Navy knew of fraudulent toxic cleanup work and kept paying, Tetra Tech lawyer claims

The Navy contractor accused of widespread fraud in the cleanup of a toxic San Francisco shipyard argued it could not have defrauded the government because the Navy already investigated and moved on from the allegations, according to court filings.

In a bid to dismiss a federal prosecutors' whistleblower lawsuit, attorneys representing Tetra Tech EC said the Navy was aware of the fraudulent activity but continued to pay the company anyway, barring False Claims Act liability.

"The Navy's undeniable knowledge of these sampling issues means that [Tetra Tech] could not knowingly submit any false or fraudulent statements or claims to the Navy," wrote defense attorney Davina Pujuari.

The U.S. Department of Justice revealed it intervened in the lawsuit alleging extensive fraud in the radiological assessment and cleanup of the Hunters Point Naval Shipyard -- including falsifying soil samples and recklessly disposing of contaminated waste -- in October 2018.

The announcement came shortly after two Tetra Tech supervisors pleaded guilty to falsifying soil sample records in San Francisco federal court.

Tetra Tech performed radiological remediation at Hunters Point from 2003 to 2016 under a series of contracts by the Navy. Accusations of fraud first surfaced in 2012.

In response to the allegations, Tetra Tech conducted an investigation that led to the termination of employees it identified as being responsible for the fraud and implementing more stringent reporting protocols.

Pujari argued the company could not have been improperly paid for allegedly fraudulent work at the Superfund site because the Navy knew about the deceit and continued to pay invoices.

Tetra Tech was awarded at least two more contracts after it supposedly addressed the fraud in 2014.

Seven plaintiffs alleged violations of the False Claims Act, which permits private parties to sue on behalf of the United States and allows federal prosecutors to intervene if they choose. United States ex rel. Jahr v. Tetra Tech EC Inc., 13-CV03835 (N.D. Cal., filed Aug. 19, 2013).

The Hanson Bridgett LLP partner and former federal prosecutor urged U.S. District Judge James Donato of San Francisco not to give prosecutors a second chance to specify allegations in their complaint because they already had six years to investigate.

Among other issues, no company manager "knew about, was deliberately ignorant of, or recklessly disregarded" any evidence of fraud when making a claim for payment to the Navy, according to the court filing. None of the employees who participated in the fraud were corporate officers.

Pujari disputed the identification of the two Tetra Tech supervisors convicted in federal court as "managers" in federal prosecutors' complaint.

Hunters Point is home to one of the city's largest development projects with more than 5,000 approved homes and 4 million square feet of commercial space. Five Point Holdings LLC has paused project operations because the Navy cannot transfer the land designated for development since it is alleged to be hazardous.

The Navy paid the radiological cleanup service company roughly $270 million for the initial work. Total cleanup expenses are expected to climb to $570 million because much of it now needs to be redone, according to Navy Director of Base Realignment and Closure Laura Duchnak.

Tetra Tech could be on the hook for more than $1 billion, according to David Anton, who is representing some of the whistleblowers.

Residents living near the shipyard are also suing the company for mishandling the cleanup and endangering their health. They seek more than $27 billion.