Michigan-based utility company, Consumers Energy Co. (“CEC”), is the subject of a recently unsealed whistleblower action. A former CEC employee, Simeon Anderson, filed a qui tam lawsuit alleging that CEC committed fraud on its customers, the federal government, and the state of Michigan by more than $4 billion.
According to the complaint, CEC created bogus customer accounts to inflate its sales and overstate the energy demands for various classes of customers, such as those receiving benefits under federal and state programs. The whistleblower claims the phony accounts were used in the creation of cost allocation schedules and electricity rates. According to the complaint, the fictional customer accounts CEC created purportedly used exorbitant amounts of electricity, e.g. one hour of energy use would be equivalent to the amount of energy typically used by 500 houses.
In addition to overcharging its customers, the whistleblower claims that the fraudulently inflated sales levels provided justification for CEC to increase its equipment, which it used to overstate its operating expenses, and lower its taxable income. The qui tam complaint alleges that approximately 60% of the data upon which CEC’s energy rates was based was fraudulent.
Anderson also alleges that CEC submitted approximately $1 billion in false claims to the federal government between 2008 and 2012 in connection with the Low Income Home Energy Assistance Program. Similarly, the complaint alleges that false claims, totaling approximately $75 million, were submitted to the state of Michigan, under the Low Income Energy Efficiency Fund.
The federal government could have, but declined to, intervene in the qui tam litigation. If the whistleblower is successful in bringing his claims, or the matter is settled, the whistleblower will be entitled to a percentage of the proceeds under the qui tam provisions of the False Claims Act.