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Wappingers Falls-based Morgan Fuel & Heating Company, Inc., which conducts business as Bottini Fuel, must now pay more than $3.2 million in criminal restitution and civil damages following a criminal conviction, Attorney General Barbara D. Underwood and State Comptroller Thomas P. DiNapoli said.
The conviction was 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 Tuesday to falsifying business records in the second degree in the Village of Wappingers Falls Justice Court. Underwood also announced the company’s civil settlement agreement resolving a qui tam action alleging false claims act violations.
“Bottini Fuel orchestrated a brazen scheme to defraud its customers for the benefit of the company and its owners,” said 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 systematically defrauded private customers and municipalities out of rebates they were due,” said 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 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.
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.
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