Alliance founder, funder, Bill Koch slapped with $550,000 fine [Op Ed]

Bill Koch" the man who called Cape Wind a ‘Sweetheart Deal’

Slapped With $550,000 Fine For No-Compete Contracts by US Justice Department

by Michael Conathan

This doesn’t qualify as much of a news flash, but just in case you were curious, hypocrisy is alive and well in the Koch family. And this time it’s going to cost one of them half a million dollars.

After a lengthy series of lawsuits he filed against his better known brothers, Bill Koch has often been described as the “black sheep ” of his family. And while Bill’s public and messy falling out with his $50 billion brothers has led to only a slightly less lucrative career as founder of the dirty energy conglomerate Oxbow Carbon, he has largely steered clear of his siblings extreme climate denial and political wrangling. Except when it comes to one pet peeve: offshore wind.

Koch’s funneled over $1.5 million dollars to the Alliance to Protect Nantucket SoundEarlier this year, Cape Wind became the first offshore wind farm to receive the green light from federal regulators despite Koch’s funneling over $1.5 million dollars to a nonprofit group, the Alliance to Protect Nantucket Sound, formed to combat Cape Wind.

The site where the project will be built just happens to be visible from backyard of Koch’s mansion on a private island country club community in Osterville, MA. One of the favorite arguments used by Koch and the Alliance is that the project was the beneficiary of a “sweetheart, no-bid deal.”

Koch's "sweetheart deal" will cost him over a half million dollars

Apparently, Koch only likes sweetheart no-bid deals for his own operations. Last week, Gunnison Energy, a subsidiary of Oxbow Carbon, was slapped by the Justice Department with a $550,000 fine “related to an agreement not to compete in bidding for four natural gas leases sold at auction by the U.S. Department of Interior.”

According to the complaint, [Gunnison Energy] and [co-conspirator SG Interests VII Ltd.] were separately developing natural gas resources in Western Colorado. In 2005, GEC and SGI entered into a written agreement under which they agreed that only SGI would bid at the auctions and then assign an interest in the acquired leases to GEC… As a result of the agreement between GEC and SGI, the United States received less revenue from the sale of the four leases than it would have had SGI and GEC competed at the auctions.

A dirty energy magnate with a history of bilking
the federal government.
Of course, that Bill Koch has ever been interested in allowing the federal government to get its fair share. His run to capture the America’s Cup yachting trophy in 1992 was fueled by tax breaks from donating his own money to a foundation set up to fund his pursuit of the prize. The donations saved him “a couple million dollars” on his taxes.

It should come as no surprise that a dirty energy magnate with a history of bilking the federal government might try to pull a fast one on federal regulators. Let’s just make sure we remember this one next time he accuses a clean energy company of working the system.

U.S. Department of Justice Seal and Letterhead

FOR IMMEDIATE RELEASE
WEDNESDAY, FEBRUARY 15, 2012
WWW.JUSTICE.GOV
AT
(202) 514-2007
TTY (866) 514-5309

JUSTICE DEPARTMENT SETTLEMENT REQUIRES GUNNISON ENERGY AND
SG INTERESTS TO PAY THE UNITED STATES A TOTAL OF $550,000 FOR
ANTITRUST AND FALSE CLAIMS ACT VIOLATIONS

Action is First Justice Department Challenge to an Anticompetitive Bidding Agreement for
Bureau of Land Management Mineral Rights Leases

WASHINGTON — The Department of Justice today announced that it has reached a settlement with Gunnison Energy Corporation (GEC), SG Interests I Ltd. and SG Interests VII Ltd. (SGI) that requires the companies to pay a total of $550,000 to the United States for antitrust and False Claims Act violations related to an agreement not to compete in bidding for four natural gas leases sold at auction by the U.S. Department of Interior’s Bureau of Land Management (BLM). Today’s action marks the first time the Department of Justice has challenged an anticompetitive bidding agreement for mineral rights leases.

The department’s Antitrust Division today filed a civil antitrust complaint in U.S. District Court for the District of Colorado, and at the same time filed a proposed settlement that, if approved by the court, would resolve the lawsuit. The complaint alleges that the agreement between GEC and SGI restrained trade in violation of Section 1 of the Sherman Act.

“Today’s unprecedented antitrust enforcement action involving illegal bidding at Bureau of Land Management auctions, demonstrates the U.S. government’s resolve to ensure there is vigorous competition for federal oil and gas rights,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “At a time of budgetary constraint, it is crucial that the federal government receive the most competitive prices for these important leases, which ultimately benefits American taxpayers.”

According to the complaint, GEC and SGI were separately developing natural gas resources in Western Colorado. In 2005, GEC and SGI entered into a written agreement under which they agreed that only SGI would bid at the auctions and then assign an interest in the acquired leases to GEC. The department determined that the agreement was not part of any procompetitive or efficiency-enhancing collaboration.

As a result of the agreement between GEC and SGI, the United States received less revenue from the sale of the four leases than it would have had SGI and GEC competed at the auctions. The United States has the legal ability to obtain monetary damages when it has been injured by an antitrust violation. The proposed settlement provides that GEC and SGI each pay $275,000 to the United States to resolve the antitrust violations.

The payments will also resolve civil claims that the United States has under the False Claims Act against GEC and SGI for making false statements to the government in connection with the agreement not to compete. The U.S. Attorney’s Office for the District of Colorado has entered into separate settlement agreements with the companies to resolve these claims.

BLM is responsible for issuing leases for oil and gas exploration and development on lands owned or controlled by the federal government. BLM provides notice of parcels to be leased and then auctions a lease for each parcel. The winning bidder is required to certify that its bid was not the product of collusion with another bidder.

“BLM relies on competition among bidders at onshore oil and gas auctions to ensure that the United States receives a fair and competitive price for its leases,” said BLM Director Bob Abbey. “We are hopeful that the outcome of this case will deter anticompetitive and fraudulent conduct at BLM auctions.”

The United States’ investigation resulted from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act. Those provisions allow for private parties to sue on behalf of the United States. They also give the United States time to investigate to decide whether to take over prosecution of the allegations or allow the whistleblower to proceed. The whistleblower is entitled to receive a portion of any recovery.

GEC, an affiliate of Oxbow Corporation, is a Delaware corporation with its principal place of business in Denver. SGI is Texas limited partnerships with their headquarters in Houston. The managing partner of both limited partnerships is Gordy Oil Company, a Texas corporation.

The proposed settlement, along with the department’s competitive impact statement, will be published in The Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to William H. Stallings, chief, Transportation, Energy and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the settlement upon a finding that it serves the public interest.

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