FOR IMMEDIATE RELEASE
FRIDAY, OCTOBER 9, 1998
TDD (202) 514-1888
TWO COMPANIES SETTLE WITH U.S. FOR UNDERPAYMENT OF COAL ROYALTIES
WASHINGTON, D.C. - Two Huntington, Utah, mining companies have agreed to pay the United States $205,000 for underpayment of coal royalties under the False Claims Act, the Department of Justice announced today.
Assistant Attorney General Frank Hunger of the Civil Division said that under the terms of the agreement, filed in U.S. District Court in Salt Lake City, Genwal Coal Company, Inc. and Castle Valley Resources, Inc. will pay the U.S. to resolve allegations that they knowingly submitted false reports to the Department of Interior's Minerals Management Service (MMS) and underpaid royalties for coal extracted from federal land in 1990 and 1991. All coal mined from federal property, except for coal unavoidably lost, is subject to a royalty.
The settlement stems from a qui tam complaint originally filed against Genwal, Castle Valley and three other parties by John Donnelly, a former employee of Genwal and Castle Valley. The government did not join in the complaint against the other parties.
The complaint alleged that the defendants knowingly submitted 11 false reports of coal sales to MMS in order to avoid paying higher royalty fees for coal mined from federal property by reporting the sales as arm's length transactions, or transactions between two unrelated entities. However, Genwal and Castle Valley are both owned by Nevada Electric Investment Company, Inc. The accurate reporting of the transactions, as either arm's length or non-arm's length, directly affect the method in which the royalties are calculated. In this case, the government argued that accurate reporting of the transactions would have resulted in higher royalties.
After investigating Donnelly's allegations with the assistance of the Department of Interior's Office of Inspector General, the Department of Justice intervened in the case as to defendants Genwal and Castle Valley only.
Under the qui tam provisions of the False Claims Act, Donnelly, known as the "relator," will receive $36,900. The Act provides that relators may recover up to 15 to 25 percent of the damages awarded to the government.