Former contractor ordered to pay $97 million for fraudulent activities at SF Hunters Point Shipyard

A former Navy contractor embroiled in a legal battle over allegations of fraud at the Hunters Point Shipyard in San Francisco has agreed to pay a staggering $97 million to resolve claims made by the U.S. Department of Justice.

The case, which was initially filed in 2013 by whistleblowers, accused Tetra Tech EC of taking shortcuts during the cleanup process by fabricating soil samples and manipulating data. The Justice Department joined the case in 2018 after adopting most of the whistleblowers’ accusations. While news of an impending resolution surfaced last month, the specific terms of the settlement had remained undisclosed at that time.

As per a recent filing with the U.S. Securities and Exchange Commission, Tetra Tech EC Inc., a subsidiary of Tetra Tech Inc., will pay $57 million for allegations brought forward under the False Claims Act (FCA) and an additional $40 million for charges under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Tetra Tech plans to cover the settlement costs using cash reserves and by tapping its credit facility.

Upon finalization of the payment and approval of a consent decree by the court, Tetra Tech EC will be absolved of all claims under the FCA and CERCLA. A consent decree is a court-approved agreement that settles the issue at hand without assigning guilt or liability, allowing Tetra Tech EC to vindicate its reputation concerning the Justice Department’s case. However, there remains a window for the court and the public to voice any objections.

For the settlement to come into effect, the judge overseeing the case must assess the consent decree’s suitability and fairness, followed by a 30-day period for public comments. The Department of Justice retains the right to withdraw its consent if the feedback reveals any inadequacies or improprieties in the decree.

Tetra Tech EC agreed to the settlement to avoid prolonged legal battles, stated spokesperson Sam Singer. The settlement does not admit any wrongdoing on the part of the company, which has consistently shifted blame to ‘rogue’ employees for the cleanup problems. Several of the company’s employees who were implicated in the fraud allegations have previously pleaded guilty and faced prison sentences.

Attorney David Anton, representing the whistleblowers, pointed out that the settlement approval hinges on U.S. District Judge James Donato. Notably, Judge Donato had rejected an inadequate settlement agreement in a separate case related to the flawed shipyard cleanup, involving the Bayview Hunters Point community and the shipyard’s developer, Five Point Holdings.

Despite the impending settlement in the Justice Department’s case, Tetra Tech EC is still facing multiple active lawsuits over its conduct during the cleanup at the shipyard. These accusations include claims of improper screening of contaminated soil, particularly at a known polychlorinated biphenyls (PCBs) hotspot within the shipyard area. PCBs have been associated with various cancers.

Starting in the 1940s, various sections of the shipyard became contaminated due to fallout from irradiated ships brought to Hunters Point for decommissioning following atomic bomb tests. While the shipyard currently presents a lucrative opportunity for real estate development, the botched cleanup has not only marred this potential but also delayed the construction of a proposed new neighborhood with thousands of homes.

The Navy, which operated at the shipyard from 1945 to 1974 and is responsible for its ongoing cleanup, agreed in 2018 to reevaluate a significant portion of the site where Tetra Tech EC had carried out remediation work. Consequently, the Navy stated in separate court filings that the financial consequences of the misconduct could range from $370 million to $570 million.

Intriguingly, a recent retesting effort by the Navy revealed additional radioactive objects in areas previously cleared by Tetra Tech EC. As Tetra Tech EC navigates through a host of other active lawsuits stemming from its work at the shipyard, the company continues to grapple with the aftermath of the fraudulent activities that have cast a shadow over the Hunters Point Shipyard cleanup project.