Oftentimes, politics in Washington can start to feel predictable. But for those who care about addressing climate change, last week the Senate produced an unexpected bombshell worthy of a season finale. After declaring that there was no deal to be had on tax reform and climate change, Sen. Joe Manchin (DW.Va.) announced that he had reached a deal with Senate Majority Leader Chuck Schumer (DN.Y.) on a blockbuster reconciliation package to invest in climate change and clean energy solutions, lower health care costs and reduce the deficit .
Especially after the Supreme Court limited the (Environmental Protection Agency) EPA’s ability to effectively regulate greenhouse gas emissions in the power sector, signaling its general skepticism of ambitious regulatory action even when that’s what Congress intended, the spending power is now an essential plank of reversing the effects of climate change. But wherever public funds are invested, some will try to take advantage, engaging in waste, fraud and abuse that hurts the taxpayers and blunts the effectiveness of important programs.
Under the False Claims Act (FCA), it is illegal to, among other things, knowingly present a false claim to the government for payment or approval. These frauds can be reported in a confidential complaint to the Department of Justice by a whistleblower. Whistleblowers can be traditional insiders, but they need not be affiliated with the fraudster, for example a competitor.
The Inflation Reduction Act of 2022, if passed, will include a variety of new investments and incentives to combat climate change. To ensure that the significant investments announced in this deal have the most impact, the government, aided by whistleblowers through the False Claims Act and other whistleblower programs, will need to ensure that those who abuse these programs are held to account.
Some components of the bill may be especially vulnerable, but also squarely covered by the False Claims Act, giving the government and whistleblowers a path to stopping the wrongdoing. First, the bill includes rebates and tax credits focused on consumer energy consumption. According to the Senate Democratic leadership summary of the bill’s climate provisions, $9 billion is invested in “consumer home energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy efficient retrofits.” Another $1 billion is dedicated to “mak[ing] affordable housing more energy efficient.”
Similar green energy home renovation programs, like the property assessed clean energy (PACE) program created under the Obama administration, attracted predatory and fraudulent participants, as laid out in a segment of John Oliver’s “Last Week Tonight.” In addition, even if contractors use energy-saving materials, they may cut corners in how they use them, resulting in little or no benefit to carbon emissions or consumer costs. The focus on low-income households and disadvantaged communities is essential but may exacerbate the attraction of bad actors. False claims to obtain the rebates directly or causing consumers to falsely claim them could be addressed through the False Claims Act.
Second, the bill includes billions of dollars in grants and new penalties to encourage emissions reduction from large industrial emitters, as well as methane emissions in the oil and gas industry. Falsely claiming or overstating emissions reduction or the environmental friendliness of business operations is already a frequent problem in a variety of markets, so much so that it is commonly referred to as greenwashing. Misrepresentations to the federal government about emissions reductions or “clean” products have already been used as the basis for False Claims Act liability. And the Biden administration had already signaled that environmental compliance issues would become an enforcement priority through, among other things, the FCA.
Third, the bill creates and funds a $27 billion “Clean Energy and Sustainability Accelerator,” which is colloquially referred to as the “Green Bank.” The focus of the Green Bank will be “leverag[ing] public and private funds to invest in clean energy technologies and infrastructure.” As we have learned from programs like the Paycheck Protection Program created to support small businesses during the pandemic, fraudsters tend to be attracted to well-funded and new federal lending programs. The Green Bank will be no different. Appropriate safeguards, oversight and accountability are essential to ensure that wrongfully obtained funds are returned and the wrongdoers held accountable.
Finally, the bill includes at least $6 billion in new money to fund environmental justice and equity-focused grant programs intended to empower disadvantaged communities in addressing climate change, clean transportation and other environmental justice issues. In addition to potentially the same wrongdoing described above, these grant programs are likely to include certain equity-focused requirements similar to minority business enterprise (MBE) or disadvantaged business enterprise (DBE) requirements in other government programs that try to improve historically disenfranchised communities’ ability to access lucrative government contracts and grants. All too often, these requirements are abused by firms that pretend to be, for example, owned by qualifying ethnic minority individuals when they are not. This sort of fraud violates the False Claims Act.
Now that Congress is so close to enacting what Sen. Tina Smith (D-Minn.) has called “the most significant action we’ve taken on climate, that we will take on climate and clean energy, ever,” we must ensure that these historic investments are protected and their return maximized. Whistleblowers who know of wrongdoing that causes fraud, waste and abuse in these programs will not only be doing the right thing to protect taxpayer dollars. They will also be helping to combat climate change.
Max Rodriguez is an attorney at Pollock Cohen LLP. Rodriguez represents individuals and entities in False Claims Act and other whistleblower matters, complex litigation, appeals and impact litigation. Rodriguez was the primary author of an amicus brief on behalf of 192 Members of Congress to the Supreme Court in West Virginia v. EPA.