They also provide financial rewards to whistleblowers for contributing to successful prosecutions, with the size of the reward linked to the size of the monetary sanctions recovered and the importance of the whistleblower’s evidence to the case. These rewards are available to whistleblowers regardless of U.S. citizenship and apply to prosecutions against U.S. companies as well as foreign companies doing business in the U.S. Leveraging this powerful system of laws could provide a revolutionary new approach to combating the climate crisis.
One of the most important whistleblower reward laws is the False Claims Act (FCA), which has collected a staggering $43 billion since 1986 for the benefit of taxpayers with $6 billion going to whistleblowers. There are two key features of the FCA that make it uniquely suitable for pursuing environmental crimes: its qui tam provision and the concept of “reverse false claims.”
Qui tam goes a step beyond most reward laws – it gives the whistleblower the opportunity to bring forward a case on behalf of the government if the government declines to intervene for whatever reason.
Meanwhile, reverse false claims hinges on the concept that in providing the government with incorrect information on customs forms, lease applications, and the like, the wrongdoer has prevented the government from collecting what it is owed. Covered customs violations include false statements such as the undervaluation and/or misclassification of goods entering the U.S.
Critically, under the FCA, violators are liable for treble damages – or three times the dollar amount that the government is defrauded – along with civil penalties for each false claim. Whistleblowers are can receive between 15% and 30% of sanctions obtained. The returns for a successful fossil fuel prosecution under the False Claims Act are potentially huge.
History proves this. In 2016, there was a record $20 billion settlement with British Petroleum (BP) following the Deepwater Horizon disaster, which included reverse False Claims Act penalties for falsifying offshore lease applications. NWC was one of the groups who advocated for the Department of Justice to include FCA claims as BP misrepresented its safety and emergency response procedures in order to operate under leases from the U.S.
In addition to the False Claims Act, there is a large framework of U.S. laws that address other common types of fraud including tax fraud (IRS Whistleblower Law), securities and commodities fraud (Dodd-Frank Act), and bribery (Foreign Corrupt Practices Act). Each has powerful whistleblower reward provisions and offers the opportunity to hold fossil fuel companies accountable for their far-ranging illicit activities.
Furthermore, an array of environmental laws, including the Lacey Act, Endangered Species Act and Act to Prevent Pollution from Ships (APPS), authorize rewards to whistleblowers for providing information that leads to prosecutions. While to date, law enforcement officials have not used the whistleblower provisions of these laws to develop major fossil fuel industry cases, their successful use in small cases involving ocean pollution highlights their potential for contributing to significant prosecutions that lead to fossil fuel industry reform.
For example, an engineer whistleblower disclosed that Carnival Cruise Lines was illegally dumping waste oil in the ocean and obstructing justice. The company agreed to pay $60 million in penalties under APPS, $1 million of which went to the whistleblower. According to a recent report on 100 APPS settlement agreements, whistleblower cases have resulted in $177 million in fines, $56 million of which have gone back to environmental programs.
A recent case involving a whistleblower and illegal logging highlights how the Lacey Act can be used to drive reform in the industrial logging industry. In 2015, U.S.-based Lumber Liquidators was fined over $13 million in the largest Lacey Act fine to date for buying wood that had been illegally logged in eastern Russian forests. An NGO whistleblower, the Environmental Investigations Agency (EIA), was key to building the case against the company. The case marked the first time that a U.S. company had been convicted of a felony related to timber under the Lacey Act.
As evidenced here, there are a host of laws that could be employed in the fight against the climate crisis – with whistleblowers at the center. And as shown by the recent cases filed against Exxon by the Attorneys General of New York and Massachusetts for alleged fraud against shareholders and consumers, there is a growing consensus among prosecutors that anti-fraud laws can be embraced to address climate corruption.
Confidentially Report Fossil Fuel Corruption
If you have information related to potentially actionable fraud by oil, gas, or coal companies, submit a report using our secure, confidential intake form, and our attorneys will review your case for free. The Whistleblower Legal Assistance Program helps connect whistleblowers with legal whistleblower attorneys. You can get the help you need submitting the information you have to appropriate law enforcement officials and learn about your eligibility for monetary rewards under the law.
For more on the industrial logging element of this campaign, click here.