Two Insurance Agents Plead Guilty in Statewide Fake Insurance Scheme Involving Underground Storage Tanks
GRAND RAPIDS, MI—The Environmental Protection Agency and the Federal Bureau of Investigation have uncovered and disrupted a scheme involving the fabrication of insurance certificates that were sold to owners and operators of underground storage tanks (“USTs”) throughout the state of Michigan. The fake documents made it appear that certain USTs were in compliance with laws requiring owners and operators of USTs to demonstrate the ability to clean up any environmental contamination caused by a leaking tank. Two insurance agents in Lansing, Michigan, have pled guilty for their roles in creating and selling fake insurance certificates to owners and operators of USTs.
Federal and state law requires owners and operators of certain underground storage tanks to obtain proof of financial assurance in the event of a release into the environment. Most owners and operators comply with the law by obtaining an annual insurance policy that would cover up to $1 million in clean-up costs and damages. The fake document scheme, which ran from 2011 to 2013, primarily involved gas stations with underground storage tanks that were either uninsurable due to age or condition, or were expensive to insure due to their age. Rather than replace the aging tanks, UST owners and operators purchased fake insurance certificates created by two Lansing insurance agents that made it appear to federal and state UST inspectors that the USTs were in compliance with the law. In reality, those gas stations had no insurance in the event of a leak.
The scheme was disrupted after undercover operations conducted by the EPA and FBI in the Lansing area successfully infiltrated the fraudulent creation and sale of fake documents by Allen P. Chadderdon, of Williamston, Michigan, and Dean P. Tucker, of Lansing, Michigan. Immediately upon disrupting the scheme, the EPA and State of Michigan sought to identify which USTs were not in compliance with the financial assurance requirements to mitigate the risk of harm to the environment. Gas stations that failed to present a genuine insurance policy were shut down until the owner or operator demonstrated compliance with the law.
Chadderdon and Tucker pled guilty in federal court to fabricating insurance certificates that they sold to UST owners and operators. Federal law prohibits altering or fabricating documents with the intent to impede, obstruct, or influence the proper administration of any matter that is within the jurisdiction of a federal agency. Both defendants face a maximum of 20 years in prison for the offense, but the Court will determine the sentence after considering the federal sentencing guidelines and the statutory sentencing factors. Chadderdon will be sentenced on December 3, 2014, and Tucker will be sentenced on March 5, 2015.
U.S. Attorney Patrick Miles, Jr. said, “This fraud scheme presented a serious risk of harm to many communities across Michigan. Residents of more than 30 different cities—including Battle Creek, Lansing, Ann Arbor, and Detroit—were exposed to the risk of leaking underground storage tanks where no insurance was available to pay for clean-up costs or injuries. Fuel and oil that leaks from underground storage tanks threatens not only the land surrounding the tank, but can harm drinking water and our state’s rivers and lakes. This investigation and criminal case helps ensure that owners and operators of USTs comply with the law and those who knowingly help others evade the law will be brought to justice.”
“About half of the nation’s population gets its drinking water from groundwater supplies,” said Randall K. Ashe, Special Agent in Charge of EPA’s criminal enforcement program in Michigan. “Leaking underground storage tanks pose a significant threat to the quality and safety of that groundwater. To protect human health and the environment, EPA must receive accurate and honest documents. These recent pleas demonstrate that insurance agents who callously place the American people at risk by falsifying official certificates will be held accountable for their actions.”
“The perpetrators’ fraudulent scheme to mislead federal and state inspectors placed several Michigan communities in harm’s way and exposed these areas to the risk of leaking fuel and oil from underground storage tanks throughout the state,” said Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. “The FBI, along with our federal, state and local partners, remains vigilant in its efforts to bring to justice those who actively assist others in evading the law and expose our communities to potential harm.”
The underground storage tank cases are being prosecuted by Assistant U.S. Attorney Christopher O’Connor.