Bottini Fuel and Morgan Fuel & Heating: Government Credits Paid Insiders’ Fuel Bills

The Bottini Fuel and Morgan Fuel & Heating settlement included $1.5 million in New York False Claims Act damages and penalties for diverting government customers’ fuel credits to insiders’ accounts. In its settlement agreement, the company admitted moving customer balances through dummy accounts to reduce fuel bills for owners, friends, family members, certain employees and businesses the owners had an interest in. Someone handling those accounts could see both sides: the customer’s missing credit and the insider’s smaller bill.

Morgan Fuel & Heating Company did business as Bottini Fuel. Based in Wappingers Falls, New York, it supplied heating oil throughout the Hudson Valley. From 2004 through 2016, its diversion of customer credits reached individual customers, businesses and public buyers. The company admitted the conduct concerning government customers violated the New York False Claims Act.

How Heating-Oil Customers Built up Credit Balances

A heating-oil credit balance records money the customer has paid beyond the value of the fuel or services provided. Bottini’s electronic customer accounts tracked deliveries, services, payments and amounts due. Those records already showed when a customer had money left to use.

The agreement describes several ways that balance could arise. Customers could buy fuel ahead of time in the off-season or use monthly budget plans to spread payments through the year. They could also overpay a bill or pay the same balance twice. The next delivery and the next payment therefore depended on more than the latest invoice: the existing customer balance mattered too.

Heating-oil providers would normally apply that credit toward future purchases or refund it, the agreement explains. Bottini instead swept excess balances out of the customers’ accounts. The money customers had already paid for their own heating needs became available to cover someone else’s fuel.

When a supplier keeps credits owed to state purchasing customers, the account history connects the payment already made to the credit that still belongs to the buyer.

Dummy Accounts Hid Where the Credits Went

Bottini admitted transferring credits into fictitious intermediate accounts in its sales database. These accounts had no actual customer transactions, including fuel purchases, and carried false contact information. The agreement describes generic address entries such as “Main Street.”

In some instances, balances then moved from those dummy accounts into accounts belonging to owners, friends, family members, certain employees or businesses in which owners held an interest. The transferred credits reduced what those recipients owed for fuel. The company’s own customer-account system supplied both the hiding place and the destination.

The original customer’s account then showed a zero balance. Later bills and invoices, including those sent to government customers, also showed a zero credit balance. Bottini admitted submitting invoices for current deliveries that omitted the full credit owed, keeping government customers from knowing that they had money on their accounts.

That was the false picture presented to the buyer: an invoice that concealed money the supplier owed back. We see a particularly brazen use of ordinary billing here. The same business that knew the customer had overpaid sent a bill hiding the credit while using it to cover insiders’ fuel.

Schools, Prisons, Towns and State Agencies Lost Credits

Bottini transferred balances from hundreds of Hudson Valley customers, including $590,888 from 60 government customers. The public buyers included local school districts, prisons, town governments and state agencies. The agreement’s examples show what happened to a duplicate payment and to an account left behind after a change of supplier.

Webutuck’s Duplicate Payment Went Through a Dummy Account

Webutuck Central School District made a duplicate payment of $4,730 in March and April 2009. In October 2010, Bottini removed the resulting credit from the district’s account and transferred it to a dummy account. After that account accumulated approximately $23,000 in credits from Webutuck and other customers, the company moved those balances to insiders’ accounts.

Rondout Valley’s Account Became Someone Else’s

Rondout Valley Central School District changed heating-oil suppliers in November 2008 while its Bottini account still held approximately $83,000 in credit. According to the agreement, the district apparently did not know about the balance, and the account became inactive.

In April 2009, Bottini changed the account name from the school district’s to that of a longtime acquaintance of the owners’ family. The account then served as a dummy account. That November, its credits moved to accounts belonging to insiders.

Public money. Private fuel. We find the account-name change especially telling: the school district had left the supplier, but its money remained under someone else’s name.

What Bottini Admitted in the Civil Settlement

Bottini expressly admitted the conduct described in the civil agreement, including the transfers, the omitted credits on government invoices and the benefit to the owners. It also acknowledged that its treatment of government customers violated the New York False Claims Act.

A whistleblower’s complaint started the New York Attorney General’s investigation.

In the separate criminal case, Bottini Fuel pleaded guilty to falsifying business records on November 27, 2018, as reported in New York’s announcement.

What Proof Do You Need as a Whistleblower?

For diverted fuel credits, useful billing evidence connects the customer’s payments and deliveries to the transfers that removed its credit. We examine that history with the person who understands the accounts: how the balance arose, what changed it, where it went and what the customer saw afterward.

In Bottini’s admitted scheme, an intermediate account with no fuel purchases could connect a public customer’s credit to an insider’s unpaid bill.

Rondout Valley adds another useful comparison: the account’s old and new customer names. A current account label could hide the public buyer whose payments created the balance. An employee familiar with those changes could explain why an apparently ordinary account belonged in a government procurement fraud case.

The Instructions Behind the Entries

The agreement puts responsibility for directing the practice and operating the database in plain words:

Bottini Fuel’s admitted conduct, New York settlement agreement, 2018

That makes the instructions behind an adjustment as important as the entry itself. We connect what an employee knows about those instructions to the customer history and the accounts that benefited.

A study published in the Journal of Forensic and Investigative Accounting in 2019, Unique Characteristics of Management Override Fraud Cases, compared occupational fraud involving management override with fraud involving missing controls. It found that stronger anti-fraud arrangements, including audits and formal policies, were associated with a greater relative likelihood of management override among the fraud cases studied.

The practical insight is about authority over the books. In Bottini’s case, the admitted direction from senior management makes the person who understood the database and the instructions particularly valuable to understanding the scheme.

UPS and Bottini: Hiding Money the Customer Was Owed

UPS shows how records controlling refunds can become part of a government procurement fraud case. In its May 2015 settlement announcement, the Department of Justice alleged that false delivery times and invalid exception codes concealed late Next Day Air deliveries and prevented government refunds.

The useful connection to Bottini is control over the information that tells a customer money should come back. A delivery time determined whether a refund was due in the UPS allegations. An existing credit balance showed money owed to the fuel customer in Bottini’s admissions. The operational record and the bill have to be read together.

For someone who knows the fuel business from inside the supplier or the customer’s purchasing office, that knowledge can explain the missing link between an ordinary transaction and a false account of who owes whom.

Whistleblower Rewards and the Government’s Recovery

A whistleblower case under the federal False Claims Act can pay 15% to 30% of what the government recovers. Bottini’s agreement allocated a whistleblower share under New York’s law. We build your case with you around the public money involved and bring in whistleblower lawyers who know the reward law that applies to your case.

You Know Whose Credit It Was

If you handled fuel accounts, customer payments or purchasing and know why a government credit disappeared, speak with our whistleblower experts about the balance and who benefited. We build the case with you around the transactions and decisions you understand, and bring in government procurement whistleblower lawyers who know state False Claims Act refund cases. From the first conversation through the case, you have experts beside you who understand why a zero balance can conceal a very real debt.