The husband and wife owners of a Santa Barbara environmental firm are facing felony charges after the California Attorney General’s Office accused them of overcharging and defrauding the state’s water quality agency.
On May 10, the Attorney General’s Office filed a criminal complaint in Santa Barbara County Superior Court against Kurt and Julie Hayden, co-owners of Hayden Environmental, Inc. The complaint lists counts of conspiracy, grand theft, and felony fraud, alleging the couple collected unearned reimbursements in excess of $200,000 from the State Water Resources Control Board’s Underground Storage Cleanup Fund.
“They overcharged in two ways,” alleged Cris Carrigan, director of the board’s office of enforcement. “They billed for work that they didn’t do, then they over-billed for services and products. The state provides a formula for markups, and they were taking advantage of that.”
Carrigan said the Haydens performed cleanup work on leaky petroleum storage tanks at more than 20 sites throughout Santa Barbara County, including locations in Lompoc, Santa Ynez, Solvang, and Buellton. Carrigan wouldn’t disclose specific addresses, describing them all as former gas or service stations.
The state’s Underground Storage Tank Cleanup Fund is financed by a two-cent state gasoline tax and was designed to reimburse gas-station operators up to $1.5 million per site for cleanup of oil releases at underground facilities. The fund is set up for property owners who have inherited older storage tanks without double-walled designs to bill against the fund. Environmental consultants like the Haydens do the cleanup work on their behalf.
Carrigan said there’s no indication any property owners participated in the alleged fraud, and some might have even been victimized themselves. There’s a limit property owners can claim against the fund, he explained, and if they’ve been defrauded and reach the limit, they can incur personal financial responsibility.
The Haydens were arrested and booked in Santa Barbara County Jail on May 10. Julie Hayden’s lawyer Robert Landheer couldn’t discuss details of the case, but, because of the timing of the arrest, he said the couple was held in custody and unable to see a judge for several days. Bail was recommended at $200,000 apiece, but was eventually dropped at a hearing on May 14. However, the Haydens had their passports confiscated and will be required to wear GPS monitoring devices. Prosecutors consider the couple a flight risk because they own property in Costa Rica, Landheer said.
“The way it happened was done because they’re somehow wanting it to serve as a warning to consultants and claimants against the state water board that they’re going to enforce what they perceive as any kind of fraud,” Landheer said. “It’s unfortunate that they were sort of made the poster child for this new enforcement.”
Landheer said the couple had been in contact with the Department of Justice since last October, when agents searched their multi-million dollar home in Santa Barbara and a vacation home at June Lake, seizing boxes containing company records. Landheer accused agents of “grandstanding,” saying the arrests could’ve been handled more gracefully, since the Haydens are locals and aren’t going anywhere.
“What has happened here is they are the unfortunate stray-bullet casualty of a process by an enforcement agency or the Department of Justice to be immediately exposed to public scrutiny, before any actual proof,” Landheer said. “Here are these people doing legitimate work; whether or not they’ve committed a criminal violation of law has yet to be determined.”
If the case goes to trial, Landheer added, it wouldn’t likely happen until the end of 2012 or early 2013. Calls to Santa Barbara attorney Stephen Dunkle—who is representing Kurt Hayden—and to Hayden Environmental Inc. weren’t returned as of press time.
There are about 3,700 active claims to the cleanup fund for reimbursement, according to the Water Resources Control Board. The fund has reimbursed $2.9 billion for eligible costs since 1992, and nearly 6,500 sites have been cleaned up and closed since the program began in 1989.
According to the criminal complaint, the Haydens were reimbursed nearly $13 million from the fund since 1993, including $6.5 million over the last five years. A 2008 audit of three cleanup sites, the state alleges, revealed overcharges of 57 percent and an average overpayment to HEI of 31 percent.
The Attorney General’s Office said the Haydens may have defrauded the state of more than $2 million.
The Haydens are next scheduled to appear in Santa Barbara County Superior Court on June 20. If convicted, they could each face up to five years in state prison. Carrigan said once the criminal process is over, the state’s water quality agency would also pursue civil penalties totaling more than a million dollars.
Contact Staff Writer Jeremy Thomas at jthomas@santamariasun.com.
This article appears in May 31 – Jun 7, 2012.