LOUISVILLE, Ky. (AP) - A rural Kentucky utility accused of overbilling Fort Knox for a long-running energy-savings program that in some instances didn’t reap the savings that were touted agreed to pay $7.6 million to the government to settle the case, federal prosecutors said Monday.
In announcing the settlement with Nolin Rural Electric Cooperative, acting U.S. Attorney John E. Kuhn Jr. said the investigation “uncovered criminal acts and millions of dollars in questionable payments.”
Kuhn said the settlement will produce “an important correction” to ensure future compliance with program requirements.
Nolin RECC will pay the U.S. government a total of $2.6 million as part of the settlement, prosecutors said. The utility will forfeit an additional $5 million to the U.S. Marshals Service, stemming from payments Nolin received for improperly authorized energy-saving projects, they said.
Also, Nolin RECC agreed to employ a corporate ethics monitor for two years to oversee its dealings with the federal government.
Nolin RECC President and CEO Mickey Miller said the utility’s board of directors entered into the agreement to “avoid the delay, uncertainty and expense of protracted litigation.” He defended the utility’s work, saying its performance has won national recognition for innovative energy conservation.
“No individual at Nolin profited from our work at Fort Knox, and we continue to work daily with the Army on our joint projects in this public-private partnership,” Miller said in a statement.
Elizabethtown-based Nolin RECC has about 34,000 customers in central Kentucky. Miller said the settlement won’t affect customers’ utility bills.
“We do not anticipate any rate changes whatsoever because of this settlement,” he said.
Federal prosecutors said Nolin received more than $8 million in payments for 20 energy-saving projects between 2002 and May 2008 that never should have been authorized. Those projects were promoted to save more than $7 million in a decade, but were actually projected to lose more than $15 million during that time, they said.
In early 2010, Nolin billed Fort Knox a total of $199,020 for work performed and expenses incurred on a proposed energy project that never received startup approval, prosecutors said. Because that project was not approved, Nolin submitted a bill for expenses under an unrelated project that had been authorized, they said.
Prosecutors cited another example in 2010 when Nolin billed for an unapproved project by including the costs in unrelated, authorized projects.
Since 1996, Fort Knox awarded 108 energy conservation projects to Nolin, prosecutors said. The projects, with a total value of about $270 million, were intended to make the Army post more energy efficient, they said. Projected savings were intended to offset the cost of each project.
An audit of Fort Knox’s energy program by the U.S. Department of Defense Inspector General concluded that Fort Knox officials did not properly award and administer energy-saving projects. The audit found that “the lack of adequate internal controls increases the risk of fraud, waste and abuse.”
Meanwhile, former military contractor Gary T. Meredith, facing charges stemming from the overbilling, is set to stand trial in December. Meredith was employed by Fort Knox as its energy program manager, working closely with Nolin for years. He later was hired by Nolin as its resource energy manager.
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