State Comptroller Thomas P. DiNapoli and Attorney General Barbara D. Underwood today announced the criminal conviction of Morgan Fuel & Heating Company, Inc., which conducts business as Bottini Fuel, for falsifying their business records to improperly divert credit balances belonging to individual, business, and government customers – including local school districts, prisons, town governments, and state agencies. Bottini Fuel pleaded guilty today to Falsifying Business Records in the Second Degree in the Village of Wappingers Falls Justice Court. Attorney General Underwood also announced the company's civil settlement agreement resolving a qui tam action alleging false claims act violations. Bottini Fuel will pay over $3.2 million in criminal restitution and civil damages.
"Bottini Fuel systematically defrauded private customers and municipalities out of rebates they were due," said State Comptroller DiNapoli. "Thanks to my partnership with Attorney General Underwood millions are now being returned to the taxpayers. I will continue to work to safeguard the expenditure of public funds and partner with law enforcement to punish those who attempt to defraud the public."
"Bottini Fuel orchestrated a brazen scheme to defraud its customers for the benefit of the company and its owners," said Attorney General Underwood. "This conduct was longstanding and harmed individual, business, and government customers. We are grateful to the whistleblower who helped bring this illegal conduct to light and are pleased to be able to give back the money rightfully owed to Hudson Valley customers."
Bottini Fuel, headquartered in Wappingers Falls, provides heating oil to customers throughout Hudson Valley. From 2004 to 2016, Bottini Fuel improperly retained customer overpayments and duplicative payments for heating oil. Bottini Fuel did not inform customers that they had overpaid for heating oil; instead, the company swept excess customer balances out of customer accounts and used them to benefit its owners and employees. The company admitted to this conduct as a term of the civil settlement, which can be found here.
After a whistleblower filed an action pursuant to the qui tam provisions of the New York False Claims Act in 2015, the Attorney General's Taxpayer Protection Bureau commenced a civil investigation into Bottini Fuel. A preliminary investigation revealed substantial indications of knowingly fraudulent conduct on the part of the company and its principals. Thereafter, the Attorney General's Criminal Enforcement and Financial Crimes Bureau, in conjunction with the New York State Office of the Comptroller, commenced a parallel criminal investigation into Bottini Fuel, which included the execution of a search warrant at Bottini Fuel's corporate headquarters.
When a customer overpays for heating oil, a provider normally either applies credit balances to future purchases of oil or refunds the credit balance to the customer. The Attorney General's investigation revealed that instead of doing this, Bottini Fuel regularly transferred such overpayments, or credit balances, out of customer accounts and into fictitious intermediate "dummy" accounts in the company's sales database without the customer's knowledge. Once credit balances were transferred, customer accounts would show a zero balance, which was also reflected in subsequent bills and/or invoices to customers.
The credit balances transferred into dummy accounts were then diverted to customer accounts held by Bottini Fuel's owners, friends, family members, certain employees, and businesses in which Bottini Fuel's owners held an interest. Those transfers offset their balances, reducing amounts owed for fuel usage; in essence, Bottini Fuel used regular customers' money to pay for their own personal fuel expenses and those of their friends, families, and other businesses.
The Attorney General's investigation revealed that Bottini Fuel had transferred a total of $1,762,771 in customer funds, including $590,887 from government customers.
Pursuant to today's guilty plea, Bottini Fuel paid $1,762,771 in criminal restitution to the Attorney General's Office. The Attorney General's Office will contact all defrauded customers to distribute the restitution owed. In the event that certain customers cannot be located, money relating to their accounts will be deposited with the New York State Comptroller's Office of Unclaimed Funds, where they can be claimed in the future. Pursuant to the separate civil agreement, Bottini Fuel must pay an additional $1,500,000 in fines and penalties.
The Attorney General expresses her appreciation to the whistleblower, without whose information the misconduct might have remained concealed from the authorities, and to the whistleblower's attorneys. Pursuant to the New York False Claims Act, which entitles whistleblowers who report fraud against the government to a share of the recovery, the whistleblower will receive $491,358 for bringing this misconduct to light.
Comptroller DiNapoli's investigation was led by the Office of the State Comptroller ("OSC") Division of Investigations, working with the OSC Division of State Government Accountability.
The Attorney General's civil case was led by Assistant Attorney General Justin Wagner, with assistance from Legal Support Analyst Justin Meshulam of the Taxpayer Protection Bureau. The Taxpayer Protection Bureau is overseen by Bureau Chief Thomas Teige Carroll and Deputy Chief Scott Spiegelman. It is part of the Division of Economic Justice, which is led by Executive Deputy Attorney General Manisha M. Sheth.
The criminal prosecution was handled by Assistant Attorney General Hugh L. McLean of the Criminal Enforcement and Financial Crimes Bureau, with the assistance of Supervising Analyst Paul Strocko. The Criminal Enforcement and Financial Crimes Bureau is led by Bureau Chief Stephanie Swenton and Deputy Bureau Chief Joseph D'Arrigo. The Division of Criminal Justice is led by Executive Deputy Attorney General Margaret Garnett.
Investigator Melissa Kaplan of the Attorney General's Investigations Bureau led the criminal investigation, under the direction of Supervising Investigator Sylvia Rivera and Deputy Chief John McManus. The Investigations Bureau is led by Chief Dominick Zarrella. Forensic auditing was provided by the Attorney General's Forensic Audit Section, which is led by Chief Edward J. Keegan, Jr. and Deputy Chief Sandy Bizzarro.
Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse. New Yorkers can report allegations of fraud involving taxpayer money by calling the toll-free Fraud Hotline at 1-888-672-4555, by filing a complaint online at [email protected], or by mailing a complaint to: Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236. Review prior cases at http://www.osc.state.ny.us/investigations.