Sevenson Environmental Services: EPA Cleanup Costs, Vendor Kickbacks and Bid Rigging

Sevenson Environmental Services agreed to pay more than $2.72 million to resolve allegations that vendor kickbacks and bid rigging inflated Environmental Protection Agency cleanup costs at the Federal Creosote Superfund Site. The Department of Justice alleged that the prime contractor accepted payments for awarding subcontracts, then passed most of those kickbacks through to the government. For someone who knows the bids, the disposal prices or the subcontract payments, that connection is the heart of the case: what bought the work, and how the public ended up paying for it.

The EPA-Funded Federal Creosote Cleanup

Sevenson was the prime contractor responsible for cleanup at Federal Creosote in Manville, New Jersey. The Environmental Protection Agency funded the work. The company, an environmental remediation firm based in Niagara Falls, New York, reached the settlement that the Justice Department announced on November 17, 2014.

The government alleged that Sevenson chose subcontractors in exchange for kickbacks, then conspired with them to pass most of the kickback costs to the Environmental Protection Agency.

Vendor Kickbacks Allegedly Built Into EPA Cleanup Costs

Against that settlement stands more than $1.6 million in alleged government contractor kickbacks. The Justice Department said Sevenson solicited and accepted them from six companies in exchange for Federal Creosote subcontracts. The payment allegedly bought access to the work.

The next part of the allegation explains who bore the cost. The department alleged that Sevenson conspired with the subcontractors to pass the majority of those kickbacks to the Environmental Protection Agency. We find that arrangement particularly brazen: the public buyer was allegedly made to finance the payments that corrupted its own purchasing.

The department also alleged a separate overcharge. It said Sevenson conspired with one subcontractor to pass additional inflated soil-disposal costs to the Environmental Protection Agency. That allegation concerns the price of the disposal service as well as the payment for favorable treatment.

The procurement Anti-Kickback Act prohibits improper payments for favorable treatment and their inclusion in prime-contract or subcontract prices. The Sevenson settlement resolved allegations under that law and the False Claims Act. A payment for steering a subcontract can become part of the bill sent to the government.

For an insider, the connection may sit across purchasing and accounting. The award record explains which vendor got the work. The pricing support explains what the contractor claimed the work would cost. The invoice and payment records show the charge and the money moving afterward. We examine those records together because each answers a different part of the alleged exchange.

What Is the Meaning of Bid Rigging?

Bid rigging means bidders coordinate to manipulate a competition’s outcome.

The 2024 National and Kapodistrian University of Athens thesis Bid Rigging in Public Procurement describes how coordinated bids can protect an intended winner and how subcontracting can reward another participant.

What Are Types of Bid Rigging?

Cover bidding uses deliberately uncompetitive offers to support a chosen winner. Bid suppression keeps agreed competitors from bidding, bid rotation takes turns awarding the work, and market allocation divides customers or territory.

The Sevenson allegation centered on subcontract awards exchanged for kickbacks and inflated charges passed to EPA. The question for a cleanup insider is what the participants agreed and how that agreement affected the price the government paid.

Why the Losing Bidder May Still Get Work

A subcontract can be the reward for helping another bidder win. The Athens thesis illustrates that arrangement with a hypothetical competition: one company wins at a higher price, while the other benefits through subcontracting work or future contracts. The losing bid serves the agreement, and the later work supplies the return.

That makes the relationship after an award worth understanding alongside the bids submitted before it. Who prepared the price, who was expected to win and who received work afterward can reveal different parts of the same arrangement. For a business that competed independently, the consequences are plain: it spent its effort trying to win work that others had already divided.

Repeated supplier relationships can also help competitors coordinate. Relational Contracts, Procurement Competition, and Supplier Collusion, a 2017 working paper, models a buyer that values performance it cannot fully specify in a contract. The model finds that relying on a regular group of suppliers can support that performance while also making collusion among those suppliers easier. It explains a purchasing tension: familiarity can help the buyer and help the suppliers coordinate against it.

What Are the Red Flags of Bid Rigging?

Communications coordinating bids, deliberately losing offers and subcontract work promised in return can reveal the arrangement behind a bidding pattern. The useful evidence connects the agreement to a particular award and the resulting government charge.

A 2018 construction-industry review explains why an insider’s account matters:

Review of Collusion and Bid Rigging Detection Methods in the Construction Industry, Proceedings of the Creative Construction Conference, 2018

The review also describes price comparisons that account for each bidder’s costs. Its discussion of screening methods emphasizes the importance of suitable comparisons and detailed data. Someone who knows how a quote was prepared can explain the decision behind the number, including whether the price reflected the bidder’s own costs or an arrangement with another company.

The review proposes bringing tender prices and winners together with subcontracting relationships and the quantities, materials and technology involved. That comparison keeps the price attached to the work being purchased, an essential connection when the allegation concerns inflated soil-disposal charges.

For allegations like those at Federal Creosote, we connect that knowledge to the records behind the government charge: the subcontract decision, disposal-price support, invoices and payments. Following the transaction across them connects what the vendor requested with what the public buyer accepted and paid.

A purchasing employee may know why a subcontract went to a particular vendor. Someone in accounting may know how a payment reached the cleanup bill. A subcontractor or competitor may know who discussed the bids. We work with the part you know and connect it to the rest of the transaction.

The Same Exchange in Other Public Contracts

Other civilian government procurement cases show how an improper payment can attach to an ordinary project expense. In the AMEC Construction Management matter, involving the company formerly called Morse Diesel International, the Justice Department described false bond reimbursement claims and bond-broker kickbacks on General Services Administration construction contracts. A court held the company liable under the Anti-Kickback Act and False Claims Act. The expense there was bonding. The Sevenson allegations concern cleanup subcontracts and soil disposal.

Harbert Corporation’s separate Cairo sewer-contract resolution concerned alleged payoff agreements that caused competitors to abstain or bid high on a project funded by the U.S. Agency for International Development. That illustrates the value of a deliberately losing offer to the intended winner. An independent bidder sees a competition. The participants in the alleged arrangement have agreed to remove it.

The Civil Settlement and the Whistleblower Opportunity

The Justice Department’s Civil Division Commercial Litigation Branch handled the Sevenson case.

The settlement resolved the government’s allegations against Sevenson about subcontract kickbacks, rigged bids and inflated charges.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Cleanup Bill Was Built

If you know who steered a subcontract or how a vendor payment became a cleanup charge, talk with our whistleblower experts about what you saw. We build the case with you, bring in government procurement whistleblower lawyers who understand subcontract pricing and kickbacks, and stay beside you throughout the case.